On October 13, 2022, the U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM) to modify Wage and Hour Division regulations to revise its analysis for determining employee or independent contractor classification under the Fair Labor Standards Act (FLSA). Over the past decades, the DOL and courts have applied an economic reality test to determine whether a worker is an employee or an independent contractor under the FLSA. Although factors examined under this test varied across circuits, the ultimate question under this analysis is whether, as a matter of economic reality, the worker is either economically dependent on the employer for work (and is thus an employee) or is in business for him/herself (and is thus an independent contractor). In January 2021, the DOL reduced the primary factors the agency would consider when determining whether a worker is an independent contractor or an employee to two "core factors", namely, the nature and degree of control over the work and the worker's opportunity for profit or loss based on investment. These two factors under the 2021 rule are the most probative and carry greater weight in the analysis.
The DOL seeks to modify the 2021 "core factors" inquiry under the economic reality test analysis, and instead return to the totality-of-the-circumstances analysis of multiple factors in determining whether a worker is an employee or an independent contractor under the FLSA. These factors generally include the...
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