Hunton Employment & Labor Perspectives

Last Thursday, the U.S. Department of Labor (“DOL”) published in the Federal Register its newly-proposed rule regarding independent contractor vs. employee classification under the Fair Labor Standards Act (“FLSA” or the “Act”).  Businesses have anticipated the release of this proposed rule from the Biden administration’s DOL since the DOL withdrew a more employer-friendly, Trump-era independent contractor rule in May 2021 that had not yet gone into effect.

The legal landscape for defining “employers,” “employees,” and “independent contractors” can be quite dynamic, as this past year has illustrated. In January 2021, the Department of Labor issued an employer-friendly independent contractor rule that would have departed from the agency’s typical balancing test, but it formally withdrew this rule in early May with the change in administration. The DOL’s independent contractor rule is intended to provide guidance to employers when determining whether a worker is an employee or an independent contractor. For employers, this is an important distinction because the FLSA’s overtime and minimum wage protections apply only to employees, not independent contractors. Because courts and employers sometimes struggle to find this line using the economic realities test and its iterations, the Trump-era independent contractor rule aimed to provide a clearer definition of “employee,” as opposed to “contractor.” The DOL has not yet proposed a new independent contractor test, but employers should be mindful that the Biden administration may potentially announce a new rule on this topic.

In the last weeks of the Trump Administration, the Department of Labor (DOL) published its final rule for determining whether an individual is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The distinction between an employee and independent contractor is of critical importance because independent contractors are not entitled to the benefits of the FLSA, namely minimum wage and overtime.