Advocacy by the Michigan Department of Attorney General and several other states has resulted in the U.S. Department of Labor terminating a rule put in place during the Trump administration, thus strengthening protections for working Michiganders.
The withdrawal of the rule, known as the Final Rule, was announced last Wednesday.
The rule changed the test for independent contractor status, making it easier for employers to strip employees of legal protections – such as minimum wage, benefits and unemployment eligibility – by changing their classification.
The Department and many others have engaged with lead states Pennsylvania and New York since Sept. 2020 to combat the Final Rule.
The previous administration rushed the Final Rule to completion in just over three months with a truncated comment period.
Below is a timeline of events:
• On Sept. 29, 2020, the various states first argued for a longer comment period, which the prior administration denied.
• The states then submitted a letter in opposition on Oct. 26, 2020, arguing that withdrawing the Final Rule would allow workers and businesses to continue recovering from the devastating effects of the COVID-19 pandemic, and that the Final Rule contradicts 80 years of precedent interpreting the Fair Labor Standards Act while also violating the Administrative Procedures Act.
• Despite efforts to the contrary, the Final Rule was published on Jan. 7 of this year with an effective date of March 8.
• Citing the states’ Feb. 24 letter in support of a delayed effective date, the Biden administration delayed its effect to May 7.
• Finally, on April 12, the states’ submitted a fourth letter that supported withdrawing the Final Rule, reiterating its prior arguments raised in the Oct. 26 letter.
• Effective last Friday, the Final Rule is withdrawn.
Nessel offered the following statement in response to notice of the withdrawal:
“When I took office, I was serious about protecting hardworking Michiganders. I created the Payroll Fraud Enforcement Unit in April 2019 to focus on individual allegations of wrongdoing, but also to ensure our office is engaged with national efforts to protect workers. Misclassifying workers is a significant issue here and throughout the country. It has the effect of cheating workers and robbing them of statutory protections—minimum wage, overtime pay, workers’ disability compensation, and eligibility for unemployment benefits—while also imposing higher tax burdens. The prior administration’s attempt to expand the scope of who can be considered an independent contractor is just plain wrong and hurts Michigan families at a time when they need as much assistance as possible. I applaud the states’ efforts and the Biden administration’s willingness to withdraw the Final Rule. This is a significant win for Michigan workers.”
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