Employee versus independent contractor, who cares? The U.S. Department of Labor, that’s who.
(And that means you should too.)
Misclassified employees may not receive minimum wage or overtime or family and medical leave. When that happens, the Wage and Hour Division (WHD) gets angry.
And you wouldn’t like it when the WHD gets angry, because the WHD often vents its anger with employer audits and lawsuits.
So, to help employers avoid the misclassification conundrum, yesterday, the DOL proposed this rule to help determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor. If you’d like to pour through all 159 pages of the DOL proposal, you’d better brew yourself a large pot of coffee. Maybe pour a few shots of your favorite brown liquor too.
Or you can skip to page 153 for the condensed version.
Or, just read these four DOL bullets:
- Adopts 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 himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee);
- Identifies and explains 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 himself or herself;
- Identifies three other factors that may serve as additional 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; and
- Advises 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.
The proposed rule is available for review and public comment for 30 days after publication in the Federal Register.