On September 22, 2020, the U.S. Department of Labor announced a proposed rule addressing how to determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor.
In this rulemaking, 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; an 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.
This proposed rule has triggered a heated battle over the requirements for being an independent contractor.
Weighing in on the battle is the California Attorney General as well as what he says is ” a coalition of 24 attorneys general – as well as local authorities in Chicago, New York City, Philadelphia, and Pittsburgh” who oppose the proposed rule. The coalition joined in writing a comment letter that opposed the DOL position on the rule.
They say that the “proposal upends the test currently used under the federal Fair Labor Standards Act (FLSA) that determines whether workers are entitled to critical employee protections such as paid sick leave, overtime, and unemployment insurance.”
In the comment letter, the coalition urges the Trump Administration to withdraw what they call “the unlawful proposal.”