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Lindsay M. Massillon of Fowler White Burnett. Lindsay M. Massillon of Fowler White Burnett.

On Sept. 22, the Department of Labor (DOL) released a notice of proposed rulemaking (NPRM) proposing a new rule clarifying the standard for evaluating whether a worker is an employee or an independent contractor. The proposed rule adds a new Part 795 to the Fair Labor Standards Act (FLSA) titled “Employee or Independent Contractor Classification under the Fair Labor Standards Act.” The DOL has provided for only 30 days for the public to file comments after the proposed rule is published, signaling the department’s eagerness to issue a final rule before the end of the year.

Incorrectly classifying a worker as an independent contractor can result in adverse consequences for employers. A true independent contractor is not covered by the FLSA and therefore not entitled to minimum wage or overtime. Of course, businesses stand to save a significant amount in labor costs if relieved from the requirement to pay overtime to workers and therefore would benefit from the increased use of independent contractors. However, the manner in which the Department and courts have decided whether someone is an employee or not has been inconsistent making it difficult to know whether workers are properly classified. The DOL has never issued a regulation setting the standard itself which is why clarity is so desperately needed on the issue. The rule, if finalized, would be the department’s sole authority on the topic and would streamline the analysis by expressly identifying the most important elements of an independent contractor versus an employee.

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