During the last two weeks of his Presidency, Trump's Department of Labor just revised the test for whether an individual is an independent contractor or employee under the Fair Labor Standards Act.
This is significant because employees are entitled to minimum wage and overtime whereas independent contractors are not.
If an employer misclassifies a staff member as an independent contractor when such staff member should be classified an employee, it can result in a devastating blow to the employer who will be exposed to statutory penalties, back pay, attorneys' fees and more.
Now, Trump's government is using the "economic reality" test to determine employee status.
According to the government, "the ultimate inquiry is whether, as a matter of economic reality, the worker is dependent on a particular individual, business, or organization for work (and is thus and employee) or is in business for him- or herself (and is thus an an independent contractor)."
Under this test, the Department of Labor or a Court hearing the case will look to five distinct factors to answer the test. However, two of those factors now have more probative value in answering the question than the rest. These two key factors are:
- The nature and degree of the worker's control over the work; and
- The worker's opportunity for profit or loss.
- The amount of skill required for the work;
- The degree of permanence of the working relationship between the individual and the potential employer; and
- Whether the work is a part of an integrated unit of production.
