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.
