Trump-era independent contractor rule withdrawn

Effective today, May 6, 2021, the Department of Labor’s (DOL’s) Trump-era independent contractor rule has been officially withdrawn.  The Trump-era independent contractor rule, which never went into effect due to the change between presidential administrations, would have made it easier for companies to classify workers as independent contractors.

Trump-era independent contractor rule

The Trump-era independent contractor rule expressly adopted and clarified the “economic realities test” for worker classification, and would have narrowed the focus of the inquiry to five distinct factors: (1) the nature and degree of the individual’s control over the work; (2) the individual’s opportunity for profit or loss; (3) the amount of skill required to perform the work; (4) the degree of permanence in the relationship between the individual and the potential employer; and (5) whether the work performed by the individual is part of an integrated unit of production.  The independent contractor rule veered away from the classic application of the economic realities test applied by the courts by providing that the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss were “core factors” that were to be given greater weight than the other factors.  If both of those two “core factors” supported the same classification, there would have been a “substantial likelihood” that the classification is appropriate.   Many viewed this as a substantial departure from the prior multi-factor “totality of the circumstances tests,” because if the “core factors” both pointed towards one classification, the analysis was likely to be complete and unaffected by the three remaining factors.

Reasons independent contractor rule has been withdrawn

The Biden administration’s DOL has withdrawn the independent contractor rule for several reasons, including that: