• US Labor Department Withdraws Indie Contractor Rule

  • US Labor Department Withdraws Indie Contractor Rule

    As anticipated, the U.S. Department of Labor (DOL) today announced that it is
    withdrawing the Independent Contractor Rule finalized in January under the
    Trump administration that was designed to make it easier for businesses to
    determine if a worker is an employee or indie contractor.

    The move is seen as a blow to transportation firms such as petroleum marketers.
    Clarity on independent contractor status is important to petroleum haulers who
    hire owner-operators as truckers. Some haulers have faced legal challenges for
    classifying these workers as independent contractors. Employers can get sued
    for back wages and various benefits if they misclassify employees as
    independent contractors, legal sources have told OPIS.

    The rule, published in the Federal Register on Jan. 7, was to take effect March
    8, but the Biden administration put it on hold.

    The DOL said the withdrawal, effective May 6, will "protect workers' rights to
    the minimum wage and overtime compensation protections of the Fair Labor
    Standards Act (FLSA)." The agency explained that the rule was "in tension with
    the FLSA's text and purpose, as well as relevant judicial precedent."

    The new rule prioritized two core factors to determine employee status under
    the FLSA that the DOL now says "would have undermined the longstanding
    balancing approach of the economic realities test and court decisions requiring
    a review of the totality of the circumstances related to the employment
    relationship." This would have "narrowed the facts" in analyzing if a worker is
    an employee or independent contractor, which would result in "workers losing
    FLSA protections."

    The two core factors are the nature and degree of control over the work and the
    worker's opportunity for profit or loss based on initiative and/or investment.

    The FLSA requires employers to pay employees at least the federal minimum wage
    and overtime of at least one-and-one-half times the regular rate of pay for
    every hour beyond a 40-hour work week. Those protections do not apply to
    independent contractors.

    Labor law firm Fisher Phillips, which has petroleum marketers as clients,
    earlier this year noted that the rule faced a "very uncertain future" under the
    Biden administration, which would be in office before the rule was scheduled to
    take effect.

    In February, the DOL also withdrew an opinion letter offering favorable
    guidance for transportation firms that treat owner-operator truck drivers as
    independent contractors.

    The Jan. 19 opinion letter (FLSA2021-9) on truckers tackled two issues: whether
    requiring compliance with specific legal obligations or health and safety
    standards is a factor in determining the employee status of an owner-operator
    driver under the FLSA and whether certain owner-operators are employees under
    the FLSA.

    Under both scenarios, the DOL under the Trump administration had said that
    owner-operators would likely be considered independent contractors, not
    employees.

    However, under the Biden administration the DOL said that the opinion letter
    was "issued prematurely" because it was based on a rule that had not gone into
    effect and could not be "relied upon as statements of agency policy as of the
    date of withdrawal."

    --Reporting by Donna Harris, dharris@opisnet.com; Editing by Michael Kelly,
    michael.kelly3@ihsmarkit.com




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