Sarah M. Block
Thu, 10/27/2022
Workers have a month to comment on the U.S. Department of Labor’s (DOL) proposed rule to aid in determining who is considered an “independent contractor” under the Fair Labor Standards Act (FLSA). A copy of the Notice of Proposed Rulemaking (NPRM) can be reviewed electronically on the DOL’s website. The rule, which was proposed on October 13, 2022, does not become permanent until the DOL issues a final version of the rule, after the close of the 45-day public notice and comment period. The notice and comment period closes on November 28, 2022.
DOL’s proposal is significant, as the FLSA’s protections only apply to individuals classified as “employees” and do not apply to those classified as “independent contractors.” As a result, according to the NPRM, “misclassification of employees as independent contractors remains one of the most serious problems facing workers, business, and the broader economy,” because “misclassified workers are denied basic workplace protections including rights to minimum wage and overtime pay.”
The newly proposed rule will require an analysis of a series of six factors relating to the economic reality of the employment relationship—i.e., is the individual dependent on an employer for work or are they “in business for themself”—in order to determine an individual’s classification status as either an “independent contractor” or an “employee.” Specifically, the factors to be considered, though not intended to be exhaustive, are: (1) opportunity for profit or loss depending on worker’s managerial skill; (2) investments by the worker and the employer; (3) degree of permanence of the relationship; (4) nature and degree of the employer’s control; (5) extent to which the work perform is an integral part of the employer’s business; and (6) skill and initiative utilized in performing the work. None of the factors are to be dispositive nor are they to be given any particular, predetermined weight. Instead, this analysis requires a totality-of-the-circumstances approach to ensure that all factors are considered “comprehensively instead of as discrete and unrelated.” This is a change from the previous rule issued by the DOL under the Trump Administration, which focused more narrowly on only two factors of the economic realities test.
If you believe you have been wrongly misclassified as excluded from the minimum wage and overtime protections of the FLSA, either as an “independent contractor” or on some other basis, please reach out to our firm today to learn more about your rights.
