On Dec. 13, ABC submitted comments opposing the U.S. Department of Labor’s independent contractor proposed rule, which eliminates the ABC-supported 2021 final rule’s emphasis on two “core” factors—a worker’s control over their work and their opportunity for profit or loss, both of which are paramount in making an independent contractor determination. Instead, the department’s approach is to restore a “totality-of-the circumstances” analysis of the “economic reality test.”

The new proposal creates an ambiguous and difficult-to-interpret standard under which employers will be forced to guess which factors will be more important in the determination and how to analyze the facts of their contractual relationships under multiple factors. This confusion will lead to more litigation, as employers and workers alike will not understand who qualifies as independent contractors.

ABC’s comments also state, “It is unfortunate that the DOL will not let the January 2021 final rule stay in effect long enough to work. It does not create a new standard; instead, the January 2021 final rule clarifies and simplifies the longstanding economic reality test based on an exhaustive analysis of cases applying that test around the country, which the DOL properly found put the greatest weight on the right of control and economic opportunity, along with other traditional factors.”

In conclusion, ABC urges the DOL to withdraw the new proposed rule and retain the current 2021 final rule.

Background

On Oct. 11, the DOL announced a new proposal to rescind and replace a commonsense, ABC-supported 2021 final rule on independent contractors. The proposed rule would unnecessarily complicate the test for determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act, which would cause confusion, increased litigation and additional administrative burdens for contractors.

ABC issued the following statement in response to the DOL’s announcement:

“ABC is deeply disappointed that the Biden DOL is moving forward with a proposed rule that will disrupt legitimate independent contractors, which are an essential component of the construction industry,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “Independent contractors provide specialized skills, entrepreneurial opportunities and stability during fluctuations of work common to construction. Rescinding the commonsense 2021 final rule will increase the confusion and litigation chaos that has bedeviled the regulated community for years. Any effort by DOL to undermine the use of independent contractors in the rulemaking will likely be challenged by ABC and other stakeholders.”

On Oct. 19, ABC urged the DOL to extend the Nov. 28 comment period deadline by 60 days, stating, “ABC represents a large number of contractors and subcontractors who will be significantly impacted by this new proposed rule. Due to the complexity of the issues included in the 58-page proposal, the current 45-day comment period does not allow sufficient time for ABC to fully analyze the rulemaking as well as effectively communicate the broad scope of issues with its members before providing comments.”

On Oct. 25, the DOL announced an extension of the comment deadline on the proposed rule from Nov. 28 to Dec. 13.

On Nov. 9, ABC participated in the U.S. Small Business Administration’s Office of Advocacy virtual roundtable on the proposed rule. 

ABC encouraged members to help push back against the DOL’s harmful proposal by submitting to the DOL a pre-generated comment opposing the proposed rule, which was sent out by ABC’s Action app.

ABC is one of the co-plaintiffs that successfully sued the Biden administration’s DOL for attempting to delay and rescind the commonsense 2021 independent contractor final rule. Under the March 2022 decision issued by the U.S. District Court for the Eastern District of Texas, the 2021 final rule went into effect as scheduled on March 8, 2021, and is still in effect.

To learn more about the DOL’s new proposed rule, see ABC general counsel Littler Mendelson’s analysis.