U.S. Department of Labor Revisits Independent Contractor Classification

Employers who hire independent contractors should take note of the U.S. Department of Labor (DOL) Notice of Proposed Rulemaking. The proposed rule guides employers on how to classify workers to reduce misclassification.

The rulemaking could be a signal of the DOL’s intent to issue formal regulations that may redefine how employers classify workers, potentially resulting in more people being deemed employees. Employees are granted federal protections including overtime pay and minimum wage.

Independent contractors work in a wide range of industries including home care, janitorial services, trucking, delivery, construction, personal services, and hospitality and restaurant industries, among others.

What’s in the Notice of Proposed Rulemaking?

The proposed rule would do the following:

  • Align the department’s approach with the Fair Labor Standards Act (FLSA) and the DOL’s 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.

How to comment

The DOL encourages employers and other interested individuals to participate in the regulatory process. Comments, which must be submitted by Nov. 28 should be submitted online at https://www.dol.gov/regulations.

Help is available

The business attorneys at O’Reilly Rancilio are available to help employers review their policies. To speak to an attorney, please call 586-726-1000 or visit our website.

Categories: Business