It was bound to happen.
Early last year, just before the change in presidential administrations, the U.S. Department of Labor passed a final rule, which amended the regulations interpreting the Fair Labor Standards Act to include some language finally distinguishing independent contractors from employees.
I wrote all about it here.
The short of it was that the DOL planned to focus primarily on how much control individuals have over the work they perform and their opportunity for profit or loss. More individual control and opportunity for P&L correlates with an independent contractor relationship.
Independent contractors are not entitled to minimum wage or overtime when they work more than 40 hours in a workweek.
The existing independent contractor test didn’t sit well with the current DOL. They tried to delay and withdraw the rule. However, earlier this year, a Texas federal court nullified those attempts and left the current rule in place.
The DOL appealed the decision but put that case on hold while it developed a replacement rule.
And yesterday, they announced one.
The proposed rule would restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
But will this revolutionize the independent contractor vs. employee analysis? I’ve got three reasons why I don’t think it will.
First, five of the factors under the proposed rule overlap with the existing rule. For example, the totality-of-the-circumstances analysis still considers the nature and degree of control of the principal and the individual’s opportunity for profit and loss. The weight given to these factors will differ. But, overall, we’re not talking about a wildly different analysis.
Second, the DOL rule doesn’t bind federal courts. They can consider the DOL’s input. But they may just continue to apply whatever existing precedent they’ve used to analyze whether an individual is an employee or an independent contractor. Heck, some business groups may challenge the propriety of the new rule and ask the courts to junk it altogether.
The third is that many states have separate tests for determining whether individuals are independent contractors or employees. Some are quite rigid. Whatever the feds decide will have no impact on the states.
The bottom line is that your mileage will vary. Think an “independent contractor agreement” will resolve these issues? No, it won’t. I could detail why, but here is a simple NSFW explanation.
If you have questions or concerns about whether your business has properly classified an independent contractor for wage-and-hour purposes, do yourself a favor, and contact a local employment attorney for guidance.
Do yourself another favor and click here and register for the next edition of The Employer Handbook Zoom Office Happy Hour: “Unions: Fad or Trend?” Jon Hyman will be my guest on Friday, October 14, 2022, at Noon ET.
Jon is a shareholder and director at Wickens Herzer Panza in Avon, Ohio. In that capacity, he is a Practice Group Leader of the firm’s Employment & Labor Practice Group and a member of the Firm’s Litigation Department.
With the increased popularity of organized labor and the National Labor Relations Board making it easier for unions to organize and employees to show union support, are labor unions having a renaissance?
Or is it just a moment?
We’ll answer these questions and many others, such as:
- Why have labor unions become so popular?
- How do employers unwittingly open the door to unionization?
- And what can proactive non-union employers do to keep their workplace that way?
We hope you’ll join us on Friday, October 14, 2022, at Noon ET. Click here to register.