The U.S. Department of Labor (DOL) has published its 339-page final rule on how workers will be considered as “employees” or as “independent contractors” under the federal Fair Labor Standards Act (FLSA or Act).
The FLSA sets the federal minimum wage rate for all hours worked and requires overtime pay of at least one and one-half times the employee’s regular rate of pay for every hour worked over 40 in a workweek. The Act also requires employers to maintain certain employee records and prohibits retaliation against employees who are discharged or discriminated against after, for example, filing a complaint regarding their pay. By contrast, independent contractors are in business for themselves and make or lose money without regard to minimum wages.
Other federal statutes which touch on the employee/independent contractor question include the National Labor Relations Act (NLRA) and the Social Security Act. While this DOL rule pertains just to the FLSA, there are broader implications. Under federal law, only employees can be unionized and only employees would be covered under the “joint employer” rule, recently adopted by the National Labor Relations Board, which says more than one employer may be held responsible for an individual worker’s grievances. A finding by a court or via an administrative hearing that a worker is an employee under the FLSA, then, can have ramifications beyond minimum wage levels.
It's important to note that the DOL final rule rejects a DOL ruling from the prior Administration. The ruling by the Trump Administration attempted to simplify the employee/independent contractor question by establishing two "core" factors to determine worker status. Those two "core" factors — the nature and degree of control over the work and the worker's opportunity for profit or loss — were generally helpful to a determination of independent contractor status. Under the DOL final rule, they are now just part of six overall factors to be considered equally under an "economic reality" framework.
Applying the new DOL approach to individual worker situations is fact intensive, but the DOL final rule is a clear step toward finding that a worker is an employee.
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