Proposed Department of Labor Rule May Make It Easier to Classify Workers as Independent Contractors

On 9/22/2020, the U.S. Department of Labor (DOL) proposed a rule that may make it easier for workers to be classified as independent contractors under the Fair Labor Standards Act (FLSA).  The proposed test would take effect after the 30-day comment period and DOL’s publishing of the Final Rule.  Under the proposed rule, there are five factors that could be weighed to determine if the person is an independent contractor:

• Nature and degree of the worker’s control over the work;

• Worker’s opportunity for profit or loss based on initiative and/or investment;

• Amount of skill required for the work;

• Degree of permanence of the working relationship; and

• Whether the work is part of an integrated unit of production.

The first two factors listed above carry the most weight.  If the first two factors suggest a particular status, then the remaining factor are not relevant and need not be considered.  If this proposed rule goes into effect, it will not overturn any existing state laws that are more worker friendly that may already be in place. Your company should wait to make any personnel or operational changes until the Final Rule goes into effect.  It is possible that the current proposed provisions may be amended or may not take effect at all if there are court challenges.