The latest independent contractor (IC) rule proposed by the Department of Labor is being viewed as mostly a carbon copy of the first Trump administration's regulation. The rule was formally implemented in the last days of the first Trump administration, was kept alive by a court order after the Biden administration attempted to kill it without going through a rulemaking process, and ended up being legally in place until the Biden IC rule went into effect in early 2024.
This means that for most of the Biden administration, a Trump IC rule was in effect at the Wage & Hour division of the DOL. The fact that the Trump administration would target the Biden IC rule at the Wage & Hour division was never in question, as signaled in September as part of the Trump administration's regulatory agenda.
The proposed Trump rule is possible to have a long run, providing guidance in settling worker classification disputes that come before the agency for at least half of the remainder of the Trump administration. The DOL said its IC guidelines would make it easier to properly differentiate between employees with the protections under the Fair Labor Standards Act and those workers who work as independent contractors.
At stake in the distinction between employee and IC is the requirement that employers must extend to employees numerous legally-mandated benefits, such as overtime payments, workers compensation, minimum wages, and Social Security contributions. The most significant difference between the Trump rule and the Biden rule was always the former's elevation of two standards above a five-point set of guidelines to determine whether a worker is a true IC or should be considered an employee.
The new Trump proposal emphasizes the concurrence of two factors – control and the opportunity for profit or loss – as core guideposts, intended to provide more predictability and certainty regarding the worker's status. This approach is similar to the rule released during the first Trump administration, which evaluated the 'economic realities' of the working relationship.
The proposed Trump rule does still contain three other tests that the Wage & Hour division would be expected to consider in cases involving IC status. These tests are the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
However, under the Biden rule, all five tests were considered equally, making it more likely for the Wage & Hour division to conclude a worker was an employee rather than an IC. By elevating the control and profit/loss standards, observers believe a finding of employee status becomes less likely.
Richard Reibstein, a partner with Troutman Locke who specializes in IC law, has argued that the Wage & Hour division's IC rule receives an outsized amount of attention. He believes that federal and state courts and their decisions on IC-related litigation have far more impact in creating legal precedents used to settle classification disputes.
The new rule is likely to face lawsuits, but Reibstein also notes that because no court has relied upon either the Trump or Biden rules in determining the IC status of workers, such litigation has limited practical meaning.
The new rule is likely to face lawsuits and limited practical meaning in court due to its similarity to the earlier Trump administration's regulation.
