DOL Issues Proposed Independent Contractor Rule

The U.S. Department of Labor issued a proposed rule Oct. 13 to clarify who is an independent contractor under the federal Fair Labor Standards Act.

Officials said the proposed rule would rescind the 2021 Independent Contractor Rule, and revert to the longstanding interpretation of the Fair Labor Standards Act. 

“Misclassification of independent contractors has long been a common and complex legal issue for employers,” CBIA HR counsel Diane Mokriski said. 

This new proposed rule restores the strategy of evaluating six equally-weighted factors when determining a worker’s status. 

This new proposed rule is not entirely “new,” in that it restores the Obama administration (and pre-Obama) strategy of evaluating six equally-weighted factors when determining a worker’s status. 

Ultimately, the issue to be determined is whether the worker is “economically dependent” on an employer for work, or whether they are truly in business for themselves. 

In making this determination, whether we give special weight to two factors—as the Trump administration did—or weigh six factors equally, employers must perform a careful analysis of their contractors’ working relationships in order to avoid liability for misclassification. 

Employer Impact 

The Biden administration’s proposed rule may result in some workers’ reclassification to employee status. 

However, as no one factor is now determinative, employers who wish to retain independent contractors may accomplish this goal by designing their working relationships so they conform with as many of the six factors as possible.

The six factors are:

1. Whether the worker exercises managerial skill that impacts his success or failure; has opportunity for profit or loss  

2. Investments by the worker and the employer

3. Degree of permanence of the working relationship

4. Nature and degree of control

5. Extent to which the work performed is an integral part of the employer’s business

6. Skill and initiative 

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HR problems or issues? Email or call CBIA’s Diane Mokriski at the HR Hotline (860.244.1900) | @HRHotline. The HR Hotline is a free service for CBIA member companies.