DOL Proposes Rule to Clarify Employee and Independent Contractor Status under the Fair Labor Standards Act

On September 25, 2020, the Department of Labor issued a proposed rule that would clarify whether workers are employees or are independent contractors under the Fair Labor Standards Act (FLSA). Independent contractors are not entitled to the federal minimum wage and overtime pay that covered employees receive under the FLSA. The rule adopts an “economic reality test” to determine a worker’s status:  the test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee). The rule identifies and explains two “core factors” that determine whether someone is in business for himself or herself:  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. The rule identifies three other factors that may serve as guideposts in the analysis: 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. Comments on this rule are due on October 26, 2020.