Trump administration set to pass new rule for classifying independent contractors
(Official White House Photo by Tia Dufour)
Trump administration set to pass new rule for classifying independent contractors

The White House Office of Management and Budget signed off Friday on a rule making it easier for companies to classify workers as independent contractors. The rule marks a significant effort to change employment law in the waning days of the Trump administration.

The proposed rule, promulgated by the Department of Labor, would standardize the requirements for employers to classify independent contractors across all industries. Currently, industries such as sharecropping and forestry and logging fall under different classification provisions under the Fair Labor Standards Act (FLSA).

The proposed rule also clarifies the “economic reality” test for whether an employee is an independent contractor. The proposal by the Labor Department focuses on two key factors: the extent of a worker’s control over his or her work, and the worker’s opportunity for profit or loss.

The proposed rule, expedited through the Labor Department and White House, will likely be passed before the incoming Biden administration takes over on January 21. However, the rule is unlikely to take effect, since President-elect Joe Biden has indicated he will pass a memo on Inauguration Day freezing this rule.

Normally, a rule becomes effective 60 days after it is published in the Federal Register. The Inauguration Day memo allows an incoming administration to rewrite or entirely stop new rules from taking effect.

But the process of undoing the rule will likely take significant time and require the Biden administration to address its interpretation of the FLSA early in the term. The finalized rule, despite not becoming effective, would also give companies such as Uber and Lyft strong fodder for suing the Biden administration, which has shown an intent to return to more restrictive Obama-era rules for classifying independent contractors.