The Department of Labor (DOL) recently released a proposed rulemaking that would seek to re-classify workers, addressing the distinction between employees and independent contractors under the Fair Labor Standards Act.
Specifically, the proposed rule would do the following:
- Align the department’s approach with courts’ FLSA 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.
- Rescind the 2021 Independent Contractor Rule.
The proposed rule would replace a generally employer-friendly test announced by the DOL in January 2021 with a test that is more likely to result in findings that contractors have been misclassified under the FLSA and are entitled to overtime. The Department will review comments and make a decision on whether to issue a final rule which could happen sometime in early 2024.
Analysis of the Rule