In its last weeks, the Trump administration adopted regulations which would make it easier for workers to be classified as independent contractors. Those regulations never took effect. Now the Biden administration has rejected them, opting instead to keep the economic realities test.
The proposed but not implemented regulations would have allowed employers to exempt themselves from minimum wage and overtime laws if their workers were considered independent contractors under a new test whose factors favored such a finding. Had it passed, more workers would not have been covered by a number of laws, simply because they would not been considered employees. Such laws would have included not only the Fair Labor Standards Act governing overtime and minimum wage, but also state laws such as workers’ compensation. These workers also would not have been eligible for many benefits, including health insurance, and could not participate in 401k plans.
The current law which will remain in effect applies a multi-factor test to determine if a worker is an employee or an independent contractor. In announcing the decision to keep the existing economic realities test, the administration emphasized that federal law favors giving the broadest interpretation possible to the definition of an employee. This approach favors workers being classified as employees, thereby entitling such workers to the protections of federal law and benefits only available to employees.
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