The Department of Labor (DOL) today proposed a new independent contractor rule that would establish whether workers qualify as independent contractors under the Fair Labor Standards Act.
The proposed rule, announced by the Labor Department’s Wage and Hour Division, would rescind a 2024 final rule that utilized six factors to determine whether a worker was deemed an employee or an independent contractor. That rule was ultimately halted a year later by the Trump Administration.
According to the new proposal, employers would need to “apply an ‘economic realty’ test to determine whether a worker is in business for himself or herself as an independent contractor or is an employee economically dependent on an employer for work.”
It also requires employers identify and explain two “core factors,” like “the nature and degree of control over the work,” and “the worker’s opportunity for profit or loss based on initiative and/or investment.”
Other inputs in the new proposal are:
- Identify other factors to help determine a worker’s status as an employee or independent contractor, including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
- Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
- Provide eight fact-specific examples applying the factors to real-life circumstances.
The current proposed rule would also likely follow legislation adopted by the DOL in 2021, the department noted in a statement.
“The department’s proposed rule seeks to protect these workers’ entrepreneurial spirit and simplify compliance for American job creators navigating a modern workplace, all while maintaining robust protections for employees under the Fair Labor Standards Act,” said Secretary of Labor Lori Chavez-DeRemer.
The proposed rule “would also apply the department’s streamlined analysis to the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, both of which use the FLSA’s statutory definition of ‘employ,’”, added the department.
Professionals are encouraged to comment on the rule, which will have a 60-day comment period that closes on 11:59 p.m. on April 28.