Wednesday Wisdom From Wouch Maloney - CPA Firm

Employee or Independent Contractor? What To Know About DOL Proposed Rule

The Department of Labor (DOL) announced a proposed rule regarding how to determine if a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The rule is scheduled to be published and open for comment on Thursday, October 13, 2022.

Why Employee Classification Matters

According to the DOL news release, “misclassification is a serious issue that denies workers’ rights and protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over law-abiding businesses, and hurts the economy at-large.”

Employees and independent contractors gather around a table.
Employee or Independent Contractor? New rule by DOL will provide new guidance to employers.

Classifying New Hires

The proposed rule will rescind the 2021 Independent Contractor Rule and restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.

The proposed rule is an attempt to:

  • Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
  • Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
  • Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
  • Assist with the proper classification of employees and independent contractors under the FLSA.

Need Help With Classification?

If you are planning to hire a worker and have questions as to whether this worker should be treated as an employee or independent contractor, please contact us. We will continue to monitor the status of this rule and keep you updated.

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