Trump administration initiates action to replace Biden's rule regarding independent contractors at the Department of Labor
The U.S. Department of Labor is currently in the process of deciding how to proceed with the IC classification under the Fair Labor Standards Act. This initiative, described as "major" by the department, is at the proposed rule stage.
The current IC rule, implemented by the Biden administration in early 2024, was a departure from the rule established during the Obama administration, which was replaced by a rule in the first Trump administration, not formally implemented until days before Joe Biden took office in 2021. However, the Biden administration's attempt to yank the rule early in its term was knocked down by a court in 2022, stating that the administration had not followed the necessary legal steps to replace a rule.
The Trump administration has signaled its intention to replace the current IC rule, as indicated in a case brought against the rule by the Louisiana Motor Transport Association. In this case, the Trump Department of Justice has assumed the role of defendant from the Biden administration, arguing that the plaintiff's arguments are largely correct.
The Trump rule, in contrast to the Obama and Biden rules, is seen as making it less likely for the Wage & Hour division to find a worker had been misclassified. It elevates the importance of two factors: the opportunity to profit, and the employer's degree of control over the worker. The Biden administration's rule, on the other hand, takes a "totality-of-the-circumstances" approach toward determining worker status, including an additional seventh point for other unspecified factors.
Attorney Richard Reibstein, who specializes in independent contractor issues, has criticized the prominence of the Wage & Hour division's IC rule as overstated. In a blog specifically devoted to IC issues, he stated that the legal impact of the Biden administration's IC rule would be minimal.
Despite attempts to withdraw the IC rule, it remains in effect. A memo from the Wage & Hour Division's Acting Administrator Donald Harrison instructed regional administrators to largely ignore the Biden rule. However, the outcome of the ongoing legal battle between the Louisiana Motor Transport Association and the Department of Labor could potentially lead to a change in the IC classification rules.
As the Labor department moves forward with its proposed rule, it is unclear which factors will be given more weight in determining IC status. The department has published a regulatory agenda, listing its plan to rescind the Biden administration's IC rule and replace it with its own set of guidelines. The specifics of this new rule, including the role of the six-point test and any additional factors, are yet to be determined.
