Independent contractor rule withdrawn

The Department of Labor this month announced it’s getting rid of its independent contractor rule.

That rule would have required employers to use an economic reality test to gauge financial dependency in an employment relationship to determine whether workers were employees or independent contractors.

That rule was published in January, but President Joe Biden’s administration froze its May 7, 2021 effective date as it reviewed regulatory changes adopted late in the tenure of the previous White House.

After that review, the DOL found the rule was inconsistent with the Fair Labor Standards Act, and labor officials said implementing it would have had a “confusing and disruptive effect on workers and businesses alike.”

Since the rule was withdrawn before its effective date, employers don’t need to change their practices to comply with any new requirements and should instead follow existing DOL guidance.