If you are interested in wage and hour claims, or better yet if you are a business owner or manager, you are going to want to read this.
On October 13, 2022, the Department of Labor opened the comment period, which runs through November 28, 2022, for it's revised analysis to determine if an individual is an employee or an independent contractor for a wage and hour claim (i.e., misclassification claim). As a reminder, independent contractors are also known as self-employed workers and freelancers, and are considered to be in business for themselves and therefore, not entitled to minimum wages and overtime pay under the Fair Labor Standards Act (FLSA).
However, if an employer gets this wrong, by considering an employee an independent contractor, tht employer can be subject to penalty, called liquidated damages, and more. It's a catastrophic mistake that really needs to be avoided at all costs.
The Proposed Rulemaking is available here in full.
Comments can be made electronically at Federal eRulemaking Portal at https://www.regulations.gov.
In summary, the Proposed Rulemaking is attempting to reassert the Economic Reality Test, where "[t]he ultimate inquiry is whether, as a matter of economic reality, the worker is either economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor)." In analyzing the test, the following, non-exclusive facts are generally examined, including: "the opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, whether the work is an integral part of the employer's business, and skill and initiative." Under the Proposed Rulemaking, the Department of Labor will examine the factors in the Economic Reality Test by returned to a totality-of-the-circumstances analysis rather than focusing on core factors. No longer will two factors be considered most probative and carry greater weight. Now, all factors matter and should be analyzed when determining whether a worker is an independent contractor or an employee who is subject to rights under the FLSA.
