The US Department of Labor on Thursday proposed to withdraw a Trump-era rule making it easier for companies to classify employees as independent contractors. The rule was promulgated shortly before President Joe Biden’s inauguration but has not gone into effect yet. It was widely expected to be eliminated by the Biden administration, which expressed an intent to revive Obama-era classifications of independent contractors.
Under the Trump-era rule, a simplified economic reality test would be used to determine if an employee is an independent contractor, primarily depending on a worker’s autonomy and ability to profit. Such a rule would be a massive benefit to gig economy companies such as Uber and Lyft, allowing them to avoid paying minimum wage and overtime pay.
Biden’s Labor Department has suggested that Trump’s interpretation misconstrued key elements of the Fair Labor Standards Act (FLSA) and that Trump’s rule goes against prior Supreme Court holdings. The withdrawal proposal mentions that “independent contractors are more likely to earn less than the minimum wage.”
While the department has made it clear that it intends to withdraw this rule, it has not yet clarified its own interpretation of the FLSA or proposed new rules surrounding independent contractors. This allows it to either create a new regulatory scheme or instead provide guidance around the current scheme, a move that does not require public comment.
Since the withdrawal of the rule is economically significant, it has to be done through notice-and-comment rulemaking. As such, the department will be accepting public comments regarding this withdrawal for the next 30 days. Provided there are no setbacks, the department should be able to withdraw the rule before it becomes effective on May 7.