As predicted, on May 5, 2021 the Department of Labor announced the withdrawal of the Independent Contractor Rule which was made final on January 6, 2021 (“January 6 Rule”). The withdrawal became effective today (May 6, 2021) with its publication in the Federal Register.
The January 6 Rule codified the approach of giving significant weight to several factors of the “economic realities” test for determining worker classification, while giving other factors less weight. That rule was welcome news for businesses in helping to clarify independent contractor status.
The DOL bases the withdrawal on the following:
- The January 6 Rule was not supported by FLSA’s text or purpose and has not been otherwise used by the courts.
- The January 6 Rule did not provide the clarity it intended.
- The January 6 Rule would not have benefited workers “as a whole”.
- The withdrawal of the January 6 Rule is not disruptive as it had yet to take effect and has not been applied by the courts.
The DOL’s decision withdrawing the January 6 Rule gives the judges more discretion to weigh the factors of the economic realities test, and ultimately paves the way for a more aggressive rule – perhaps a federal ABC standard – which will contribute to a growing classification of more workers as “employees”.