Tuesday, June 22, 2021

Biden Administration Rescinds Trump-Era "Independent Contractor Rule"

It has been a rough year for workers, but recent developments in worker classification suggest better days are ahead. On May 5, 2021, the Department of Labor (“DOL”) rescinded Trump-era guidelines regarding independent contractor classification under the Fair Labor Standards Act (“FLSA”). The withdrawal came days before the Trump Administration’s “Independent Contractor Rule” would have gone into effect, essentially preserving the status quo with respect to federal independent contractor classification guidelines.

The FLSA does not cover independent contractors. As a result, they are not guaranteed minimum wage, overtime pay, unemployment insurance, workers’ compensation, and other vital protections. Given its dramatic implications, worker classification remains a hot-button political issue. Courts commonly apply the “economic realities” approach to assess worker classification, a multi-factor balancing test that evaluates whether a worker depends on their employer to make a living as a matter of economic reality. If the “totality of the circumstances” indicate that more factors than not show that worker is economically dependent on their employer, several federal circuit courts nationwide held that they are classified as an employee.

The Trump Administration adopted a pro-business position on worker classification in 2017. In keeping with this position, the DOL issued a final “Independent Contractor Rule” (Rule) on January 6, 2021. Bryan Schwartz Law blogged about this Rule previously. Although the Rule purported to reaffirm the extant “economic realities” test, in practice it abandoned longstanding judicial precedent in favor of a more business-friendly standard. The new guidelines would have made it easier for employers to classify workers as independent contractors by reducing the considerations traditionally included in the analysis. Instead of the multi-factor balancing test applied by courts for decades, the Rule prioritized two main factors, the worker’s level of control and opportunity for profit, above all other considerations. If analysis of these main factors proved inconclusive, the Rule then required employers to weigh three additional factors: (1) the level of skill required for the work, (2) the permanence of the working relationship between the worker and the employer, and (3) whether the work is integral to the employer’s overall business operation. This approach ultimately would have reduced the number of workers classified as employees under the FLSA, thereby depriving them of federal protections.

After the Trump Administration’s exit, the Biden Administration instructed its DOL to withdraw the “Independent Contractor Rule.”  The DOL offered three reasons to rescind the Rule: first, that it conflicted with the text, purpose, and judicial precedent interpreting the FLSA; second, that its hierarchy of main and guiding factors contravened the balancing approach used in the economic realities test; and third, that it restricted “the totality of the circumstances” traditionally analyzed when determining worker classification.

Workers’ rights advocates hope more administrative and legislative actions will follow. As part of his 2020 presidential campaign, Biden promised aggressive FLSA enforcement to crack down on employers who misclassify their workers as independent contractors. In addition, Biden committed to designing a federal standard for worker classification modeled after the “ABC test.” California’s AB-5 legislation is one such example of this test. To qualify as an independent contractor under the ABC test, that worker must (a) be free from the control and direction of the hiring entity, (b) perform work outside the usual course of the hiring entity’s business, and (c) engage in an independently established trade, occupation, or business. That worker may be classified as an independent contractor only if they satisfy all three prongs.

If you believe you have been misclassified as an independent contractor, contact Bryan Schwartz Law

Juneteenth: A Celebration and a Call to Action

What is Juneteenth and why is it a national holiday?

The oldest known celebration of the end of slavery in the U.S. became a national holiday last week. President Biden signed the Juneteenth National Independence Day Act on June 17, creating the first new federal holiday since Martin Luther King Jr. Day was established in 1983.

Juneteenth originated in Texas to mark Maj. Gen. Gordon Granger’s announcement on June 19, 1865, at Galveston, that formerly enslaved people were free under the law. This day is a celebration of freedom, but it also serves as a reminder for the country that just as the Emancipation Proclamation did not actually end slavery in 1863, Black Americans’ fight against oppression did not end with freedom from slavery. Instead, these moments mark turning points in a struggle that is ongoing today.

What does the Juneteenth National Independence Day Act really do?

This law doesn’t guarantee a day off for most workers. Though most federal employees got Friday, June 18 off this year (June 19 being a Saturday), and some states (though not California) also made the day a paid holiday for state employees, private employers can choose whether or not to cancel work.

Recognition of Juneteenth as a milestone of national importance is certainly cause for celebration, though advocates recognize it is only a step toward racial justice. Opal Lee, who helped lead the movement to make Juneteenth a federal holiday and was in attendance as Biden signed the bill, said, “We've got all of these disparities that we've got to address and I mean all of them. While we've got some momentum I hope we can get some of it done.”

What is the role of employment law in effecting change?

While legal action can address only a limited range of racism’s manifestations, it can serve as an important tool against certain forms of race-based harassment and discrimination that employees face at work. For example, a class represented by Bryan Schwartz Law is suing Tesla for the rampant racism its members have experienced as workers in the car manufacturer’s Fremont factory. On April 9 of this year, the court denied Tesla’s motion to end class claims, fueling hopes for the lawsuit’s future.

As an employment law firm, Bryan Schwartz Law is committed to fighting race-based discrimination and harassment in the workplace. If you are experiencing harms of these kinds and are seeking legal assistance, you can reach out to us here.