CLIENT ALERT – Independent Contractor Rule Change Delayed

February 22, 2021

For those of you preparing for the change in independent contractor rule scheduled to take place on March 8, stop – at least for the time being.  On Friday, February 19, the Wage and Hour Division (WHD) announced that it had withdrawn Opinion Letter FLSA2019-6, which involved an analysis of the relationship between a virtual platform organization and its workers.  That Opinion Letter had determined that the workers were independent contractors.  (A summary of the withdrawn letter is available here: https://www.dol.gov/newsroom/releases/whd/whd20190429.) Friday’s announcement follows an earlier announcement by the WHD that there will likely be a delay of the effective date of the new rule, “Independent Contractor Status Under the Fair Labor Standards Act.” The additional time will be used for WHD review and consider the rule and is the result of “Regulatory Freeze Pending Review” issued by the Biden administration on January 20.  According to the WHD website, the WHD has proposed delaying the effective date of the rule until May 7, 2021.  The WHD now is in the process of soliciting comments on the delay only.

In the meantime, if your organization uses independent contractors, you may want to rely on the current rule.  That is, when determining the nature of the engagement, 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.

We’ll keep you posted on developments, but if you have questions, please contact Jean Novak at jnovak@smgglaw.com or at 412-281-5423.