DOL Proposes New Worker Classification Regulations Under FLSA

December 13, 2022
Hall Benefits Law, LLC

The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) has published a Notice of Proposed Rulemaking in the Federal Register concerning the classification of employees and independent contractors under the Fair Labor Standards Act (FLSA). One of the main functions of FLSA is to outline the minimum wage and overtime requirements that apply to employees but not independent contractors.

The proposed regulations would rescind and replace the 2021 regulations on the same subject; although the DOL previously delayed and withdrew the regulations, a court later vacated the withdrawal and made them effective.

The proposed regulations apply a framework for determining whether a worker is an independent contractor under FLSA. This framework rejects the approach of the 2021 regulations, which rejected the plain text of FLSA and decades of caselaw, in favor of a “totality of the circumstances” approach that is more consistent with judicial precedent. Instead of focusing primarily on two “core” factors, the proposed regulations require the balanced consideration of six factors that reflect the economic reality of the working relationship, which include:

  • The worker’s opportunity for profit or loss due to managerial skill;
  • Investments by the parties;
  • The relationship’s permanency;
  • The nature and degree of control over the work;
  • Whether the work is an integral part of the employer’s business; and
  • Skill and initiative.

Application of this framework also may require the consideration of other relevant factors. This framework is indicative of the basic tenet that individuals who are economically dependent on the employer for work are employees, and those who are in business for themselves are independent contractors.

While the changes in DOL’s regulations may be significant, employee benefit plan rules typically determine employee status under ERISA or the Code as opposed to FLSA. Plan administrators and benefits attorneys should make this determination under the appropriate rules when necessary.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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