Today the U.S. Department of Labor (“DOL”) released its proposed independent contractor regulations under the Fair Labor Standards Act (“FLSA”). The proposed regulations largely restore the Obama administration’s totality-of-the-circumstances analysis to determine whether workers are employees or independent contractors. Among many concerns, the proposed regulations do not provide employers with a clear test for determining the lawful classification of their workers.

Please join FortneyScott on October 19th from 12:00 noon to 1:00 ET for a complimentary webinar discussing the proposed regulations and their potential impact on employers. You can register for the webinar here.

The regulatory comment period closes on November 28, 2022 (the Monday after the Thanksgiving holiday). Clients interested in filing comments should contact the FortneyScott team.

Additional Background: For decades, the DOL had applied a multi-factor “economic reality” test, which asks whether the worker is economically independent from the employer, to determine whether a worker is properly classified as an independent contractor. The Trump administration published a regulation in 2021 with preferred factors to be used in making the economic reality determination, emphasizing two “core” factors: (1) the nature and degree of the employer’s control over the work; and (2) the worker’s opportunity for profit or loss. The new proposed regulations return to a “totality-of-the-circumstances” analysis “in which the factors do not have a predetermined weight and are considered in view of the economic reality of the whole activity.” The proposed regulation lists six factors for the analysis: (1) opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the employer; (3) degree of permanence of the work relationship; (4) nature and degree of control; (5) extent to which the work performed is an integral part of the employer’s business; and (6) skill and initiative. Additional changes being proposed, such as adopting “reserved authority” in place of overtly exercised “direct control,” would have potentially significant consequences for employers who utilize independent contractors.

FortneyScott will continue to follow this issue and provide analysis on new developments.