The U.S. Department of Labor (DOL) announced withdrawal of the independent contractor rule for determining how workers are classified under the Fair Labor Standards Act (FLSA). DOL published the final independent contractor rule in January 2021, but the rule never went into effect. The independent contractor rule would have adopted an economic realities test for classifying workers as employees or independent contractors, and would have provided greater clarity for how independent contractors are classified under the FLSA. The Labor Department cited several reasons for withdrawing the rule, including:
- The independent contractor rule was in tension with the FLSA’s text and purpose.
- The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
- The rule would have narrowed the facts and considerations compromising the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.
It was expected that the Department of Labor would withdraw the independent contractor rule, but it is unclear how the Department will proceed with a new rule and potential regulations on this matter. NAR has remained engaged on this issue, and will continue to provide updates. For more information on NAR’s advocacy efforts on worker classification matters, please visit nar.realtor/independent-contractor-status.