DOL Gig-Contractor Rule Gets White House OK, Release Imminent

A final rule to ease employers’ use of independent contractors has been cleared by the White House, setting the stage for the U.S. Labor Department to complete one of its biggest rulemakings of the Trump era in the administration’s final days.

The Office of Information and Regulatory Affairs at the White House Office of Management and Budget signed off on the final rule after conducting a legal and economic analysis that took only 10 days, according to an online notice. That approval signals the final rule will be released soon.

The regulation, proposed in September, delves into one of the most contentious issues in employment law. It would adopt a simpler, shorter test for when a worker may be legally classified as an independent contractor rather than an employee who’s subject to minimum wage and overtime protections.

Labor Department leaders have worked for months to expedite completion of the rule. Their post-election strategy was to finalize it before President Donald Trump leaves office Jan. 20 but provide for it to take effect two months later, Bloomberg Law reported. If they follow through with that plan, it would force the incoming Biden administration to make critical decisions about the rule’s future, creating the potential for a courtroom showdown with the business lobby.

The president-elect’s incoming press secretary, Jen Psaki, cited this rule Wednesday as one of the “midnight” regulations the new administration will block from taking effect in a memo on Inauguration Day.

In effect, the departing Trump administration would be giving employers a persuasive tool to fend off expensive class actions accusing them of improperly classifying workers as independent contractors. That would be a boon for employers in several economic sectors, including the gig economy, where independent contractors are central to the business models of leading companies such as Uber Technologies Inc., Lyft Inc., and Instacart.

The Labor Department initially proposed five factors to determine whether a worker is economically dependent on an employer and thus an employee. Two of those factors were given greater weight: the nature and degree of an employer’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment.

Judging by the Biden campaign’s labor platform, which included a commitment to restore the Obama administration’s aggressive wage-hour misclassification agenda, the incoming DOL leadership is likely to move to reverse the finalized measure.

After the initial move to freeze it from taking effect, far tougher decisions would then be in store, including on what mechanism to use to undo the rule and, then, how to navigate the process of replacing it with a broader interpretation of employees under the Fair Labor Standards Act. Those decisions would be made under the assumption that the business community is likely to press its case in court.