The U.S. Department of Labor announced plans to rescind two Trump-era rules that respectively provided much-needed clarity in determining independent contractor status and joint employment scenarios.
Trump-era joint employer rule expected to be replaced: The Trump DOL issued its own joint employer rule in January 2020 that clarified the law along traditional lines, finding a joint employer relationship only where an employer exercised actual and direct control over another employer’s workers’ terms and conditions of employment. The move was supported by HR Policy Association and included a number of our recommendations. However, the rule was for the most part subsequently struck down by a federal judge in September 2020. Recently, the Biden administration has sent a new proposed joint employer rule to OMB. The proposal to rescind the Trump rule is another step toward replacing it.
- Biden’s proposed rule claims the Trump rule was "unduly narrow" and seeks "to engage in further legal analysis, in order to ensure that lawful and clear guidance is being provided to the regulated community."
The Trump-era independent classification rule was slated to become effective March 8, but was delayed last week to “allow the department to review issues of law, policy, and fact.” In comments submitted to the Department in response to its proposed delay, HR Policy strongly advised against delaying implementation of the Trump-era rule, which brought clarity and consistency to misclassification law. On March 5, the Biden administration sent a new proposal to the White House Office of Information and Regulatory Affairs for review.
- Biden’s proposed rule would rescind the Trump standard because it "has never been used by any court or by [the Wage and Hour Division], and is not supported by the Act’s text or case law," and because the new administration does not believe the Trump rule would “benefit workers as a whole.”
The recent appointment of former Deputy Labor Secretary Seth Harris as White House labor advisor could signal that the Biden administration’s expected restrictive approach to worker classification that assumes most workers are employees under the FLSA could also involve carveouts for certain industries. Last November, California voters passed Prop 22, which exempted platform drivers from California’s AB 5 classification law while requiring Uber and Lyft to provide their drivers certain benefits such as health insurance and an enhanced minimum wage. Harris has previously put forward a similar proposal, though he has been severely criticized for this by some in the labor movement.
Outlook: The Biden administration is moving rapidly to undo Trump-era labor and employment policies. New proposed rules on each issue may be seen before the end of the year. Employers should closely evaluate their use of contractors, as well as their relationships with contractors and franchisees, and be ready to adjust accordingly to the likely forthcoming new rules.