Independent Contractor Rule Coming No Later Than October, DOL Says

Author: Michael Cardman, XpertHR Senior Legal Editor

June 13, 2023

A recent court filing suggests that the US Department of Labor (DOL) will finalize a new independent contractor rule no later than October.

The filing marks the latest development in a years-long conflict about how to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA).

In 2021, the Trump administration put forth a rule establishing an employer-friendly five-factor test. Later that year, the Biden administration withdrew the rule one day before it was supposed to take effect. Then, in 2022, a federal district court in Texas reinstated the Trump administration's five-factor test, which has remained in effect until today.

The DOL appealed to the 5th Circuit Court of Appeals, and the case has been tied up in litigation ever since.

In the meantime, the DOL proposed a new independent contractor rule that would replace the Trump administration's five-factor test with a version of the "economic realities test."

In a filing dated June 9, 2023, the DOL asked the 5th Circuit to hold off on any further proceedings in the case for 120 days while it considers whether to adopt its proposed rule. "Issuance of a final rule should make it unnecessary to pursue this appeal," the DOL said.

The 5th Circuit granted the DOL's request the same day - meaning the DOL will have until October 7, 2023, to either finalize its rule or continue with its appeal.

Of course, there is no guarantee that the DOL will stick to its own timeline. The agency already has missed its self-imposed targets for the independent contractor rule and for a new overtime rule several times.

The DOL had not returned a request for comment as of the time of publication.

Any final independent contractor rule would take effect no sooner than 60 days after it is published in the Federal Register.

In a related development, the National Labor Relations Board today issued a decision making it more difficult for employers to treat workers as independent contractors under the National Labor Relations Act.