DOL Announces Proposed Rule on Classifying Employees and Independent Contractors

On October 13, the U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM) to modify Wage and Hour Division regulations that would revise the analysis for determining employee or independent classification under the Fair Labor Standards Act (FLSA). The NPRM would set a framework more consistent with longstanding judicial precedent. PHTA monitors this topic due to the potential impact it can have on pool construction and service industries, where companies may rely on independent contractors.

More widely, the rule would do the following:

• Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
• Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
• Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
• Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control, and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
• Assist with the proper classification of employees and independent contractors under the FLSA.
• Rescind the 2021 Independent Contractor Rule.

DOL believes the proposed rule will address employee misclassification as this denies workers’ rights and protections. Comments on the NPRM can be submitted until November 28,2022. The entire NPRM can be read here.