The US Department of Labor (DOL) has announced it has officially withdrawn the Independent Contractor rule.
The Independent Contractor rule was initially published January 6, 2021. However, the Biden administration postponed the effective date to May 7, 2021, allowing time to evaluate the rule before it became effective.
The final rule would require that employers must consider whether there is a financial dependency in the employment relationship with their workers based on the Economic Realities Test. This test would be used to determine whether a worker is economically dependent on the employer — and is therefore an employee — or is really in business for themselves — and is therefore an independent contractor.
The DOL determined the rule was inconsistent with the text and purpose of the Fair Labor Standards Act. It believed that, if implemented, this rule would have caused a “confusing and disruptive effect on workers and businesses.”
Employers Next Steps
- As the rule was withdrawn before taking effect, you don’t need to change any practices or policies to comply with any new requirements for the Independent Contractor Final Rule.
- We recommend that you review your employee classification procedures, there are many layers to consider before making the decision between paying someone as an independent contractor vs an employee, as we outlined in a recent Ask HRK.
- If you are a Full-Service or Virtual HR client and would like our assistance with an Independent Contractor Assessment, please email us.
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