The United States Department of Labor (the Department) has announced a final rule withdrawing the “Independent Contractor Status Under the Fair Labor Standards Act” rule (Independent Contractor Rule). The Independent Contractor Rule was enacted by the Department under the Trump Administration and would have generally found “gig economy” and certain other workers as independent contractors for purposes of federal labor law.
On January 6, 2021, the Department, as part of the Trump Administration, announced a final rule regarding the standard for employee versus independent contractor under the Fair Labor Standards Act (FLSA). The effective date of the final rule was March 8, 2021.
In the final rule, the Department said it:
On March 12, 2021, the Department, as part of the Biden Administration, issued a notice of proposed rulemaking (NPRM) proposing to withdraw the Independent Contractor Rule.
The Department has announced that it has decided to finalize the withdrawal of the Independent Contractor Rule for several reasons, including:
The rule would have generally found “gig economy” and certain other workers to be independent contractors for purposes of federal labor law. Could the proposed withdrawal of the rule signify an intent to classify workers of Uber, Lyft, DoorDash, etc. as employees? If so, the withholding, payroll tax and benefit implications could be massive for these gig economy businesses.
Nathan R. Olansen is a Shareholder in the law firm of Midgett Preti Olansen. His practice is focused on estate planning, probate and trust administration, IRS and state and local tax audit and tax collection cases, as well as individual and entity tax planning, asset protection and a variety of related transactional matters.
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