The Coalition to Promote Independent Entrepreneurs submitted comments on April 12, 2021, urging the U.S. Department of Labor not to withdraw the final regulations on Independent Contractor Status Under the Fair Labor Standards Act. To read the comments, click here.
In the comments, the Coalition respectfully urged DOL not to withdraw the Independent Contractor Rule because it provides much needed clarity to the application of the “economic realities” test and reflects an objective restatement of the court decisions that have applied the test. The enhanced clarity cuts in both directions. It not only helps legitimate independent contractors and their clients enter into contractual relationships with a greater degree of certainty that the relationships will be respected for purposes of the FLSA, but it also more glaringly exposes instances of worker misclassification under the FLSA. The only beneficiary of a withdrawal of the Independent Contractor Rule would be the trial attorneys who profit from the uncertainty and unpredictability that exists under current law.
The Coalition argued, among other things, that a withdrawal of the Independent Contractor Rule would be disquieting to the regulated community. While a new Administration certainly can disagree with the policy positions of a prior Administration, a withdrawal of the Independent Contractor Rule would be inconsistent with DOL’s own published research findings, based on its review of decades of federal court decisions applying the economic realities test, including the U.S. Supreme Court decision in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947).
While DOL asserts that its withdrawal of the Independent Contractor Rule would not be disruptive because it has yet to take effect,[1] the Coalition argued that the withdrawal would be highly disruptive and could have undesirable practical implications.
For example, if DOL were to withdraw the Independent Contractor Rule and bring an enforcement lawsuit against a company, asserting that the company had misclassified individuals as independent contractors, the company could respond by relying on DOL’s own research findings that are published in the Federal Register.[2] The company could assert (if factually supportable) that because the five-factor test, with its two “core factors,” as applied to the individuals at issue, indicate an independent-contractor relationship, the company could reasonably assume that it properly classified those individuals as independent contractors.[3] If this were to occur, would DOL dispute its own published research findings? To be sure, a company could have conformed its independent-contractor relationships to the final regulations, based not only on the final regulations, but also – and independently – on DOL’s published research findings that produced those regulations.
The Coalition respectfully urged DOL not to withdraw the Independent Contractor Rule. The enhanced certainty and predictability the Independent Contractor Rule creates would benefit all direct stakeholders. As noted, the only beneficiaries of a withdrawal of the Independent Contractor Rule would be trial attorneys.
[1] 86 Fed. Reg. 14027, 14035.
[2] See above note 14.
[3] DOL’s publication in the Federal Register of its September 2020 NPRM and its January 2021 Independent Contractor Rule represent two separate actions, namely, (i) DOL’s publication of its research findings concerning its review of decades of federal court decisions applying the multi-factor economic realities test in determining worker status, and (ii) DOL’s publication of a final regulation based on those research findings. It is arguable that a withdrawal of the latter would necessarily impugn the former.
