Labor Department Launches Rulemaking on Independent Contractors
The Labor Department said it will start drafting a rule on determining whether a worker is an employee or an independent contractor not covered by the federal law that governs minimum wage, overtime pay and other benefits.
Of importance to NATSO members, the Wage and Hour Division will hold a public forum June 24 to hear from employers. NATSO members who wish to participate should click the following link to register in advance.
Former President Donald Trump's Labor Department issued an independent contractor rule just before he left office in 2021. The Biden Administration withdrew it in May 2021, but a district court vacated the withdrawal in March 2022, ruling that the Trump Administration's rule had already taken effect.
The Labor Department subsequently appealed the decision.
President Biden seeks to restore the Obama Administration’s wage-hour misclassification agenda, which would entail a more rigid test for qualifying workers as independent contractors than what President Trump’s Labor Department issued.
The rule issued under President Trump considered five factors to determine whether a worker is economically dependent on an employer, and therefore an employee rather than a contractor. It:
- Reaffirmed an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee).
- Identified and explained two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself.
- Identified three other factors that could serve as additional guideposts in the analysis, particularly when the two core factors did not point to the same classification, 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, among others.
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