On October 13, 2022, the United States Department of Labor (“DOL”) published a Notice of Proposed Rulemaking (“NPRM”) that would change the standard for determining whether a worker is an employee or an independent contractor under federal wage and hour law. This issue continues to be a political football, with the Obama, Trump, and now Biden administrations each proposing their independent contractor classification rule. The most recent proposal would return to a more labor-friendly standard and could make it harder for businesses to classify workers as independent contractors under the Fair Labor Standards Act (“FLSA”).
Why does the proposed rule matter?
Under the FLSA, employees are entitled to certain benefits and protections, such as a minimum wage and overtime premiums. Independent contractors, however, are not entitled to those same benefits and protections. Many employers today, particularly in light of recent labor shortages and inflation, may consider hiring independent contractors rather than employees to save on wages, benefits, and other labor costs. However, employers should be wary of this approach and the ever-changing rules regarding the classification of independent contractors. Calling a worker as an independent contractor – and even entering into a contract that memorializes the independent contractor tutus – does not necessarily mean the worker will legally qualify as an independent contractor, and the so-called “misclassification” of independent...
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