by Adam Henningsen and Mollie Mohan
On October 13, 2022, the U.S. Department of Labor (DOL) published a proposed rule regarding how to determine who is an employee versus an independent contractor under the Fair Labor Standards Act (FLSA).
The proposed rule would rescind an earlier rule on this topic that was published under the Trump Administration. The current rule’s “economic reality” test focuses on whether workers are economically dependent on an employer or are in business for themselves. The current rule includes a list of factors to be considered, but attempts to streamline the analysis by focusing on two “core factors”: (1) “the nature and degree” of control over the work; and (2) “the worker’s opportunity for profit or loss.” See Tueth Keeney’s prior insight on the current rule, which can be found here.
The DOL’s new rule proposes to do the following:
- Align the Department’s approach with courts’ interpretation of the FLSA and application of the economic reality test;
- Restore the longstanding 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 any predetermined weight to any particular factor or set of facts;
- Return to the longstanding interpretation of the factors, including the investment factor, control factor, profit or loss factor, and the integral factor, which considers whether the work is integral to the employer’s business; and
- Rescind the 2021 Independent Contractor Rule.
The new proposed rule is more complex, and likely will make it more difficult for employers to classify workers as independent contractors. Among other things, the proposed rule would restore the “totality-of-the-circumstances” analysis to determine whether a worker is “economically dependent” on an employer. The Department will consider six factors when assessing whether a worker is an employee or an independent contractor:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the employer
- Degree of permanence of the work relationship
- Nature and degree of control
- Extent to which the work performed is an integral part of the employer’s business
- Skill and initiative
None of these factors would have a predetermined weight under the new proposed rule. All factors would be considered in view of the economic reality of the whole enterprise.
The proposed rule is now subject to public comment, which will remain open through December 13, 2022.
Worker classification under the FLSA is important because independent contractors are not subject to federal minimum wage and overtime requirements.
Attorneys at Tueth Keeney will continue to monitor and report on developments with respect to the proposed rule change.
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Labor and Employment – Tueth, Keeney, Cooper, Mohan & Jackstadt, P.C. has successfully represented a number of businesses, large and small, throughout the Midwest in labor and employment matters. Our broad range of experience includes employment discrimination litigation, wage-hour investigations, affirmative action revision plans development, INS audits, and a variety of traditional labor matters.
Adam Henningsen practices primarily in the areas of education law, labor and employment law, and civil litigation. Adam regularly works with school districts and individual administrators on matters including labor and employment, contracting, student discipline, special education, and state and federal regulation compliance. He has successfully represented school districts, charter schools, and other employers in State and Federal Court, as well as administrative agencies including the Equal Employment Opportunity Commission, the Missouri Commission on Human Rights, the Missouri Administrative Hearing Commission, and the United States Department of Education Office for Civil Rights. Prior to joining the firm, Adam practiced school law at a firm in Kansas City, Missouri.
Mollie G. Mohan practices primarily in the areas of labor & employment, litigation, and higher education. Mollie represents colleges, universities, and private employers in labor and employment matters. Prior to joining the firm, Mollie worked at a large-sized litigation firm in Saint Louis. While in law school, Mollie was a student law clerk to the Honorable Jean C. Hamilton of the United States District Court for the Eastern District of Missouri.