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NCA Member Alert: DOL Rescinds Trump Independent Contractor Rule – Effective Tomorrow

This morning, the Department of Labor announced the withdrawal of the Trump Administration’s independent contractor rule effective May 6, 2021.

The Trump rule would have placed more emphasis on two of five factors in determining a worker’s classification as an employee or independent contractor. The now rescinded rule prioritized whether the worker has control over the work and potential for profit or loss based on personal initiative or investment. The rule was supported by the business community, including NCA, because it simplified and clarified the process of classification of workers.

The withdrawal of the rule means enforcement of worker classification reverts back to the previous rule which includes a seven-part “economic realities” test to determine whether a worker is an employee or an independent contractor.

  • The extent to which the services rendered are an integral part of the principal’s business.
  • The permanency of the relationship.
  • The amount of the alleged contractor’s investment in facilities and equipment.
  • The nature and degree of control by the principal.
  • The alleged contractor’s opportunities for profit and loss.
  • The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
  • The degree of independent business organization and operation.

This action by the Department of Labor was not unexpected. “By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” said U.S. Secretary of Labor Marty Walsh. “Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors. We remain committed to ensuring that employees are recognized clearly and correctly when they are, in fact, employees so that they receive the protections the Fair Labor Standards Act provides.”

If you have any questions, please feel free to contact NCA Vice President of Government Relations, Joe Trauger, at [email protected].