DOL Proposes New Independent Contractor Classification Rule
Posted November 11, 2022
On Oct. 11, 2022, the U.S. Department of Labor (DOL) announced a proposed rule to rescind and replace its 2021 independent contractor classification rule under the Fair Labor Standards Act (FLSA).
Whether a worker is covered by the FLSA depends on whether they fall within its definition of “employee.” The DOL favors using the five-factor economic realities test (ERT) to classify workers as either employees or independent contractors.
The 2021 rule uses the ERT, but it designates tow factors, the nature and degree of control over the work and worker’s opportunity for profit or loss, as “core factors,” having more probative value and carrying greater weight than the others.
The proposed rule returns to the pre-2021 rule precedent and allows employers to consider all five ERT factors equally. If the rule is adopted, employers need to consider the “totality of the circumstances” in their worker classification efforts.
Employers should continue to monitor this development and consider how they may need to update their worker classification procedures if this proposal is finalized and adopted.
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