The U.S. Department of Labor announced this week it is seeking a two–month delay in the effective date of the Trump administration rule on independent contractors and is asking for public comment by Feb. 24.
The federal rule, which had been scheduled to take effect March 8, would have offered an “an economic reality” standard, generally viewed as more favorable to businesses than the more restrictive so-called ABC test, to determine if an individual is an employee or independent contractor.
Different tests apply under various federal laws and state laws to determine when someone is an independent contractor. Individuals hired as independent contractors do not receive employee benefits and must pay their own taxes quarterly instead of being subject to state and federal tax withholding.
On Jan. 19, the day before President Biden’s inauguration, the Trump administration’s Wage & Hour Division issued two separate opinion letters to interpret and bolster the rule that had not yet taken effect. Less than a week later, the Biden administration withdrew both of those opinion letters,
This action means employers may not rely on the withdrawn opinion letters as official statements of DOL policy, or as part of any “good faith” defense to an alleged violation of the Fair Labor Standards Act.
Legal experts view the Biden administration’s actions as the first step in eventually withdrawing the Trump administration independent contractor rule before it can be implemented and beginning the process of proposing a new one.