On October 13, 2022, the U.S. Department of Labor (DOL) published a proposed rule updating the test for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The proposed rule would restore the multifactor economic reality test previously applied by the DOL. The DOL departed from this test when it published a new rule in January 2021, which clarified and simplified the multifactor test. Shortly after a change in administrations, the DOL delayed and withdrew the 2021 rule. The U.S. District Court for the Eastern District of Texas vacated the delay and withdrawal after it was challenged in March 2022. The court held that the rule became effective on March 8, 2021.
The DOL’s proposed new rule would replace the more business-friendly test announced by the DOL in January 2021. The proposed rule returns to the totality-of-the-circumstances analysis of the economic reality test historically applied by courts that focuses on whether each factor shows the worker is economically dependent upon the employer. The proposed new rule sets forth a six-factor test for determining independent contractor classification under the FLSA:
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