DOL Proposes Rule Clarifying How to Identify Independent Contractors

ANCOR members who rely on contractors should be aware of this proposed rule by the Department of Labor (DOL) and consider whether to submit public comments once the proposed rule is published in the Federal Register. We remind members that this proposal is still in the early stages of the regulatory process. After the public comment period (in this case, a 30-day period after publication in the Federal Register), the proposal will still need to undergo internal revision by DOL to address comments received, and then review by the White House’s Office of Management and Budget (who can hold listening sessions on the issue) before final publication.

Per the Wage & Hour Division:

“Today, the U.S. Department of Labor’s Wage and Hour Division (WHD) posted revisions to regulations that implemented the paid sick leave and expanded family and medical leave

Today the U.S. Department of Labor announced a proposed rule offering clarity to determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor.

 In the proposed rule, 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 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.

This Notice of Proposed Rulemaking (NPRM) is available for review and public comment for 30 days once it is published in the Federal Register. The Department encourages interested parties to submit comments on the proposed rule.”