Dive Brief:
- The Department of Labor intends to rescind a 2024 rule on independent contractor classification, according to its regulatory agenda. The agency did not signal how it intends to change the rule under the Fair Labor Standards Act.
- The rule is a method of determining if a worker is an independent contractor or a full-time employee, and therefore owed benefits by their employer. For construction, the rule is significant in determining if someone is employed as a subcontractor or directly by the general contractor on the jobsite.
- It’s not the first rule pivot in recent years. The 2024 shift under President Joe Biden marked a change from a 2021 move at the end of President Donald Trump’s first term. The Biden administration’s revision, effective March 2024, has faced five separate legal challenges.
Dive Insight:
The current framework uses a “totality of the circumstances” method, weighing six major factors considered by the DOL to determine employer status. They include:
- Worker opportunity for profit or loss
- Investments made by the worker and the employer
- Degree of permanence of the work relationship
- Nature and degree of control over performance of the work
- Extent to which the work performed is an integral part of the employer’s business
- Use of worker’s skill and initiative
By contrast, the previous rule approached workers’ control and profit-loss opportunity.
Groups representing construction employers had opposed the Biden-era rule and now applaud its imminent repeal.
The Associated General Contractors of America had joined in on the filing of an amicus brief against the 2024 rule change, which the DOL stopped enforcing in May, Brian Turmail, AGC vice president of public affairs and workforce, told Construction Dive.
“We had anticipated this move and expect a future rule to make compliance and the lines for determining status clearer for employers,” Turmail said. “We would welcome a rule that offers a clear and consistent federal clarification of status and preserves the legitimate use of independent contractors in the construction industry.”
Associated Builders and Contractors also applauds the development.
“ABC is pleased to see that the DOL appears to be moving forward in its effort to revisit the independent contractor rule as it indicated to the court it would,” Kristin Swearingen, vice president of government affairs for Associated Builders and Contractors, told Construction Dive. “Many construction employers depend on legitimate independent contractors to provide specialized skills, entrepreneurial opportunities and stability during fluctuations of work common to the industry.”
Nonetheless, the regulatory agenda also slated a replacement rule to be proposed later this month. The typical timeline for the review and finalization of a rule is lengthy — for example, the Biden-era rule was first announced in 2022. That means the adoption of any new final rule is likely far out on the horizon.
