CLIENT ALERT – Independent Contractor Rule

May 6, 2021

In February we notified clients that the independent contractor rule scheduled to go into effect on March 8 was being delayed for further review.  On May 5, 2021, the US Department of Labor (DOL) announced that the “Independent Contractor Status Under the Fair Labor Standards Act” final rule was being withdrawn.  In support of its decision the DOL stated,

[T]he Rule is inconsistent with the FLSA’s text and purpose, and would have a confusing and disruptive effect on workers and businesses alike due to its departure from longstanding judicial precedent.

https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor.  The withdrawal is available here: https://www.federalregister.gov/public-inspection/2021-09518/independent-contractor-status-under-the-fair-labor-standards-act-withdrawal.

Thus, effective May 6, 2021, we’re again bound by the “old” rule. That is, when determining the nature of a relationship, consider whether:

  1.  The person provides services that are ancillary (rather than integral) to your business.
  2.  You have a short-term (or recurring short-term) relationship with the person.
  3.  The person invests in items such as facilities and equipment to provide the service.
  4.  The person provides services with little control or direction.
  5.  The person, in providing services, has opportunities for profit.
  6.  The person is in open competition with others providing similar services.
  7.  The person maintains a business organization, such as an LLC.

            If, in anticipation of the rule becoming effective, you changed how you categorized such relationships, now is the time to re-evaluate those arrangements to ensure that you have an independent contractor, not an employee.

Still confused? Contact Jean Novak at jnovak@smgglaw.com or at 412-281-5423.