Last week the US Department of Labor announced a proposed rule to define independent contractor under the Fair Labor Standards Act.
According to USDOL Secretary Gene Scalia, “Part of what’s notable about this proposed rule is simply that we’re doing it. In the more than 80 years since enactment of the Fair Labor Standards Act, or FLSA, the Department has never adopted a rule defining the term for general industry.”
The purpose of the regulation is to, “…explain the contours of the economic reality test and clarifies and sharpens a test that has become less clear and consistent through decades of case-by-case administration in the courts of appeals. If this proposed rule were finalized, it would contain the Department’s sole and authoritative interpretation of independent contractor status under the FLSA.”
Key aspects of the proposal include:
- Adopting 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 himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee);
- Identifying and explaining 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 himself or herself;
- Identifying three other factors that may serve as additional guideposts in the analysis: 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; and
- Advising 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.
While this is excellent news, it does not change the NJ’s A-B-C test or the legislative proposal to further restrict state standards for worker classification. NJCJI will continue to lead the business community’s broad based coalition to see that a reasonable across the board test for employment is adopted in NJ.
In closing, Secretary Scalia so clearly and succinctly articulated why we are fighting this fight, “As Labor secretary, I’m struck how often young people tell me they want to start their own business; I’ve yet to meet one who says, “I dream of being an FLSA-covered employee.” Freedom from the strictures of a nine-to-five can be especially welcome to parents, caregivers and others who need greater control over their schedule and workload.”
A copy of the proposal can be found here. Comments are due by October 26, 2020. NJCJI will convene the IC coalition for a virtual meeting in the next few weeks to discuss the proposal and draft comments. If you would like to join the coalition or have other comments please contact Eric DeGesero 973-464-9504 or email@example.com.