Thursday, September 24, 2020

DOL proposes new independent contractor rule under the FLSA

 My favorite subject - employee/independent contractor classification! On Tuesday, DOL issued a press release: U.S. Department of Labor Proposes Rule to Clarify Employee and Independent Contractor Status Under the Fair Labor Standards Act. The new rule is part of their efforts to "simplify the compliance landscape."

The proposed rule:

  • Adopts an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee); 
  • Identifies and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
  • Identifies three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and 
  • Advises that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.
You can read the actual rule here
Not official use.

Believe me, employers (and their poor attorneys) need simpler rules to follow in this area. A five-factor test in which two factors count more but none of the factors is determinative and even more factors exist because the list is not exhaustive... I'm not sure that's simple. And, of course, that's only the test for the FLSA (maybe, we'll have to see how courts actually apply the rule and whether they even follow it) - employers will still have different tests for state wage and hour laws, another test for UC benefits, and yet another for workers' comp. Simple enough for ya yet?

Oh yeah, we have an election coming up, so let's wait and see if the final rule even crosses the finish line. 

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