Biden Administration Eliminates Key Trump-Period Laws for Employment Relationships Below FLSA

Q: Do the Trump-era FLSA Regulations for Independent Contractor Classification and Joint Employer Status (still) apply?

A: The U.S. Department of Labor (USDOL) announced its decision to reverse a Trump-era rule to differentiate between workers and independent contractors under the Fair Labor Standards Act (FLSA), due to go into effect on March 8, succession Another recent announcement by the Biden administration soliciting public comment on its intention to repeal the Trump-era FLSA Employment Employment Regulations, which came into effect in March 2020. Both reversals have a significant impact on whether a company is considered an employer under the FLSA and is therefore subject to statutory minimum wage, overtime and record keeping requirements.

Joint employment regulations are to be repealed

Last year, the Trump administration revised the FLSA’s Common Employer Rules (29 CFR Part 791) to create a single rule that harmonized an inconsistency that had developed after various federal courts ran various tests to see if a Employee is jointly employed by more than one employer. In September 2020, however, a federal district court in New York ruled that the revised Common Employer Rules violated the Administrative Procedures Act (APA). See Troutman Pepper’s discussion of this decision here. The court’s decision was pending at the time the Biden government sought public comments on its intention to repeal the previous rule.

USDOL is now proposing to revert to its previous joint employer arrangements, citing the concerns identified in the federal court decision. In particular, the USDOL found that it shared the court’s concerns that the common employers’ rules are inappropriately narrow and close to a “control test” for establishing a common law employment relationship. According to the USDOL, this “control test” is not compatible with the FLSA, as the legal definition of “employ” (ie “suffer or permit work”) has been viewed in the jurisprudence as one of the most comprehensive definitions in the entire federal statutes and extends the meaning of “ Employee ”in the sense of the FLSA is aimed at areas that would not be covered by a strict application of traditional agency law. In particular, USDOL criticized the Trump-era regulation for failing to adequately take into account the worker’s economic dependency on the potential common employer (ie, the “economic realities”).

Although not cited as a reason for the regulatory change, by reverting to the old joint employer rules, the FLSA will align itself with the regulatory tests for joint employment under the Family and Medical Leave Act of 1993 (FMLA). Prior to the Trump administration’s decision to update the common employer rules under the FLSA, both the FMLA and the FLSA had relied on the same multifactor tests.

Rule lifted for independent contractors

During the waning weeks of the Trump administration, the USDOL announced a revised rule for independent contractors due to go into effect March 8. However, following the inauguration of President Biden, USDOL immediately delayed the effective date of the rule, with that delay now updated to a permanent resignation.

Consistent with their objection to the Joint Employer Regulations, the Biden Government’s disagreement with the Independent Contractor Tests focuses on the test’s emphasis on “control” and “opportunity for profit” as “core” factors versus other factors must be weighed. In particular, the Biden administration opposed the Trump-era proposal to narrow the importance of a factor that takes into account “whether the work of the worker is an integral part” of the employer’s business. USDOL also disagreed with the Trump administration’s decision to give greater importance to the question of whether the actual practice of the parties indicates exercise of control, rather than whether there is a right or authority to control (regardless of how it is exercised) .

Bring away

For employers, the main takeaway is that the USDOL is rewinding the tape on the regulatory reforms put forward under the previous administration. For example, employers who have begun assessing their FLSA compliance against the revised Common Employer Rules should be careful about reassessing compliance based on the rules in place prior to the Trump administration changes.