Will Trump DOL Move Away From Biden Independent Contractor Classification Rule?

It is likely that the independent contractor rule finalized last year under the administration of former President Joe Biden will see changes in Department of Labor support and implementation under the new administration, according to Katelynn M. Williams, senior counsel at Foley & Lardner LLP.

Referring to the ongoing rulemaking about how to determine whether workers are “employees” covered by the Fair Labor Standards Act or “independent contractors” exempt from FLSA coverage as a “tennis match,” Williams noted that the change in presidential parties means another round of changes in approach.

The DOL under Biden released its final rule regarding employee or independent contractor classification under the Fair Labor Standards Act in January 2024 amid continued pushback from the financial industry actors, who often prefer independent status for advisers.

The rule modified the definition of independent contractor in a manner expected to make it easier for workers to be classified as employees, rather than freelancers. It uses a six-factor test to determine classification. Employees are entitled under federal law to a range of benefits to which independent contractors are not entitled, such as overtime pay, a minimum wage and workplace safety requirements enforced by the Occupational Safety and Health Administration.

There are five lawsuits challenging this 2024 Independent Contractor Rule, according to Williams. Oral arguments in Frisard’s Transportation LLC v. United States DOL in a federal appeals court were scheduled to begin early this month. However, under the administration of President Donald Trump, the DOL secured a postponement and has until March 25 to tell the court how it plans to proceed.

“We can expect that the DOL will drop its defense of the 2024 Independent Contractor Rule, which had rescinded the Trump 1.0-era test for independent contractor classification under the FLSA,” Williams wrote. Instead, she suggested that the DOL may restore the 2021 Independent Contractor Rule or leave it to the courts to judge classification issues without formal guidance from the department.

If, in fact, the “Trump 1.0” independent contractor rule from 2021 is restored, Williams wrote, it uses a five-factor test to determine worker classification, including two “core” factors: the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss. While that rule was seen as simpler and more employer friendly, Williams “it was no free pass, either,” Williams wrote. “It made clear that actual practice dictates whether a worker is properly classified, not contractual labels or the parties’ preference.”