Employee vs. Independent Contractor Issues

As we previously covered, on October 13, 2022, the United States Department of Labor (“DOL”) issued a proposed new rule for classifying workers under the Fair Labor Standards Act. The proposed rule largely mirrors the Obama-era test, which seeks to focus “on the economic realities of the workers’ relationship with the employer,” and frames a worker's economic dependence on their employer as the “ultimate inquiry” for the test. The comment period for the proposed rule closed on November 28, 2022, with an unprecedented 52,644 comments submitted.

The biggest change outlined by the proposed new rule would be the rescinding of the 2021 Independent Contractor Rule. This rule, put in place during the final days of former President Donald Trump’s administration, utilized an “economic realities test” that focused on two factors: (1) the nature and degree of the individual’s control over their work, and (2) the individual’s opportunity for profit or loss.

According to the DOL, the new proposed rule would do the following:

• Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
• Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
• Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
• Revert to the longstanding interpretation of the...

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