DOL Announces Proposed Rule on Classifying Employees, Independent Contractors Under FLSA

As a business owner, it is crucial that you stay up to date on changes in the Fair Labor Standards Act (FLSA) and other laws as they pertain to your business and your employees. Understanding the impact of changes in the U.S. Department of Labor (DOL) rules concerning the classification of workers under the FLSA can be critical to avoiding legal problems in the future. Worker misclassification can lead to legal disputes between employers and workers over certain benefits guaranteed by FLSA.

You can take proactive steps to protect your business by following all applicable employment laws and rules, including maintaining the proper classification of your employees and independent contractors under FLSA. Furthermore, you can rely on a Florida business law attorney at Kramer Green to help you work through any employment law matters as they arise.

DOL Notice of Proposed Rulemaking

DOL published a Notice of Proposed Rulemaking in the Federal Register on October 13, 2022, concerning classification of employees and independent contractors under FLSA. Employers have 45 days from that date, or until November 28, 2022, to submit comments on the proposed rule.

In its proposed rule, DOL proposes to “restore the multifactor, totality-of-the circumstances analysis to determine whether a worker is an employee or an independent contractor under FLSA.” This proposal returns to earlier, longstanding judicial precedent on which employers have relied in classifying their workers for the purposes of FLSA. The proposed rule also rescinds the 2021 Independent Contractor Rule.

DOL’s proposed rule is a departure from the much narrower “ABC Test” that California and some other states have adopted in various forms. By adopting the multifactor test, DOL and the courts can consider and apply different weight to various relevant factors. As a result, the proposed rule provides more flexibility for employers in classifying their workers. In particular, the flexibility in the factors considered in determining worker classification can be useful to companies that need to fill limited-duration functions requiring specialized skill sets that their general workers lack.

Factors to Consider Under the Proposed Rule

The proposed rule outlines six factors to consider, but the weight given to each factor may vary depending on the unique circumstances of each case. No one factor receives any predetermined weight or more weight than another in the multifactor, totality-of-the-circumstances analysis. The factors for consideration include the following:

  • Opportunity for profit or loss depending on managerial skill
  • Investments by the worker and employer
  • Degree of permanence of the work relationship
  • Nature and degree of control
  • The extent to which the work performed is an integral part of the employer’s business
  • Skill and initiative

The proposed rule also reverts to the longstanding interpretation of the economic reality factors, or those related to opportunity for profit or loss, investments by both parties, and control over the work.

Furthermore, these six factors are not the only factors that DOL and courts may consider in determining classification of workers. They may consider additional factors “if the factors in some way indicate whether the worker is in business for himself, as opposed to being economically dependent on the employer for work.”

Allow Us to Help You Protect Your Business Today

A business law attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. is ready to assist you in protecting your business by ensuring that you meet the requirements of all relevant rules and laws. We know how hard you have worked to build your business and we want to help you preserve it to the greatest degree possible. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal issues with our attorneys.

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