On Sept. 22, the U.S. Department of Labor announced a proposed rule that would revise its interpretation of independent contractor status under the Fair Labor Standards Act. The DOL indicates the proposal would offer clarity to determine whether a worker is an employee under the FLSA as well as promote certainty for stakeholders, reduce litigation and encourage innovation in the economy.
According to the DOL press release, the proposal would:
- Adopt an “economic reality” test to determine a worker’s status as an employee or an independent contractor under FLSA. The test considers whether a worker is in business for themselves (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 themselves;
- 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 potential 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.
To learn more about the proposed rule, see ABC general counsel’s analysis, “DOL Releases Proposed Regulation on Independent Contracting.”
The proposal is expected to be published in the Federal Register by the end of the week. The public will then have 30 days to comment. ABC National plans to submit a comment letter.