A proposed rule aimed at clarifying who is an employee and who is an independent contractor under the Fair Labor Standards Act was announced Tuesday by the US Department of Labor.
“The department’s proposal aims to bring clarity and consistency to the determination of who’s an independent contractor under the Fair Labor Standards Act,” Secretary of Labor Eugene Scalia said.
Reuters reported the department aims to adopt a final rule by the end of the year. The rule wouldn’t override state laws that are more strict, but would make it more difficult for workers to bring nationwide misclassification lawsuits, the news agency reported.
According to the department, the proposed rule:
- Adopts an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee).
- Identifies and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself.
- Identifies three other factors that may 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.
- Advises 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.
Public comments will be taken for 30 days after the proposal is published in the Federal Register.