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DOL Withdraws Independent Contractor Rule

Employee Benefits

On May 6, 2021, the Department of Labor (DOL) formally withdrew the previous final rule regarding independent contractor status under the Fair Labor Standards Act (FLSA) that was issued on January 6, 2021. The previous final rule provided clarifications and reduced the number of tests required to determine whether an individual is an independent contractor or FLSA employee of an employer. 

In particular, the new rule required employers to use an economic reality test to determine financial dependency in the employment relationship to determine independent contractor status. Despite the publication of the rule in early January 2021, the Biden Administration put a “freeze” on all regulatory changes adopted during the Trump Administration. 

Upon review, the DOL determined that this previous final rule was not consistent with the meaning and purpose of the FLSA and that implementation of the rule would be confusing and disruptive. The withdrawal of this rule means that employers will not need to implement any new requirements or update any policies and procedures related to independent contractors.

Key Takeaway

Employers are not required to make any changes to their current process of determining independent contractor status. Employer policies should be aligned with previous DOL independent contractor status guidelines.

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