DOL Officially Withdraws Independent Contractor Rule

On May 6, 2021, the U.S. Department of Labor formally withdrew the independent contractor Final Rule that had been issued in the waning days of the prior administration, which it had previously proposed to do and we discussed in our March 2021 E-Update.

The now-withdrawn Final Rule made it easier to achieve independent contractor status, meaning that employers would not need to keep time records and pay overtime, extend employment benefits or pay employment taxes for those individuals. With the withdrawal of this rule, we anticipate a return to the DOL’s prior approach to this issue, which greatly favors the finding of employee status.

In light of this development, employers should be particularly cautious with regard to their designations of individuals as independent contractors. Given the change in approach, it is entirely possible, if not likely, that those individuals who were arguably properly treated as independent contractors during the last administration may nonetheless now be found to be employees.