New proposed independent contractor regulations issued from DOL (again)

Earlier this month, the U.S. Department of Labor (DOL) released a proposed rule to once again update the test to determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The proposed rule is intended to replace the 2021 independent contractor regulation. The new 2022 rule largely returns to the “economic realities” test. In publishing the proposed new rule, the DOL emphasized that courts have applied the economic realities test for several decades in interpreting the FLSA. If adopted, the rule could impact certain workers’ eligibility for overtime and minimum wage laws. As a result, employers may need to revisit their existing policies and practices to determine whether workers that they previously characterized as independent contractors should be reclassified as employees.

Under the new proposed rule, an employee is defined as any individual who an employer “suffers, permits, or otherwise employs to work,” and an independent contractor is any worker who, as a matter of economic reality, is “in business for themselves.” Whereas the current rule in effect emphasizes whether the worker has control over their duties and earnings, the proposed rule would place significant weight on a worker’s “economic dependence,” which is evaluated through six factors. These factors include: