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Federal Register / Vol. 86, No. 41 / Thursday, March 4, 2021 / Rules and Regulations
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FLSAs purpose, recognized repeatedly by the Supreme Court, to broadly cover workers as employees; the costs and benefits attributed to the January 2021
Rule, including the assertion that workers as a whole will benefit from the January 2021 Rule; and/or whether the January 2021 Rules explanation of the standard provides clarity for stakeholders and for the purposes of enforcement, as was intended.1
In the NPRM, the Department explained that it believed a 60-day delay would not be disruptive. The Department noted that the Independent Contractor Rule is not yet effective, and the Department has not implemented the Independent Contractor Rule. The Department further explained that its public guidance, including the longstanding Fact Sheet 13, titled Employment Relationship Under the Fair Labor Standards Act FLSA, https www.dol.gov/agencies/whd/factsheets/13-flsa-employment-relationship, does not contain the Independent Contractor Rules new standard for determining whether a worker is an employee or independent contractor and will continue to be publicly available. Moreover, the Department explained that federal courts across the country have developed and applied legal analyses for determining employee and independent contractor status under the FLSA. Therefore, employers and workers are already familiar with the legal standard that the Department and courts will apply when determining a workers employment status under the FLSA during any delay of the January 2021 Rules effective date.
The Department sought comment on its proposal to delay the effective date of the Independent Contractor Rule. The period for providing comment expired on February 24, 2021.
II. Comments and Decision The Department received 1,512
comments in response to the NPRM.
Many workers and representatives of workers supported delaying the effective date of the Independent Contractor Rule, stating that the delay would allow the Department to further consider whether the Independent Contractor Rule was inconsistent with the intent of the FLSA, as well as relevant case law, and evaluate the extent to which the Independent Contractor Rule may not have fully considered additional costs to workers.
For example, numerous commenters, including A Better Balance, the American Federation of State, County and Municipal Employees, the Center 1 See
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for Law and Social Policy, The Leadership Conference on Civil and Human Rights, the National Employment Law Project, NETWORK
Lobby for Catholic Social Justice, the Service Employees International Union SEIU, the Shriver Center on Poverty Law, and the United Brotherhood of Carpenters & Joiners of America, asked the Department to delay the January 2021 Rule to consider, among other issues, the January 2021 Rules deviation from statutory text and relevant case law as well as the January 2021 Rules impact on workers. Many of these comments noted that the January 2021 Rule will have a $3.3 billion cost to workers each year, and will cause the most harm to workers of color in lowpaying jobs in industries, such as janitorial services, home care, and agriculture, in which independent contractor misclassification is common.
The Attorneys General of New York, Pennsylvania, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington also submitted a comment supporting the proposed delay, asserting that the January 2021 Rule would impose costs on states and does not increase clarity regarding the standard for determining who is an employee and who is an independent contractor. The Department agrees with these commenters that allowing more time for consideration of the January 2021 Rule is reasonable given the significant and complex issues the January 2021 Rule raises, including whether the January 2021 Rule is consistent with the statutory intent to broadly cover workers as employees as well as the costs and benefits of the rule, including its effect on workers. Moreover, allowing the Independent Contractor Rule to go into effect while the Department undertakes a further review of the Independent Contractor Rule could lead to confusion and uncertainty among workers and businesses in the event that the Department proposes changes to the Independent Contractor Rule following its review.
Numerous businesses, trade associations, individuals who identified themselves as freelancers or independent contractors, and their representatives opposed the NPRM
because they believe the new standard created in the Independent Contractor Rule will provide clarity, and they would like it to take effect on its original effective date. For example, the
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American Council of Life Insurers, the Center for Workplace Compliance, the Coalition to Promote Independent Entrepreneurs, the National Association of Home Builders, the Harbor Trucking Association and Association of Bi-State Motor Carriers, and the Washington Legal Foundation took this stance; many of these commenters asserted that the Department fully considered the January 2021 Rule during the initial rulemaking process, and others stated that they had undertaken preparations in anticipation of the January 2021 Rule going into effect.2 The Department also received hundreds of nearly identical comments from individuals who identified themselves as a financial professional, small business owner and an independent contractor affiliated with LPL Financial, who expressed a desire to be able to continue to choose to be independent contractors. The Department has considered the comments opposing the delay of the effective date of the January 2021 Rule, but does not agree with them. The maintenance of the current state of the law would not be disruptive to current business practices, so the regulated community would not be significantly affected by the continuation of the longstanding status quo for 60
additional days. In addition, individuals who are currently independent contractors will not be affected by a delay of the Independent Contractor Rule, because they are already not employees under the FLSA. Although the Department understands that some commenters favor the January 2021 Rule and may have chosen to prepare to make adjustments to their operations in anticipation of it, the Department does not believe that the delay is significant enough to overcome its interest in carefully considering the January 2021
Rule pursuant to the Regulatory Freeze Memorandum and OMB Memorandum M2114.3
2 Commenters such as the Chamber of Commerce and Seyfarth Shaw on behalf of the Coalition for Workforce Innovation also asserted that the Departments fundamental basis for a delaythat the Independent Contractor Rule would create a new standard for determining who is an employee under the FLSA versus an independent contractor, and that this significant change merits further considerationis incorrect. They note that the Independent Contractor Rule sets forth an economic realities test, which courts have used for decades.
Although these commenters are correct that courts and the Department have previously applied an economic realities test for this purpose, the substance of the test in the January 2021 Rulefor example, giving two factors greater weight in the analysis and nearly dispositive weight if they both point toward the same classificationis different in a number of significant ways from the existing analysis.
3 Some commenters opposed to the proposed delay, including the U.S. Chamber of Commerce
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