The Labor Department is accelerating a plan to propose and finalize this year a worker classification regulation defining when workers are independent contractors or employees under federal wage law.
The timeframe for such a significant rule—only six months for the proposal, public comment period, and final publication—would be far more compressed than the typical regulatory process. But that’s the mission of senior DOL officials who are making the independent contractor issue a top priority, said five current and former administration sources and others briefed on the plans.
The administration wants to wrap up the rulemaking in the final months of President
The Democrat-majority House and a growing number of state legislatures have enacted bills to force businesses into reclassifying independent contractors as employees, giving them enhanced labor protections. The DOL rule, which the White House has labeled “deregulatory,” also surfaces amid a wave of worker lawsuits against corporations from
Democratic presidential nominee
The business community’s pushing the department to finish the initiative to beat legislative action, although the rule wouldn’t pre-empt state laws that are more protective of workers.
“I have full confidence that the Department of Labor will issue a rule on independent contractors by the end of the year,” said Michael Lotito, a management attorney at Littler Mendelson who represents the U.S. Chamber of Commerce in a brief supporting a legal challenge from Uber and Postmates to halt the California classification bill. “This is one of the most cataclysmic issues in labor and employment law and it’s most important for the Department of Labor to give us their view.”
The DOL declined to comment on an unreleased rule and didn’t address questions about Election Day implications. A department spokeswoman deferred questions about the regulatory agenda to the White House Office of Management and Budget. An OMB media representative didn’t respond to a request for comment.
Details on the rule haven’t been released, but it would lay out a framework for businesses to understand when their workers are independent contractors or employees who are covered by minimum wage and overtime laws, according to a White House regulatory agenda notice Tuesday.
The DOL’s Wage and Hour Division over the past two administrations has offered guidance instead of more formal regulations as a response to classification disputes that coincided with the rise of the gig economy and as companies more frequently outsource non-core functions to third-party contractors.
The Trump administration has been trying to reverse course on the Obama administration’s approach to cracking down on employer misclassification. The DOL in 2017 withdrew a 2015 guidance memo saying most workers are employees, not independent contractors, under the Fair Labor Standards Act.
An opinion letter from the administration last year interpreted the law in favor of a company’s decision to treat its workers as independent contractors, a move that would help some gig-economy companies but was too narrow to please the wide swath of corporate executives who view worker classification as an existential threat to their business model.
Scalia Takes Helm
Since his arrival in September, Labor Secretary
An independent contractor regulation is a natural outgrowth of that philosophy, said Jonathan Berry, who was Scalia’s top policy official at DOL through April.
“The employment relationship question is perhaps the murkiest and most important question under the Fair Labor Standards Act and so it’s a natural target for a Scalia Labor Department that wants to dispel regulatory uncertainty wherever possible,” said Berry, now a partner at administrative law firm Boyden Gray & Associates in Washington. “I know that regulatory clarity about rights and obligations, avoiding unfair surprise, giving fair notice—those have been extremely consistent themes of Secretary Scalia’s leadership, both publicly and internally.”
Some see this as scaling back on the number of employees entitled to wage protections.
“What I would expect to see is an effort to radically narrow the existing test and reinterpret the factors in that test in the manner that reduces the number of employees as much as possible, and increases the number of independent contractors as much as possible,” said Seth Harris, a former deputy and acting labor secretary under President
The White House earlier this week had slated a June 2020 release for a proposal, a deadline that’s already come and gone but indicates a proposed rule is forthcoming. It’s unclear whether DOL can complete a final rule by year’s end, and have it take effect before Inauguration Day 2021.
Harris sees a deeper takeaway from the effort to speed up the process.
“I think it’s striking that Secretary Scalia doesn’t believe that President Trump is going to be elected,” Harris said, “so much so that he’s scrambling to get out a business-friendly interpretation of the law before he expects President Trump to leave office.”