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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Rules and Regulations inconsistent with the court-mandated totality-of-the-circumstances approach to determining whether a worker is an employee or an independent contractor.150 In addition, the Rules reliance on Rutherford Foods integrated unit of production language was overly rigid and incomplete. The Rule did not consider a passage from the Supreme Courts contemporaneous decision in Silk finding that unloaders were employees of a retail coal company as a matter of economic reality in part because they were an integral part of the businesses of retailing coal or transporting freight. 331 U.S. at 716
emphasis added. The Rule did not sufficiently credit courts or WHDs longstanding treatment of Rutherford Foods integrated unit language as tantamount to analyzing whether the work is an integral part of the employers business.151 Finally, the Rule stated that the integral part factor tended to indicate employee status and had a higher rate of misalignment with the ultimate result in certain cases; 152 however, it did not identify any cases where the integral part factor led to a result that was contrary to the totality of the evidence.
Accordingly, the Rules narrowing of the integral factor is another reason in support of withdrawal.
d. Downplaying the Employers Right or Authority To Control the Worker
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The Rule would also have stressed the primacy of the parties actual practice by providing that the actual practice of the parties involved is more relevant than what may be contractually or theoretically possible, and that a business contractual authority to supervise or discipline an individual may be of little relevance if in practice the business never exercises such authority. 153 In support, the Rules preamble asserted that the common law control test does not establish an irreducible baseline of worker coverage for the broader economic reality test applied under the FLSA, and that the FLSA does not necessarily include every worker considered an employee under the common law. 154 The proposal to withdraw the Rule questioned whether this approach was 150 See
footnote 106, supra.
e.g., AI 20151, 2015 WL 4449086, at 5
relying on Rutherford Foods integrated unit of production language in its discussion of the integral factor.
152 See 86 FR at 1194.
153 86 FR at 1247 795.110.
154 Id. at 1205.
151 See,
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consistent with Supreme Court precedent.155
Commenters who supported withdrawal objected to how the Rule would treat the employers right or authority to control the worker. For example, the AFLCIO commented that discounting contractual or reserved control is inconsistent with congressional intent to expand the coverage of the FLSA beyond the narrow confines of common law employment and the Department provides a faulty basis for discounting reserved control. The State Officials stated that the Rule unduly narrowed the existing factors when it emphasized that evaluating whether an employment relationship exists should rely heavily on actual practice. They added that how the Rule would have treated the employers right or authority to control the worker is contrary to law and would have impermissibly narrowed employment even further than it was understood at common law citing New York v. Scalia, 490 F. Supp.3d 748, 78788 S.D.N.Y. 2020.
Commenters who opposed withdrawal generally agreed with how the Rule would have treated the employers right or authority to control the worker. For example, the National Retail Federation commented that the Rule would have appropriately focused the test on actual practice rather than contractual or theoretical possibilities. The Center for Workplace Compliance described this provision of the Rule as consistent with historical interpretation of the economic reality test by federal courts and DOL.
Having considered the comments and the issue further, the Department believes that the actual practice of the employer is not invariably more relevant than the authority that the employer may have reserved for exercise in the future. As several commenters noted, the right to control is part of control at the common law, and the Rules blanket diminishment of the relevance of the right to control seems inconsistent with the Supreme Courts observations that the FLSAs scope of employee coverage is exceedingly broad and broader than what exists under the common law.156
Thus, an employers right or authority to control a worker, for example, can be 155 See
86 FR 1403334.
Rosenwasser, 323 U.S. at 362 A broader or more comprehensive coverage of employees than that contemplated under the FLSA would be difficult to frame.; Darden, 503 U.S. at 326 the FLSA stretches the meaning of employee to cover some parties who might not qualify as such under a strict application of traditional agency law principles.
156 See
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strong evidence suggesting the existence of an FLSA employment relationship, just as it is under the common law.157
In sum, the Rules simplistic declaration that the parties actual practices are invariably more relevant is another reason to withdraw the Rule.
B. Whether the Rule Would Provide the Intended Clarity One of the Independent Contractor Rules primary stated purposes was to significantly clarify to stakeholders how to distinguish between employees and independent contractors under the Act. 158 Although the stated intent of the Rule was to provide clarity, it would also as discussed above have introduced several concepts to the analysis that neither courts nor WHD
have previously applied. As explained in the NPRM, the Departments proposal to withdraw the Rule arose in part from a concern that these changes would cause confusion or lead to inconsistent outcomes rather than provide clarity or certainty, as intended.
Numerous commenters asserted that the Independent Contractor Rule would clarify the distinction between independent contractors and FLSAcovered employees, and that withdrawing the Rule would forfeit the benefits of this added clarity. For example, the U.S. Chamber of Commerce stated that under the status quo ante . . . employers are uncertain how to classify a worker under the economic realities test because they can not sic know how WHD will evaluate the different factors . . . which puts employers at risk of WHD enforcement and private litigation, and can impede businesses from engaging many smaller businesses or sole proprietors. Several commenters specifically identified the Rules elevation of two core factors as a clarifying feature that would reduce uncertainty and inconsistency in application of the economic realities test. See, e.g., American Society of Travel Advisors Assigning greater weight to any factor will necessarily reduce, to some degree, the element of subjectivity inherent in the test.;
Competitive Enterprise Institute Increasing the number of factors that must be given equal weight would lead to more inconsistent outcomes in the courts and elsewhere.. Some commenters, such as Brownstein Hyatt Farber Schreck and the Washington Legal Foundation, praised the 157 See, e.g., Razak, 951 F.3d at 145 Actual control of the manner of work is not essential;
rather, it is the right to control which is determinative..
158 86 FR 1168.

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