Key Issues

DOL Releases Proposed Rule on Independent Contractor Status Under the Fair Labor Standards Act

September 22, 2020 (WASHINGTON INSIDER ALERT) - On September 22, the Department of Labor's Wage and Hour Division released its proposed rule on “Independent Contractor Status Under the Fair Labor Standards Act” (FLSA). There will be a 30-day comment period beginning on the date the proposal is published in the Federal Register, which is expected in the next few days.

The Department explains that the rule proposes to:

  • Adopt 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 themselves (independent contractor) or is economically dependent on a putative employer for work (employee);
  • Identify and explain 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 themselves;
  • Identify three other factors that may serve as additional guideposts in the analysis including:
    • 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
  • Advise 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.

CUPA-HR will review the proposal in its entirety and provide further details as soon as possible.