The U.S. Department of Labor has put forth a new test for determining whether someone is an employee or independent contractor under the Fair Labor Standards Act that could tilt the balance in that determination towards employee status.
On October 11, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a proposed rule to establish a new test for determining who is an independent contractor versus an employee under the Federal Labor Standards Act (FLSA). If and when the proposal is finalized, it would rescind a Trump administration final rule clarifying the standard for employee versus independent contractor status under the FLSA. AGC supported the Trump administration’s rule that adopted a consistent, clear and common-sense standard for determining independent contractor status under the FLSA. AGC previously filed comments opposing the DOL move to withdraw the rule in 2021.
The FLSA ensures employees receive various benefits from employers including a minimum wage and overtime pay for hourly workers among others. It does not apply to independent contractors. In addition, it should be noted that the proposed rule, as applicable to independent contractor/employee determinations under the FLSA, does not impact such determinations under state employment law, federal tax law, the National Labor Relations Act or others.
Under the new DOL proposal, the test for determining whether someone is an employee or independent employee falls under a totality-of-the-circumstances analysis that includes six factors—but does not limit it to just those six—with no predetermined weight. The current Trump administration rule in effect includes two primary factors: (1) control over the work; and (2) opportunity for profit or loss. Those factors carry greater weight in determining employee/independent contractor status.
AGC has long called for federal clarification of the independent contractor status and preservation of legitimate independent contractor relationships, such as those that have historically existed in the construction industry. Comments on the proposal are due by November 28. AGC will provide comments opposing the rule as written and explaining it could impact those legitimate relationships.