Employers will have harder time claiming independent contractors

DOL Withdrawal of Independent Contractor Rule

On May 5, 2021, the U.S. Department of Labor (DOL) announced the withdrawal of the Independent Contractor Rule under the Fair Labor Standards Act (FLSA). The withdrawal went into effect May 6, 2021.

The DOL stated that the rule:

• Was inconsistent with the FLSA’s wording and purpose, as well as judicial precedent, and
• Would have had a confusing and disruptive effect on both workers and businesses.

The rule would have made it easier to classify workers as independent contractors, resulting in some workers losing FLSA protections, such as minimum wage and overtime pay.

Employers must take a close look at independent contractors’ classifications. This change is at the federal level, but employers must also factor in state and local laws when it comes to a worker’s minimum wage and overtime pay.

Posting change?

The Employee Rights Under the Fair Labor Standards Act poster, which must be posted by all employers, contains information about independent contractors. The withdrawal of the rule will not impact the poster, however.

The poster notes that workers are sometimes incorrectly classified as independent contractors when they are really employees and emphasizes the importance of knowing the difference between the two classifications.

Employees are entitled to minimum wage and overtime pay protections, while independent contractors are not. This information remains accurate, so the FLSA poster will not be updated because of the rule withdrawal.