In March, the U.S. Department of Labor (DOL) announced a notice of proposed rulemaking (NPRM) proposing to rescind the Independent Contractor Rule (“Independent Contractor Status Under the Fair Labor Standards Act”). The rule was originally published on January 7, 2021 under then-president Donald Trump with an effective date of March 8, 2021; upon the inauguration of Joe Biden on January 20, 2021, the Biden Administration delayed the rules effective date until May 7.
The ruling clarified the standard of an employee versus an independent contractor (IC). In the finale rule, the DOL, among other factors, reaffirmed an “economic reality” test to determine whether an individual is in business for him or herself (IC) or is economically dependent on a potential employer for work (employee); it additionally identified and explained two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
- The nature and degree of control over the work
- The worker’s opportunity for profit or loss based on initiative and/or investment
This week, the American Society of Travel Advisors (ASTA) sent a letter to the DOL sharing that, because the rule provides businesses and other stakeholders with much-needed guidance to structure their worker engagements, ASTA supported it and, for the same reason, opposes the proposal to withdraw it. While noting that the Trump Administration rule wasn’t perfect (saying in October 2020 the rule “represents a meaningful if modest improvement over the status quo”), ASTA said in its April 12 letter that the rule’s withdrawal “can only be considered a corresponding step backward in the quest for a truly workable standard to determine worker status.”
ASTA this week said it most agrees with the prior administration’s two “core factors" (mentioned above) that were most probative of the worker’s economic dependence and are therefore entitled to greater weight in the analysis than the others; however, it called some of the additional factors “peripheral at best [—] and at times do not even seem to apply to the particulars of the engagement being evaluated.”
ASTA also noted the federal government’s inconsistencies when defining an employee or IC, pointing to the DOL’s ruling, the Internal Revenue Service’s 20-factor common law-based “right of control” test, as well as the “hybrid test,” which incorporates elements of both the common-law test and the economic reality test. The organization said it has strongly advocated for passage of the Modern Worker Empowerment Act, which seeks to amend the Fair Labor Standards Act to create the single standard.
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