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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Rules and Regulations
Independent Contractor Rules inclusion of illustrative factual examples, while other commenters expressed appreciation for the Rules guidance on common business practices that would not militate against independent contractor status, such as requiring individuals to comply with specific legal obligations, satisfy health and safety standards, carry insurance, meet contractually agreed-upon deadlines or quality control standards, or satisfy other similar terms. See American Trucking Association Without such guidance, motor carriers and other companies in other industries will be more reluctant to engage with and require improved safety as a condition of working with them for their independent contractors.; New Jersey Warehousemen & Movers Association same. Numerous commenters asserted that these features of the Rule would reduce litigation over the FLSA
employment status of alleged independent contractors. See, e.g., Chauvel & Glatt, LLP; Society for Human Resource Management.
Some commenters supportive of the Independent Contractor Rule addressed the concern expressed in the NPRM that the novelty of the Rules guidance would cause confusion or lead to inconsistent outcomes. The Competitive Enterprise Institute asserted that all rule changes are initially unfamiliar and require courts and others to adjust, and that unfamiliarity is not a rationale for leaving the rules unchanged when they become outdated. See also Melinda Spencer So what if this is a new definition? The country clearly needs a new, clearer definition.. Associated Builders and Contractors ABC and Littler Mendelson, P.C. disputed that the Rules guidance was new or novel at all, asserting that its features were consistent with the way that most courts have been applying the economic realities test. Asserting differences in the ways that circuit courts describe the economic realities test, the Coalition to Promote Independent Entrepreneurs opined that the Independent Contractor Rule provides an opportunity to conform all federal circuits to one unified explication of the test.
By contrast, many other commenters shared the concern expressed in the Departments NPRM that implementation of the Independent Contractor Rule would add confusion rather than clarity due to the Rules deviation from established guidance and precedent. For example, AFSCME
asserted that the Rule would upset . . .
settled understandings and relied-upon judicial precedent upon which millions of American workers and employers
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have ordered their relationships. A
number of commenters, including the Center for Law and Social Policy CLASP, the North Carolina Justice Center, and the Shriver Center on Poverty Law, characterized the Independent Contractor Rule as a a radical departure from established agency and court interpretations of the FLSA. Farmworker Justice asserted that the Rule would still require complex, fact-specific considerations of the unique circumstances of each employer-worker relationship, but introduce a whole set of new ambiguities and legal questions, such as whether it matters at all that an activity is integralor importantto the business . . . how to weigh worker investment without comparing it to the investment made by the employer; what type of control is relevant when deciding the control factor; when to weigh the secondary factors and so forth. The Signatory Wall and Ceiling Contractors Alliance SWACCA
asserted that, if the Independent Contractor Rule were adopted, subsequent court decisions interpreting the Rule would necessitate additional, ongoing familiarization costs. NELA, Pleval Law, and the International Brotherhood of Teamsters opined that implementation of the Rule would be discordant with state laws featuring more expansive worker coverage, increasing the likelihood that some workers might have different employment statuses under state and federal law.
Several commenters asserted that the lack of clarity regarding whether and to what extent courts would defer to the Independent Contractor Rules guidance would result in uncertainty. See AFL
CIO; International Brotherhood of Teamsters; Northwest Workers Justice Project; SWACCA; Texas RioGrande Legal Aid. The United Brotherhood of Carpenters and Joiners of America stated that the Rule would itself be vulnerable to a successful legal challenge, invoking the fate of the Departments equally flawed joint employer rule. 159 See also State Officials From its initial proposal to the present, the States and other commenters have consistently questioned the Rules legality due to its departure from the FLSA and 159 On September 8, 2020, the U.S. District Court for the Southern District of New York vacated most of the FLSA Joint Employer Final Rule issued by the Department and effective in March 2020, on the grounds that it is contrary to law and arbitrary and capricious. See Scalia, 490 F. Supp.3d 748. An appeal is currently pending before the Second Circuit Court of Appeals. See New York v. Walsh, No. 203806 2d Cir. appeal docketed Nov. 6, 2020.

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violation of Administrative Procedure Act-required procedures..
Upon further reflection, including consideration of relevant comments, the Department does not believe that the Independent Contractor Rule would have achieved the added clarity it intended to provide to the regulated community. To the contrary, given how the Rule failed to account for the FLSAs broad suffer or permit language and the numerous ways in which it departed from courts longstanding precedent, it is not clear whether courts would have deferred to the Rules guidance. To the extent that some courts would have declined to apply the test set forth in the Independent Contractor Rule, this would have created conflicts among courts and between courts and the Department, resulting in more uncertainty as to the applicable economic realities test. Businesses operating nationwide would have had to familiarize themselves with multiple standards for determining who is an employee under the FLSA across different jurisdictions, continuing to comply with the most demanding standard if they wished to make consistent classification determinations. 160
In addition to uncertainty resulting from whether courts would defer to the Independent Contractor Rule given its departures from courts own precedent, the Rule would have introduced several ambiguous terms and concepts into the analysis for determining the FLSA
employment status of an alleged independent contractor. For example, courts and regulated parties would have had to grapple with what it would mean in practice for two factors to be core factors and entitled to greater weight. In addition, they would have had to determine, in cases where the two core factors pointed to the same classification, how substantial the likelihood is that they point toward the correct classification if the additional factors point toward the other classification. Perhaps most difficult of all, the Rule cautioned that its list of factors was not exhaustive, 161 but did not specify whether the additional factors referenced in 795.105d2iv would have had less probative value or weight than the three other factors listed in 795.105d2iiii of the Rule.162 Assuming that they did, the Rule would have essentially transformed the multifactor balancing test that courts and the Department currently apply into a three-tiered 160 86

FR 1241 n. 255.
FR 1246 795.105c.
162 86 FR 1247.
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