DOL Proposes Rule for Classifying Workers
The U.S. Department of Labor (DOL) issued a proposed rule to determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor. The rule will be open for comment 30 days after it is published in the Federal Register. Additional information about the proposed rule is available on the DOL’s website.
The proposed rule adopts an economic reality test to determine if a worker is 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 an employer for work (employee).
The proposed rule focuses on two core factors to help determine if a worker is economically dependent on someone else’s business or is in business for themselves. The two factors are:
- The nature and degree of the worker’s control over the work
- The worker’s opportunity for profit or loss based on initiative and/or investment
The proposed rule lists three other factors to serve as additional guideposts in the analysis: 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.
The proposed rule also states “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.
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Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.