Yesterday, September 22nd, the U.S. Department of Labor announced a proposed rule clarifying the definition of employee under the Fair Labor Standards Act (FLSA) as it relates to independent contractors.
The proposed rule from The Department 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: 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.
The Notice of Proposed Rulemaking is available for public comments and review for 30 days after it is published in the Federal Register.
You can read more from The Department here, https://www.dol.gov/newsroom/releases/whd/whd20200922