Trump Overhauls Biden’s Contractor Rule: What’s Next?

A new rule will mark the latest volley in a back-and-forth that has been going on among the Obama, Trump 1, Biden and Trump 2 administrations for several years. The Department of Labor’s IC rule helps govern decisions made by the department’s Wage & Hour division in cases brought to it where a complaint is made that a worker or group of workers were incorrectly classified as ICs rather than employees.

Ping-pong regulation

The Obama administration’s IC rule was pushed out by a rule in the first Trump administration that was not formally implemented until just days before Joe Biden took office in 2021. The Biden administration yanked the rule early in its term, but in 2022 a court knocked down that action, saying the administration had not followed the legal steps necessary to replace a rule. The Biden administration’s rule was rolled out and implemented in early 2024.

The Trump administration had signaled this year, in a case brought against the rule by the Louisiana Motor Transport Association, that it was likely to replace the rule. It asked for, and was granted, a delay in oral arguments in the case, as its opposition to the rule was in sync with the LMTA’s arguments. 

With the original case being filed against the U.S. government, it was Trump’s Department of Justice that assumed the role of defendant from the Biden administration from where it argued that the plaintiff’s arguments were largely correct.

Besides the action in the Louisiana case, a memo from Wage & Hour Division’s Acting Administrator Donald Harrison on May 1 instructed regional administrators to largely ignore the Biden rule.

“Consistent with the Department’s position on the 2024 Rule expressed in…litigation, WHD will no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status in FLSA investigations,” Harrison said in the memo.

However, there was no announcement of the rule being withdrawn, as the Biden administration attempted to do before being stopped by a judge.

Is it that important?

While the Wage & Hour division’s IC rule gets a great deal of attention, its prominence has been criticized as overstated by at least one attorney in the IC field.

Richard Reibstein of the law firm of Troutman Pepper Locke writes a blog specifically devoted to IC issues. When the Biden administration IC rule was formally proposed at the start of 2024, Reibstein said of its impact: “The legal impact of the final rule, however, will hardly ripple the waters. After all, it is the courts that create law on this subject, not regulatory agencies.”

Both the Obama and Biden rules were created to make it more likely for the Wage & Hour division to find a worker had been misclassified. The Trump rule is seen as the opposite.

In its agenda posting, the Labor department described its efforts as being in the “proposed rule stage.” It also described the importance of its initiative as “major.”

Both the Biden and Trump rules rely on a six-point test to help determine whether a worker is an employee or an IC. (The Biden rule has a seventh  point for other unspecified factors.) 

Broadly, the tests deal with control and independence, such as the question whether the worker, through initiative and hard work, can more greatly profit from that effort than if they are an employee on a defined wage or salary.

The Trump rule was seen as differing from the Biden rule primarily in that it elevated in importance two of the rules: the opportunity to profit, and the employer’s degree of control over the worker. The Biden administration rule has been referred to as taking a “totality-of-the-circumstances” approach toward determining worker status.

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