DOL Announces Rule Change on Independent Contractor Classifications

On October 11, 2022, the U.S. Department of Labor announced that it will publish a Notice of Proposed Rulemaking on October 13 to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA).

The proposed rule changes the standards for independent contractor classification, replacing the rule issued by the Trump administration in early 2021. The DOL says the proposed framework is “more consistent with longstanding judicial precedent on which employers have relied to classify workers as employees or independent contractors under the FLSA.”

While we have not yet seen the rule, the DOL has indicated that it will do the following:

• Align the DOL’s approach with courts’ interpretation of the FLSA and the 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 (e.g., investment, control, and opportunity for profit or loss) and the integral factor, which considers whether the work is integral to the employer’s business.
• Assist with the proper classification of employees and independent contractors.
• Rescind the 2021 Independent Contractor Rule. 

We will keep you posted as the proposed rule progresses. If you have questions about the proposed rule, independent contractor classification, or other labor and employment matter, do not hesitate to reach out to the Employment & Executive Compensation Group at Levenfeld Pearlstein.