As promised, today the U.S. Department of Labor (DOL) issued a proposed rule under the Fair Labor Standards Act (FLSA) on the misclassification of employees as independent contractors. The proposed rule would replace the Trump-era rule of 2021, which has made it easier for employers to classify workers as independent contractors rather than employees by focusing on two core factors (control over the work and opportunity for profit or loss). The new proposed rule under the Biden administration shifts employers back to six recommended economic reality factors (which are “not exhaustive”) under a totality-of-the-circumstances test:
- Opportunity for profit or loss depending on managerial skill
- Investments by worker and employer
- Degree of permanence of the work relationship
- Nature and degree of control
- Extent to which work performed is an integral part of employer’s business
- Skill and initiative
- Additional factors – any other factor that may in some way indicate whether the worker is in business for themselves, as opposed to being economically dependent on the employer for work.
Notably, the new proposed rule includes an examination of “exclusivity” under the performance factor, with the DOL noting that exclusivity “is a strong indicator of control” and an employment (rather than independent contracting) relationship. The DOL also notes that “working for others and having multiple jobs…does not weigh in favor of independent contractor status” when the individual remains economically dependent on an employer (in contrast to an individual who is in business for themself and chooses to market their independent services to multiple entities). In the proposed rule, the DOL also reinforces “issues related to scheduling and supervision” as relevant control factors.
The proposed rule is scheduled to be published in the Federal Register on October 13. Employers may comment on the proposed rule for 45 days after the published date.