On September 22, 2020, the U.S. Department of Labor (Department) announced a proposed rule addressing how to determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor.
In this rulemaking, the Department proposes to:
- 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.
The Department seeks comment on all aspects of the proposed rule; comments can be submitted through regulations.gov for 30 days following the publication on the Notice of Proposed Rulemaking in the Federal Register. Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record and be posted without change to regulations.gov. Any comment from an individual gathered and submitted by a third-party organization as a group to WHD and posted under a single document ID number on regulations.gov will likewise be posted without change, including any personal information provided.
The Department has determined that 30 days is a sufficient period of time to comment, and therefore will not extend the comment period for this NPRM. Without regulatory guidance, workers and businesses must continue to locate fact-specific court decisions or subregulatory guidance and attempt to determine whether the facts of those work arrangements are sufficiently comparable to their own. The lack of regulatory guidance underscores the need for an expedient rulemaking.