In the waning days of the Trump administration, the U.S. Department of Labor (DOL) issued a rule that would have drastically altered how the DOL evaluates whether a worker is an independent contractor. Specifically, the Rule would have revised the DOL’s test for determining worker status under the Fair Labor Standards Act to focus on two “core factors” (control and opportunity for profit and loss), and de-emphasized the other factors traditionally considered as part of the “economic realities” test.
In light of the withdrawal of the Rule under the Biden administration, the DOL will likely continue to use the six-part economic realities test. Those factors are:
1. The extent to which the work performed is an integral part of the employer’s business;
2. The worker’s opportunity for profit or loss depending on his or her managerial skill;
3. The extent of the relative investments of the employer and the worker;
4. Whether the work performed requires special skills and initiative;
5. The permanency of the relationship; and
6. The degree of control exercised or retained by the employer.
DOL Wage and Hour Division Administrator’s Interpretation No. 2015–1 (July 15, 2015).
“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” U.S. Labor Secretary Marty Walsh said in a statement. “Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors.”
Independent contractors are exempt from important labor protections such as the minimum wage and overtime. Many employers misclassify employees as independent contracts to save on taxes, wages, sick pay, unemployment insurance, and workers compensation benefits.
If have employment law questions, including employee versus independent contractor status, please contact us at 1-877-858-6868 or coordinator@caklegal.com.