Washington Report

Advocacy Updates from Washington D.C.

DOL Independent Contractor Rule Paused for Review

On January 20, the new Administration released a “Regulatory Freeze Pending Review” Memorandum for the heads of executive departments and agencies. The memo outlines parameters around which federal agencies should review or delay certain pending regulations, including those that have been finalized but not yet gone into effect.

In accordance with this memo, on February 5, 2021, the Department of Labor has proposed to delay the effective date of the final independent contractor rule issued under the prior Trump Administration, which was supposed to take effect on March 8, 2021. DOL will delay the effective date of the rule to May 7, 2021, which is 60 days beyond its original effective date. The idea of the delay to allow the new administration to review and consider the legal, policy, and enforcement implications of adopting this new standard.

For real estate professionals, the rule did not change their classification as independent contractors under the Internal Revenue Code, nor did it preempt the many states laws classifying real estate professionals as independent contractors. Rather, the final independent contractor rule outlined two core factors to determine whether a worker is an employee based on an economic dependence on someone else’s business (nature and degree of control; worker’s opportunity for profit or loss) and three other guideposts to use in the support of that analysis (amount of skill; degree of permanence; integrated unit of production). The final rule also included a fact specific analysis for all.

NAR continues to advocate for minimal disruption to the industry that greatly benefits from the ability of real estate professionals to be classified as independent contractors. Many states and some federal laws have codified the ability of real estate professionals to be classified as independent contractors, but there continues to be ongoing scrutiny and legal challenges to this status. NAR will support efforts to provide a clear and consistent standard for evaluating a worker’s status, while preserving existing worker classification authority that allows real estate professionals to be independent contractors.

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