New Guidance for Classifying Independent Contractors Published by the DOL

Five factors identified to guide the economic dependence analysis

On September 22, 2020, the DOL proposed new regulations to codify criteria to identify independent workers under the Fair Labor Standards Act (FLSA). If the regulations are implemented they will provide a framework for employers to classify workers as independent contractors when compared to current case law.

The proposed rule relies strongly on an economic reality test that considers the following factors: (1) whether a worker is in business on his/her own or independent or (2) whether the worker is economically dependent on another company for work and therefore, is an employee. Proposed are the following five factors to guide the economic dependence analysis; however, the list is not exhaustive nor is a single factor dispositive, even though the first two factors carry more weight.

1. The nature and degree of the individual’s control over the work.
2. The individual’s opportunity for profit and loss.
3. The amount of skill required for the work.
4. The degree of permanence of the working relationship between the individual and the employer.
5. The determination of the work being a part of an integrated unit of production.

The regulations were published in the Federal Register on September 25, 2020 and are subject to a 30-day comment period which expires on October 26, 2020.

For more information about the proposed regulations and how to provide comments, click here.