The Department of Labor (“DOL”) has announced a plan to roll back the Trump administration’s rules for determining independent contractor and joint employment status. These rules were heavily criticized by pro-employee organizations for not affording adequate protections to workers and being too favorable to employers.
The proposed rule laid out a five-factor “economic reality” test to determine if an individual should be classified as an independent contractor or an employee: (1) the nature of the work and the degree of control the hiring entity has over the work performed; (2) the worker’s opportunity for profit or loss based on their own initiative and investment; (3) the skill required to perform the work; (4) the permanency of the working relationship between the worker and the hiring entity; and (5) whether the work being performed is integral to production.
In its notice to rescind this rule, the DOL stated that this test has not been supported by prior court decisions or used by the DOL, that it misconstrued the law, and that it disproportionately benefited employers.
The DOL also announced its intention to rescind the final rule outlining the test for joint-employer status though this rule, from its inception, had faced strong opposition from states’ attorneys general. The rule established a four-factor balancing test to determine if Company #2 could be considered a joint employer of Company #1’s employee: does Company #2 (1) hire or fire Company #1’s employees, (2) supervise and control work schedules or conditions of employment of Company #1’s employees, (3) determine the rates and methods of payment of Company #1’s employees, and (4) maintain the employment records for Company #1’s employees?
The DOL wanted further analysis as the proposed rule differs “from the analyses and tests applied by every court to have considered joint employer questions.”
The DOL has invited public comment on the withdrawal of these rules but has yet to announce any proposed new rules. Suffice it to say the Biden administration will be more employee-friendly in any upcoming labor and employment-related lawmaking.
For any questions about the above changes, please contact Ellen below:
Ellen M. Leibovitch
Board Certified Labor & Employment Lawyer
ASSOULINE & BERLOWE, P.A.
2101 N.W. Corporate Blvd., Suite 410
Boca Raton, Florida 33431