U.S. Labor Department Withdraws Independent Contractor Rule

A rule that made it difficult for contract workers to receive minimum wage and overtime pay has been withdrawn by the U.S. Labor Department, effective today.

The Independent Contractor Rule limited the ability of workers to argue that they were misclassified as contractors when they should have been employees. Companies have increased the use of contractors in recent decades, partly to lower labor costs as employees are entitled to benefits that contracts don’t receive, such as insurance, a minimum wage, and overtime pay, The Washington Post reports.

Labor Department officials said the decision to reverse the rule was based on their opinion it was out of step with the Fair Labor Standards Act, which the department is sworn to uphold.

“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” said Labor Secretary Marty Walsh. “Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors. We remain committed to ensuring that employees are recognized clearly and correctly when they are, in fact, employees so that they receive the protections the Fair Labor Standards Act provides.”