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What's the Independent Contractor Standard Now?

The capitol building in washington, dc.

​While the Trump administration's independent contractor standard under the Fair Labor Standards Act (FLSA) is still in effect, the Biden administration might not be enforcing it, House Republican leaders told the U.S. Department of Labor's (DOL's) Acting Secretary Julie Su. We've gathered articles on the news from SHRM Online and other media outlets.

Different Standards

In January 2021, the DOL issued a final rule entitled "Independent Contractor Status Under the FLSA." This rule emphasized two core factors for determining if someone is an independent contractor: a worker's control over the individual's work, and the person's opportunity for profit or loss.

If these factors are not clear, the rule includes three guidepost factors: 1) the amount of specialized skill required for the work that the potential employer does not provide; 2) the degree of permanence of the working relationship, focusing on the continuity and duration of the relationship and weighing toward independent contractor status if the relationship is definite in duration or sporadic; and 3) whether the work performed is part of an integrated unit of production.

The Biden administration's independent contractor proposed rule, issued in October 2022, would implement a multiple-factor test where the weight of each factor depends on the facts of the case and where additional factors may be relevant, the letter noted.

U.S. House Education and the Workforce Committee Chairwoman Virginia Foxx, R-N.C., and Subcommittee on Workforce Protections Chairman Kevin Kiley, R-Calif., asked that the DOL explain why it posted on its website a fact sheet that included the proposed test that is not yet current law rather than the 2021 test that is still law. Noting that approximately 18.9 million individuals work as independent contractors, they said that they're conducting oversight on the DOL's worker classification enforcement under the FLSA.

(House Committee on Education and the Workforce letter)

Proposed Rule

Under the new proposed rule, employers would use a totality-of-the-circumstances analysis, in which all the factors do not have a predetermined weight, instead of having two core factors.

The 2021 rule made it easier for employers to classify workers as independent contractors rather than employees. Under the FLSA, employees are entitled to minimum wage, overtime pay and other benefits. Independent contractors are not entitled to such benefits, but they generally have more flexibility to set their own schedules and work for multiple companies.

(SHRM Online)

SHRM's Policy Stance

On Dec. 13, 2022, SHRM submitted a comment to the DOL's Wage and Hour Division on the proposed rule for how employers can determine a worker's independent contractor status under the Fair Labor Standards Act. SHRM urged the department to keep the current worker classification test in place because it provides two clear standards to determine worker classification—the nature and degree of control over the work, and the worker's opportunity for profit or loss based on initiative and investment.
SHRM said the modern economy demands more flexibility from employers, and employees expect it. Unfortunately, the proposed rule does not consider organizational size. Small businesses will have to anticipate and plan to allocate more time and resources to navigate the DOL's new totality-of-the-circumstances standard.

Additionally, SHRM said the proposed rule will limit independent work opportunities because it tilts the scales toward employee classification. If employers are forced to consider full employment to fulfill talent needs, contracting opportunities will become scarce as work functions become internalized.

(SHRM comment on DOL's proposed rule)

House Committee Ponders Independent Contractor Rule

Supporters and opponents debated the pros and cons of changing the rule that determines how to properly classify employees and independent contractors during a U.S. House Education and the Workforce Committee hearing on April 19.

The debate over who is an independent contractor isn't just relevant under the FLSA. Congress is considering the PRO Act, legislation that would make it more difficult for employers to classify their workers as independent contractors, who are not covered by the National Labor Relations Act.

(SHRM Online)

Senators Spar over Labor Secretary Nominee

Su faced intense partisan wrangling at her Senate confirmation hearing on April 20. The support and opposition fell mostly along party lines, as was the case two years ago when Su became deputy labor secretary.

Some members of the business community have opposed Su for her pro-labor stances. Other business leaders have written in support of her.

Several Democrats haven't yet said if they'll support her nomination.

(SHRM Online) and (CNBC)


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