DOL Withdraws Opinion Letter on Independent-Contractor Status

Lisa Nagele-Piazza, J.D., SHRM-SCP By Lisa Nagele-Piazza, J.D., SHRM-SCP February 22, 2021
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ride-hailing driver wearing face mask using smartphone

The U.S. Department of Labor (DOL) recently withdrew an opinion letter that said some gig-economy workers who find jobs through smartphone apps—such as drivers for ride-hailing services—are properly classified as independent contractors under federal wage and hour law.

Opinion letter FLSA2019-6, which was issued in April 2019, addressed the same issues as a rule on independent-contractor status that was finalized by the Trump administration and slated to take effect in March. The Biden administration has proposed delaying the final rule so that the new leadership team has time to review it. The withdrawn opinion letter "addressed the same issue under consideration by the department," the DOL said in a Feb. 19 announcement.

The DOL also withdrew an opinion letter stating that employers don't have to pay long-haul truck drivers for time they spend in a truck's sleeping berth, so long as the drivers are relieved of all duties.

"Several courts have declined to follow this letter, determining, among other things, that it is inconsistent with the department's regulations," the DOL said.

We've rounded up articles and resources from SHRM Online and other trusted media outlets on the news.

Independent-Contractor Classification

In January, the Biden administration asked all federal agencies to freeze proposed regulations and those with pending effective dates so that Biden's appointees have the opportunity to review them. In accordance with the directive, the DOL recently proposed delaying a final rule issued by the Trump administration that would make it easier for businesses to classify workers as independent contractors rather than employees. The DOL may consider repealing the rule and taking the more stringent position that most workers are employees under the Fair Labor Standards Act (FLSA). The withdrawn opinion letter also addressed independent-contractor status under the FLSA. "Thus, consistent with its proposed delay of the final rule, [the DOL Wage and Hour Division] is withdrawing this opinion letter," the department said.

(Bloomberg Law)

More Opinion Letters Expected to Be Reviewed

In January, the DOL withdrew three opinion letters issued in the last days of the prior administration that addressed tipped workers and independent-contractor status under the FLSA. "These letters were issued prematurely because they are based on rules that have not gone into effect," according to the DOL. The new administration is expected to thoroughly review other FLSA opinion letters that were issued by the prior administration. More opinion letters may be withdrawn as the department aligns with the new administration's priorities.

(The National Law Review)

DOL Lifts Limits on Subregulatory Guidance

Employers can expect to have new compliance obligations in the wake of the Biden administration's lifting of certain limits that the Trump administration had put on subregulatory guidance—guidance that hasn't gone through the notice-and-comment period. The Trump administration tried reducing the number of subregulatory guidance documents issued, with the notable exception of opinion letters, which the Trump administration increased. Employers may find other forms of subregulatory guidance to be less helpful and more burdensome than opinion letters.

(SHRM Online)

Review Evolving Independent-Contractor Rules

Employers should note that states may apply stricter independent-contractor rules than the DOL. For instance, California's law significantly differs from the Trump administration's paused rule. The federal rule would apply an economic-reality test and primarily consider the nature and degree of control over the work and the worker's opportunity for profit or loss based on initiative and investment. California's three-prong "ABC" test, however, requires all three of the following factors to be met for a worker to be properly classified as an independent contractor:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The worker performs tasks that are outside the usual course of the hiring entity's business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Other states, such as Illinois, Massachusetts and New Jersey, apply a similarly stringent independent-contractor test, and Biden has said that he supports a nationwide ABC test.

(SHRM Online)

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