Law Alert: DOL Releases Text of New IC Rule for FLSA
September 23, 2020
Yesterday, the U.S. Department of Labor (DOL) released a proposed rule to determine independent contractor status under the Fair Labor Standards Act (FLSA). The proposal is expected to be published in the Federal Register later this week or early next week. Comments will be due 30 days following formal publication.
The proposal marks a more significant venture for the DOL than its previous efforts to define the parameters for determining independent contractor status generally under the FLSA. The proposal synthesizes various courts’ approaches to implementing the Supreme Court’s economic realities test. Under the proposal, a court must evaluate whether a worker is economically dependent on a putative employer or is in business for him/herself. To do this, a court would examine two “core” factors: (1) the nature and degree of control the worker has over the work; and (2) the opportunity for profit or loss based on initiative and/or investment. If both core factors indicate either independent contractor status or employee status, no further inquiry would be needed under the proposed rule. In the customary and usual fact patterns found in trucking, both core factors should most often point in the direction of independent contractor status.
If both core factors do not lead to the same result, the proposed rule provides three additional “guideposts” for consideration. These are: (1) the amount of skill required; (2) the degree of permanence of the working relationship; and (3) whether the work is part of an integrated unit of production. As proposed, this factual inquiry will emphasize the actual practice between the parties rather than what is contractually or theoretically possible. These secondary factors could present challenges to maintaining independent contractor status based on some existing case law addressing driver work classification under various state laws.
DOL has strongly encouraged interested parties to submit comments in response to this proposed rule. Interested parties may contact the Firm to participate in this process.