Out with the Old and in with The New -- The Biden Administration Makes Its Mark on Joint Employer and Independent Contractor Regulations.

“You know you hate me but it ain’t no lie, baby bye bye bye”

– NSYNC

At the time of this blog, Joe Biden has been the President of the United States for 57 days. The first 100 days of any presidency is rife with changes in the executive branch and that is especially true when it comes to the Department of Labor (“DOL”). At the end of September, DOL saw a flurry of activity with President Donald Trump doing his best to make a lasting impact on the way DOL views employment status for the purposes of interpreting the Fair Labor Standards Act (“FLSA”). Abrahams Wolf-Rodda wrote a blog on that here: https://www.awrcounsel.com/blog/2020/9/28/the-silly-season-in-government-contracting-arrives-earlythe-rush-is-on-to-issue-executive-orders-new-rules-and-to-bring-judicial-challenges?rq=biden. However, as tends to happen when one attempts to make change quickly through executive policy and executive orders, the new president is just as easily able to rescind that policy.

That was the case on March 11, 2021 when DOL decided they wished to rescind the Independent Contractor Final Rule issued on January 7, 2021. This rule adopted an “economic reality” test to determine whether a worker is an employee or an independent contractor under the FLSA. DOL wrote that the old rule would actually narrow the factors that a court could consider when determining whether a worker truly is an employee and under the protections of the FLSA. DOL also stated that this new rule had never been used by any court or by the Wage and Hour Division while also not having any basis in the FLSA’s text. In addition, DOL stated that the economic reality test considered factors such as whether the worker is an integral part of the employer’s business, which would tend to place workers in a gig economy as “independent contractors”. This proposed withdrawal will likely make more workers, especially in the gig economy, into employees for the purpose of the FLSA and therefore entitle them to minimum wage and overtime requirements. For more information or to make comments on this NPRM, please visit the federal register here: https://www.federalregister.gov/documents/2021/03/12/2021-05256/independent-contractor-status-under-the-fair-labor-standards-act-withdrawal.

DOL also published a second Notice of Propose Rulemaking looking to rescind the current regulations on Joint Employer relationships under the FLSA. The rulemaking ostensibly took effect on March 16, 2020, however several states in February 2020 of that year filed a lawsuit claiming that the Joint Employer Rule actually violated the Administrative Procedure Act. The effect of that lawsuit was to enjoin most of the Joint Employer Rule on account of the rule being “arbitrary and capricious” due to its failure to explain why DOL decided to do a complete 180 turn on past policy. This proposed rulemaking will have the effect of completely cutting out the new Part 791 of Title 29 of the Code of Federal Regulations. Since DOL is not replacing this part of Title 29 with anything, they are requesting commenter feedback for a replacement. For more information or to make comments on this NPRM, please visit the Federal Register here: https://www.federalregister.gov/documents/2021/03/12/2021-04867/rescission-of-joint-employer-status-under-the-fair-labor-standards-act-rule.

It is clear from both of these rulemaking activities that President Biden’s inauguration spelled a victory for worker’s rights. These proposed rules would either restore or extend additional protection to those otherwise on the border of independent contractor status, and will allow employees of joint employers to pursue their interests against two separate entities if either one does not perform their responsibilities. These rules will return the labor world to the status quo before President Trump shook things up, but this back-and-forth policy change still causes trouble for compliance departments. Those employers who changed or previously reviewed their worker’s positions may have to do so again in order to remain in compliance with the FLSA. With all of this activity on the Federal Register, it is important for in-house legal staff and HR departments to peruse DOL’s news releases so that they are not surprised by any new regulations and can get a jump on changes in the legal rules.