What awaits us
For now, the Biden administration has indicated that it has no plans to release a new independent contractor test under the FLSA that may be more restrictive in finding an independent contractor relationship. However, there is both good and bad news on the horizon for employers that will ensure continued uncertainty around this issue for some time, requiring continued vigilance for potential changes.
First, employers reassured that at least the same test that the DOL has used for years remains in place, thus providing at least familiarity and experience in the application, should remain concerned about President Biden’s statements. regarding independent contractor relationships. Specifically, President Biden has repeatedly noted his support for the “ABC” test similar to California’s new independent contractor rule resulting from the Dynamex Operations West, Inc. v. Superior court decision and subsequently codified by AB5. Under the “ABC” test, it is assumed that all workers are employees instead of contractors, and a worker would have to meet the following three factors for a company to correctly classify them as an independent contractor:
- The worker is free from the control and direction of the hiring entity in the performance of the work;
- The worker performs tasks that are outside the ordinary course of business of the hiring entity (that is, the worker cannot perform work related to the service or commodity that the company offers to its customers); and
- The worker is usually engaged in an independently established trade, occupation or business of the same nature as the work he performs.
This strict standard, similar to tests already in existence in Illinois, Massachusetts, and New Jersey, can be codified nationally if the Biden administration determines it has the necessary support to be implemented through it. administrative regulations or legislation of Congress. Given the support expressed by President Biden, as well as the support that Labor Secretary Marty Walsh has indicated for this standard, this potential change remains a viable option for implementation at the expense of employer interests.
Alternatively, while the Trump rule never came into effect, an ongoing litigation in Texas seeks a court order implementing such a rule. On March 26, 2021, the Coalition for Workforce Innovation and Associated Builders and Contractors, Inc. filed suit in the United States District Court for the Eastern District of Texas, seeking to implement the Trump Independent Contractor Rule. Specifically, the plaintiffs seek a declaratory judgment against the Biden administration’s DOL, arguing that the DOL’s delay of the March 8, 2021 effective date of the Trump rule was “arbitrary and capricious” and in violation of the law on administrative procedures. The plaintiffs seek a court order that, because the delay was in violation of the Administrative Procedures Act, the delay must be reversed, the Trump rule would then come into effect on March 8, 2021 and thus obsolete the final rule of the Biden administration. May 6. Thus, employers should keep an eye out for any development in such litigation which could result in another shift in the independent contractor analysis.