DOL Publishes Independent Contractor Rule

September 25 the U.S. Department of Labor (DOL) published a proposed rule offering clarity on determining whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor.

In the proposed rule, DOL would:

• Adopt 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);
• Identify and explain 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;
• Identify three other factors that may serve as additional guideposts in the analysis including: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the putative employer; and whether the work is part of an integrated unit of production; and
• Advise 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.

DOL is accepting public comments on the proposed regulation for 30 days, until October 26, as their goal is to finalize the rule before the end of the year. There will likely be a deluge of comments from both worker-advocates and businesses, potentially setting the stage for a legal challenge on the eventual final rule. Management-side stakeholders primarily see the proposed rule in a favorable light as written. Still, they will be advocating for tweaks that give employers an even greater degree of legal certainty when interpreting employee status.