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DOL Finalizes New Rule Regarding Independent Contractor Status, But Its Future Is In Jeopardy

Client Alert
January 11, 2021

On January 6, 2021, the Department of Labor announced its final rule regarding independent contractor status under the Fair Labor Standards Act. As described in a prior BMD client alert, this new rule was fast-tracked by the Trump administration after its proposal in September 2020. The new rule is set to take effect on March 8, 2021, and contains several key developments related to the "economic reality" test used to determine whether an individual is an independent contractor or an employee under the FLSA.

The new rule represents a more employer-friendly approach, intended to be more precise and predictable than the existing multifactor balancing test.

  • This new approach to the economic reality test considers whether a worker is in business for themselves or is economically dependent on the putative employer by looking at five distinct factors.     
  • Two core factors are given greater weight in determining whether or not the worker is economically dependent: the nature and degree of the worker's control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment.
  • Three other factors may also contribute to the analysis, including the amount of skill required for the work, the degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
  • The final rule prioritizes analysis of actual practices over what is theoretically possible in determining whether a worker is an employee or an independent contractor.

However, this rule is likely in immediate jeopardy as Democrats are set to control all three branches of government in the coming weeks. The United States Department of Labor is a cabinet-level department and the appointees to lead those departments will not face the check of a Republican controlled Senate. Although the DOL moved quickly enough to finalize the rule before Biden takes office, because the rule’s effective date falls after the transition, the new administration may be able to delay the effective date of the rule by up to 60 days. During this postponement, the Biden administration could seek to propose a new rule or repeal the Trump administration rule through the administrative rule-making process.

In addition, the results of the senatorial elections in Georgia have great significance for recently finalized rules. The Congressional Review Act gives Congress the power to halt rules shortly after they become final, through a congressional resolution of disapproval. Because Democrats will soon control the House, Senate, and Presidency, they will likely have a window of opportunity to nix the DOL’s newly finalized independent contractor rule.  

The BMD Employment and Labor Law Practice Group will keep you updated as further developments arise, and we are available to assist if you have questions regarding independent contractor status under the FLSA.

Employment LawLabor LawRussell T. RendallIndependent ContractorU.S. Department of Labor
Client Alert

Latest Batch of Ohio Chemical Dependency Professionals Board Rules: What Providers Should Know

March 25, 2024The Ohio Chemical Dependency Professionals Board recently released several new rules and proposed amendments to existing rules over the past few months. A hearing for the new rules was held on February 16, 2024, but the Board has not yet finalized them.Client Alert

Now in Effect: DOL Final Rule on Classification of Independent Contractors

March 21, 2024Effective March 11, 2024, the U.S. Department of Labor (DOL) has adopted a new standard for the classification of employees versus independent contractors — a much anticipated update since the DOL issued its Final Rule on January 9, 2024, as previously discussed by BMD.  In brief, the Fair Labor Standards Act (FLSA) creates significant protections for workers related to minimum wage, overtime pay, and record-keeping requirements. That said, such protection only exists for employees. This can incentivize entities to classify workers as independent contractors; however, misclassification is risky and can be costly.Client Alert

Florida's Recent Ruling on Arbitration Clauses

March 15, 2024Florida’s recent ruling on arbitration clauses provides a crucial distinction in determining whether such clauses are void as against public policy and providers may have the opportunity to include arbitration clauses in their patient consent forms. On March 6, 2024, Florida’s Fourth District Court of Appeals reversed and remanded Florida’s Fifteenth Circuit Court ruling of Piero Palacios v. Sharnice Lawson. The Court of Appeals ruled that the parties’ arbitration agreement did not contradict the Legislature’s intent of Florida’s Medical Malpractice Act (the “MMA”), but rather reflects the parties’ choice to arbitrate claims entirely outside of the MMA’s framework. Therefore, the Court found that the agreement was not void as against public policy.Client Alert

Corporate Transparency Act Update 3/14/24

March 14, 2024On March 1, 2024, a federal district court in the Northern District of Alabama concluded that the Corporate Transparency Act (“CTA”) exceeded Congressional powers and enjoined the Department of the Treasury from enforcing the CTA against the plaintiffs. National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.). On March 11, 2024, the U.S. Department of Justice appealed the district court’s decision to the Eleventh Circuit Court of Appeals.Client Alert

The Ohio State University Launches Its Accelerated Bachelor of Science in Nursing Program

February 27, 2024In response to Ohio’s nursing shortage, The Ohio State University College of Nursing is accepting applications for its new Accelerated Bachelor of Science in Nursing program (aBSN). Created for students with a bachelor’s degree in non-nursing fields, the aBSN allows such students to obtain their nursing degree within 18 months. All aBSN students will participate in high-quality coursework and gain valuable clinical experience. Upon completion of the program, graduates will be eligible to take the State Board, National Council of Licensure Exam for Registered Nursing (NCLEX-RN).
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