DOL Announces Plan to Solicit Input for New Independent Contractor Rule

On June 3, the Department of Labor (DOL) announced its intention to issue a new independent contractor (IC) rule via a blog post from Jessica Looman, Acting Director of the DOL’s Wage and Hour Division. The IC rule clarifies the employee-vs.-independent contractor analysis criteria under the Fair Labor Standards Act (FLSA). Under FLSA, employees are entitled to minimum wage, overtime pay and other benefits. Independent contractors are not entitled to such benefits

Due to the advertising industry’s continued reliance on freelance talent for flexible project-based staffing solutions, agencies may be interested in following these developments to help them understand possible changes to federal labor laws and liability concerning proper worker classification.

The current IC final rule was issued during the Trump Administration. It had been slated to go into effect in March 2021, was initially delayed, and then ultimately was withdrawn by the Biden DOL in May 2021. However, in March 2022, a federal court in Texas held that the Biden DOL’s delay and withdrawal of the Trump IC rule was unlawful, and that the current final rule from the Trump Administration has been in effect since its original March 2021 date. The DOL recently appealed that ruling, and the appeal is pending in the U.S. Court of Appeals for the Fifth Circuit.

Over the years, both the courts and the DOL had developed similar, yet somewhat varying, standards for determining whether an individual is an employee or an independent contractor. The Trump IC rule applies a more-limited economic-realities test to determine whether workers are independent contractors or employees.

Worker classification standards were derived from six, non-exclusive factors originally presented by the Supreme Court. The factors include:

• The employer’s versus the individual’s degree of control over the work;
• The individual’s opportunity for profit or loss;
• The individual’s investment in facilities and equipment;
• The permanency of the relationship between the parties;
• The skill or expertise required by the individual; and
• Whether the work is “part of an integrated unit of production.”

As the agency considers developing a new IC rule, the Biden Department of Labor is hosting public listening sessions to solicit feedback from workers on June 29 and employers on June 24 respectively.

On behalf of our members, the 4As Government Relations team will be monitoring ongoing regulatory developments concerning the independent contractor rule. Through the formal public comment process and other employer-friendly labor coalitions, we will ensure that the concerns of the agency community are communicated to relevant policymakers and regulators as this rule is developed and finalized.

If you have any questions about the federal independent contractor rule or federal worker classification laws, please contact Amanda Anderson, 4As Vice President of Government Relations.