Judge Rules Against Biden Administration On DOL Independent Contractor Rule

On March 14, a judge from the Eastern District of Texas struck down the U.S. Department of Labor Department’s (DOL) 2021 delay and withdrawal of the Trump-era regulations governing independent contractor status under the Fair Labor Standards Act (FLSA).

With the Coalition for a Democratic Workplace, MSCI had opposed the DOL’s efforts to delay the rule.

Adopted in the final days of the Trump administration, the Trump administration independent contractor rule had established two factors for determining whether a worker should be classified as an independent contractor or an employee: the degree of control over work and a worker’s opportunity for profit or loss. (The latter standard often is referred to as the “economic reality test.”)

Shortly after President Joe Biden took office, his DOL proposed a rule that would have delayed the effective date of the independent contractor rule by two months. The department later withdrew the rule entirely, a move that left businesses with little guidance regarding the proper classification of workers under the FLSA.

In a 41-page opinion issued last week, Judge Marcia Crone found that both the delay and the withdrawal of the rule violated the Administrative Procedure Act. As far as next steps, the Biden administration may appeal the decision or engage in new rulemaking for a new independent contractor standard.

Stay tuned to Connecting the Dots for news regarding this regulation and, in the meantime, find more information here.