The US Department of Labor is moving forward with a new rule aimed at determining who is an employee and who is an independent contractor. The department announced this week it will publish a notice of proposed rulemaking on Oct. 13.
Its new rule will likely require more workers — including gig economy drivers — to be classified as employees rather than independent contractors, The New York Times reported.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Secretary of Labor Marty Walsh. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”
In addition to rescinding the Trump-era 2021 IC rule, the DOL’s proposed rule would:
- Align the department’s approach with courts’ Fair Labor Standards Act 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 economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
- Assist with the proper classification of employees and independent contractors under the FLSA.
The department announced its intention to issue a new final rule back in June 2022, according to the “North America Legal Update” report by Fiona Coombe, director of legal and regulatory research at Staffing Industry Analysts.
The current Trump-era independent contractor final rule was set to go into effect in March 2021 but was initially delayed by the incoming Biden administration and was withdrawn by the Department of Labor in May 2021. However, a federal court held the withdrawal was unlawful, and the rule remains in place.