The U.S. Department of Labor announced a proposed rule clarifying the definition of employee under the Fair Labor Standards Act (FLSA) as it relates to independent contractors. AGC has long called for federal clarification of the independent contractor status and preservation of legitimate independent contractor relationships, such as those that have historically existed in the construction industry.
The Department’s proposed rule would:
- Adopts 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 himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee);
- Identifies and explains 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 himself or herself;
- Identifies three other factors that may serve as additional guideposts in the analysis: 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
- Advises 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.
This Notice of Proposed Rulemaking (NPRM) is available for review and public comment for 30 days after it is published in the Federal Register. The Department encourages interested parties to submit comments on the proposed rule.
For more information, contact Claiborne Guy at claiborne.guy@agc.org or 703-837-5382.