On Tuesday, September 22nd, the U.S. Department of Labor (DOL) shared proposed regulations that would make it easier for companies to determine whether workers are employees, who are subject to the Fair Labor Standards Act's (FLSA) minimum wage, overtime, and sick leave protections; or are classified as independent contractors, who are not entitled to any of the listed protections. The Labor Department has fast-tracked the proposed regulations, with a plan to finalize the rule before a potential change-of-hands of the White House in January.
Eugene Scalia — the son of the late Supreme Court Justice Antonin Scalia and the current head of the Department of Labor — stated "The department's proposal aims to bring clarity and consistency to the determination of who's an independent contractor under the Fair Labor Standards Act. Once finalized, it will make it easier to identify employees covered by the act, while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor."
To determine whether a worker is an employee or an independent contractor, companies use an “economic reality” test, which takes into account two core factors: whether a worker is in business for themselves, meaning they're an independent contractor, or is economically dependent on a putative employer for work, meaning they're an employee. Three other “guideposts” help determine a worker’s status: skill requirements; permanence of the working relationship between worker and employer; and if the work is a part of an integrated production unit.
Stakeholders will have thirty days to comment once the proposal is published on the Federal Register — which senior DOL officials indicated will likely be within the next two weeks — leaving the department only two months to review the input on the high-stakes plan before cementing the decision.
Ride-hailing giants like Uber and Lyft and delivery companies like Amazon, Instacart, and Grubhub are fighting to convince courts that their drivers are independent contractors under the FLSA. If finalized, the rule would make waves in the many lawsuits over the status of workers in those industries.
Johnson & Bell’s Employment group will continue to monitor this issue and share any further developments with clients. If you have questions about how this development may impact your workforce, please contact Johnson & Bell Shareholders, Joseph F. Spitzzeri, Genevieve M. LeFevour, Christopher J. Carlos or Brian C. Langs.