Regulatory Updates

DOL Proposes Delay for Independent Contractor Regulations

The Department of Labor (DOL) Wage and Hour Division has proposed a delay of the effective date for final regulations on independent contractor status, regulations that were due to become effective March 8, 2021. The DOL is seeking to delay the effective date to May 7, 2021. Comments on the request to delay the effective date must be received by February 24, 2021.

In its request for a delayed effective date, the DOL stated that this action will not have negative effects because the final regulations have not yet been implemented, and the existing public guidance—Wage and Hour Division Fact Sheet #13, Employment Relationship under the Fair Labor Standards Act (FLSA)—"will continue to be available to all.”

The final regulations were published January 7, 2021, in the Federal Register. Their intended purpose, as described by the DOL, was to clarify distinctions between employee and independent contractor status in employment situations. Businesses sometimes use independent contractors to control costs and create efficiencies. Some have run afoul of federal and state laws by classifying workers as independent contractors when they are actually employees. Because various definitions of “independent contractor” have emerged under federal and state laws, determining whether workers are independent contractors or employees has, under some circumstances, been confusing at times, resulting in inconsistent worker classifications. The delivery of employee benefits, such as retirement savings and certain other benefits, is often tied to a determination of independent contractor or employee status.

The newly proposed delay is a response to a directive by President Biden in a January 20, 2021-issued memorandum entitled, Regulatory Freeze Pending Review. These final regulations are among several items of federal agency guidance expected to be examined for possible revision.