DOL issues proposed rule on independent contractor status 
News
Monday, September 28, 2020

DOL issues proposed rule on independent contractor status 

By Payroll and Entitlements Editorial Staff

The Department of Labor has issued a Notice of Proposed Rulemaking (NPRM) revising its interpretation of independent contractor status under the FLSA. With respect to a final rule, the Department’s Wage and Hour Division is planning to ‘‘finalize before year-end.’’

Key provisions The Department proposes to:

  • Adopt an ‘‘economic reality’’ test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for themselves (independent contractor) or is economically dependent on a putative employer for work (employee);
  • Identify and explain two ‘‘core factors,’’ specifically: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for themselves;
  • Identify three other factors that may serve as additional guideposts in the analysis including: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and
  • Advise that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.

The proposed regulation has been submitted to the Office of the Federal Register (OFR) for publication and is currently pending placement on public inspection at the OFR and publication in the Federal Register. The Notice of Proposed Rulemaking will be available for review and public comment for 30 days after it is published in the Federal Register.

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