May 10, 2021
The U. S. Department of Labor announced it is withdrawing the Independent Contractor rule that was set to go into effect Friday May 7, 2021.

The rule to be withdrawn would have favored app-services firms like Uber, DoorDash and Instacart by narrowing the review and prioritizing certain factors to be weighed in deciding whether a worker is an employee or independent contractor.

In its withdrawal notice, DOL writes that the Supreme Court has emphasized that the “technical concepts” used to label a worker as an employee or independent contractor do not drive the analysis under FSLA, but rather it is the economic realities of the relationship between the worker and employer that is determinative.
On May 5, 2021, the U.S. Department of Labor (DOL) announced it will officially withdraw the Independent Contractor final rule. The withdrawal will be effective on the day the DOL’s official withdrawal is published in the Federal Register. The Federal Register is expected to publish the withdrawal on May 6, 2021.

Background Information

The rule was originally published in January, but its effective date was delayed as the result of a freeze the Biden administration ordered on regulatory changes adopted late into the previous administration.
The independent contractor final rule would have required employers to use an economic reality test to gauge financial dependency in an employment relationship to determine whether workers should be classified as employees or independent contractors. 

Rescinding the Rule

After reviewing the rule, the DOL determined that the rule was inconsistent with the text and purpose of the Fair Labor Standards Act and that implementing the rule would have “a confusing and disruptive effect on workers and businesses alike.”

Impact on Employers

The DOL is withdrawing this rule before its May 7 effective date. As a result, employers are not required to change any practices or policies to comply with any new requirements.

Instead, employers should review their employee classification procedures to ensure they comply with existing DOL guidance. 

Feel free to contact ACBI via email or at 203-259-7580 with any questions.