In October, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a proposed rule to establish a new test for determining who is an independent contractor versus an employee under the Federal Labor Standards Act (FLSA).
The proposed rule is designed to reduce misclassification by returning to the “totality of the circumstances” test for analyzing whether a particular worker is an “employee” or “independent contractor.”
The “totality of the circumstances” test analyzes the following six factors:
• Opportunity for profit or loss depending on managerial skill;
• Investments by the worker and the employer;
• Degree of permanence of the work relationship;
• Nature and degree of control;
• Extent to which the work performed is an integral part of the employer’s business; and
• Skill and initiative.
The proposed rule provides further detail and explanation as to what each of these factors means in practice. It also clearly states that these six factors are not exhaustive and that additional factors may be relevant depending on the circumstances.
DOL announced this week that it has extended the comment period to December 13, allowing concerned parties an additional 15 days to provide input.