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Independent Contractor Final Rule Planned for Jan. 7 Release (1)

Jan. 4, 2021, 2:57 PMUpdated: Jan. 4, 2021, 4:34 PM

The Trump administration is planning to release a hot-button final rule on Jan. 7 that makes it easier for businesses to classify workers as independent contractors, two sources familiar with the matter told Bloomberg Law.

That rule, which would be issued 13 days before Trump leaves office, is a chief priority for the U.S. Labor Department and part of a flurry of employer-friendly measures in recent weeks designed to tie the hands of the Biden administration. The White House regulatory review office gave its final sign-off to the measure on Dec. 31.

Proposed in September, the rule 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. The issue of worker classification has taken on greater significance during the rise of 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 Department cannot comment on pending rulemakings,” a DOL spokeswoman said via email.

President-elect Joe Biden’s incoming press secretary, Jen Psaki, cited the independent contractor regulation on Dec. 30 as one of the “midnight” rules that would be potentially frozen from taking effect in a memo on Inauguration Day.

The Thursday release will state that the measure won’t take effect until 60 days after it’s formally published in the Federal Register, the sources said. This would allow the Biden Labor Department to temporarily postpone the effective date, but create more complicated decisions on how to proceed thereafter.

Democratic state attorneys general have argued against the rule’s legality, signaling a willingness to file a lawsuit challenging it. The Biden Justice Department could decline to defend that suit in court. But the business community stands ready to wade in by urging a judge to force DOL to implement the new independent contractor test, Bloomberg Law reported Dec. 15.

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.

—With assistance from Chris Opfer

(Updated with Labor Department comment in fourth paragraph. )

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com