WHD Announces the Withdrawal of the Independent Contractor Rule

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Earlier this month, the Wage and Hour Division (WHD) announced the withdrawal of the Independent Contractor rule effective May 6, 2021. The announcement noted that the current final rule published on January 7, 2021, had significantly undermined safeguards against unfair pay practices. Therefore the withdrawal was essential to protect workers’ rights to the minimum wage and overtime compensation protections of the Fair Labor Standards Act (FLSA).

In February, as the new Biden administration transitioned in, the WHD published a proposal to delay the Independent Contractor Rule’s effective date to allow for time to consider potential issues associated with the rule established by the Trump administration. The WHD followed this in March with a notice of proposed rulemaking (NPRM) to withdraw the Independent Contractor Rule explaining that the rule was inconsistent with the FLSA’s text and purpose and would have a confusing effect on workers and businesses alike due to its departure from judicial precedent.

The WHD sought comments on its NPRM to withdraw the Independent Contractor Rule, providing a comment period that expired on April 12, 2021, for which they received more than 1,000 responses. The commenters expressed opposition to the Independent Contractor Rule predominantly because the rule would have facilitated the exploitation of workers reclassified or misclassified as independent contractors due to the rule.

After considering the comments submitted in response to the NPRM, the WHD finalized the withdrawal of the Independent Contractor Rule. They anticipate that the withdrawal of the independent contractor rule will avoid a decline in workers’ access to employer-provided fringe benefits such as health insurance and retirement plans and avoid a reduction in other benefits such as workers’ compensation coverage and unemployment insurance.