One of the most notable pending Trump-era rules is the Department of Labor’s (“DOL”) final rule clarifying the test used to determine whether a worker is an employee or independent contractor, which was set to take effect March 8th. The final rule was intended to reduce worker misclassification and provide great clarity on how to properly analyze whether a worker is an employee or an independent contractor. The test primarily examined the nature and degree of control an organization exerts over a worker. The more control an organization exercises over a worker, the more likely that worker is an employee of the organization and, thus, entitled to minimum wage, overtime, and other benefits.
Employers can expect the new Administration to revise the DOL’s independent contractor test, especially given the fact that the DOL recently withdrew two opinion letters on the topic. DOL opinion letters are issued in response to employer inquires and describe how the law should be interpreted under specific circumstances. In fact, the Biden administration is expected to significantly narrow the DOL’s independent contractor test to make it much more difficult for a worker to be classified as an independent contractor. Biden supports applying California’s stringent “ABC” independent contractor test, which automatically presumes a worker is an employee, unless an organization can meet a very stringent three-factor test to prove otherwise.
Another Trump-era DOL rule that will also be subject to review is a final rule which amended FLSA regulations for tipped employees. The FLSA allows businesses to pay tipped workers, such as restaurant servers, bartenders, and hairdressers, a lower minimum wage so long as an employee’s tips combined with their hourly wage equal the federal minimum wage. The DOL’s final rule, which was long sought by the restaurant industry, allowed businesses to pay the lower minimum wage of $2.13 per hour, rather than $7.25, for hours spent on related non-tipped duties under certain circumstances. The rule also allowed for tip sharing in certain situations among those employees who customarily receive tips, such as waiters and bartenders, and those who do not, such as cooks and dishwashers.
This final rule is still pending and will likely be reviewed and revised, especially given the fact that the DOL recently withdrew an opinion letter on this very topic. Biden is currently attempting to get rid of the tipped minimum wage altogether. As such, employers can expect the new Administration to revoke or at least significantly modify this Trump-era rule.
Although the new Administration has yet to make any substantive changes on the above topics, employers can certainly anticipate that such changes are coming down the pike. Employers should plan accordingly, especially on the issue of worker classification. If you have any questions regarding the above regulatory freeze and/or potential changes to workplace law feel free to contact any KWW attorney.
As always, your workforce is our priority.