Mark Pestronk
Q: The nominee to serve as Department of Labor secretary in the Trump administration is Lori Chavez-DeRemer, whose record as a Republican member of Congress was surprisingly pro-labor. Her stance would imply that many of the Biden administration policies, including the independent contractor rule adopted last year, could remain in place. So if she does become Labor secretary, what are the chances that our agency's ICs will be reclassified as employees? Reclassification would be a complete disaster, not only for us but for all agencies that host ICs. Finally, I know that the IRS also has a rule or policy about independent contractors vs. employees. Why can't we have just one set of criteria for all government agencies?
A: Chavez-DeRemer's view is not the prevailing one within the new administration, which is much more anti-labor and pro-employer than any administration since Ronald Reagan's. The administration's general view will undoubtedly prevail, and many of the Biden era's Labor Department changes will be rolled back.
One of the Biden changes was the adoption a year ago of a six-factor test of IC vs. employee. It was complicated, especially by the rule's statement that the department could also consider "any other factors" affecting the relationship.
I suspect that the IC vs. employee rule will revert to the one issued in the first Trump administration ("Trump 1.0"). That rule applied an "economic-reality test" that primarily considers just two main factors: the nature and degree of the individual's control over the work and the individual's opportunity for profit or loss.
Clearly, more host-IC relationships would pass muster under the two-main-part Trump 1.0 rule than under the six-plus-part Biden rule, so a reinstatement of the former would be a good thing for both hosts and ICs.
I have never heard of a host that would welcome having to follow employment law, and I have never heard of a successful IC who would rather be an employee.
Over at the IRS, the rule is somewhat different from the Labor Department test. The IRS focuses on "behavioral control," "financial control" and "facts of the relationship," or what I call the BFF test. The IRS looks at 15 factors to help determine whether a relationship is really one of employment under the three-part test.
Because the IRS rules are so different from those of the Labor Department, it is possible that a given host-IC relationship would be classified as one of employment by one of the government agencies and not the other. To most reasonable people, this would be an entirely unreasonable outcome.
ASTA, and no doubt other interested groups, would like to see just one rule for all federal agencies, and that would clearly be a good idea. Of course, each state has its own rules, including sometimes separate rules for taxes, workers compensation and injury law.
Although the federal government has the power to preempt and supersede all of those state rules -- which would also be a good idea -- preemption of any state laws is extremely unlikely in the next four years.