The Department of Labor (DOL) has announced a significant shift in its enforcement strategy, effectively pausing the implementation of the Biden-era independent contractor rule. This move, revealed in a recent field assistance bulletin, signals a potential reprieve for nursing homes and long-term care facilities grappling with the rule’s implications.
The rule, which went into effect in March 2024, aimed to tighten the criteria for classifying workers as independent contractors, using an “economic realities” test. This test broadened the factors considered, making it potentially harder for employers to classify workers as independent contractors. Now, the DOL has instructed its Wage and Hour Division to refrain from applying this rule’s analysis in current enforcement matters.
“While the department reviews the 2024 final rule, agency investigators are directed not to apply the 2024 rule’s analysis in current enforcement matters,” the DOL stated in its bulletin.
This reversal comes amidst significant pushback from industry groups, including those representing senior living and long-term care providers. These groups expressed concerns that the stricter rule would impose substantial legal and financial burdens on their operations.
“The previous rule ‘legally risked increasing instead of reducing misclassifications because it narrowed the facts and basis for determining whether a worker is an employee under the FLSA’ and was ‘out of sync’ with what the courts had been saying for decades,” then-Solicitor of Labor Seema Nanda said last year.
The 2024 rule’s “economic realities” test considered factors like the worker’s opportunity for profit or loss, the financial investment in the work, the permanence of the relationship, the employer’s control, the work’s essential nature to the business, and the worker’s skill and initiative. Legal experts had warned that this standard could lead to a surge in labor law infractions.
According to a 2023 report by the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), “The long-term care sector faces significant workforce challenges, with a projected need for an additional 1.2 million workers by 2030.” This labor shortage makes worker classification a critical issue for nursing homes.
The DOL’s recent bulletin clarifies that while the 2024 rule remains on the books, it won’t be the focal point of future worker classification investigations. This provides some breathing room for nursing homes, offering them more clarity in navigating their employment arrangements.
“This new enforcement approach is meant to give employers and workers more clarity when navigating work arrangements,” reported McKnight’s.
However, the DOL emphasizes that this does not signify a complete abandonment of enforcement. “The department may still exercise enforcement authority in individual cases deemed appropriate by the Wage and Hour Administrator or a designee,” the bulletin states.
For nursing home administrators, this development warrants careful attention. While the immediate pressure may have eased, the long-term implications of worker classification remain a crucial consideration. Staying informed and compliant with evolving labor regulations will be essential for navigating the complex landscape of the healthcare industry.