The U.S. Department of Labor announced a proposed rule addressing how to determine whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor. The proposed rule aims to simplify, clarify and harmonize principles the federal courts have espoused for decades when determining what workers are "employees" covered by the minimum wage and overtime pay requirements of the FLSA. In this rulemaking, the Department proposes to:
Adopt an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for themselves (independent contractor) or is economically dependent on a putative employer for work (employee);
Identify and explain two “core factors,” specifically: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for themselves;
Identify three other factors that may serve as additional guideposts in the analysis including: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and
Advise that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.
IBA and others in the Coalition to Promote Independent Entrepreneurs have been outspoken about the need to streamline federal regulations so IBA members across the nation can thrive. We have consistently opposed laws, such as the one California passed last year, AB5, which require companies to treat as employees a broad range of workers who previously who have been recognized as independent contractors. IBA continues to maintain state operations in New York and New Jersey to thwart legislation akin to AB5 and protect independent bakers in the Northeast. Public comments are due to DOL by 30 days after the rule's publication in the federal register. IBA will seek input from its Independent Contractor Working Group in preparation for public comment. To join the Working Group, email Elizabeth@ibabaker.com.