On Sept. 22, 2020, the U.S. Department of Labor (DOL) announced a proposed rule to clarify how employers should classify their workers as either employees or independent contractors. Accurate worker classification enables employers to determine which obligations, protections, rights and benefits apply to their employees under the law.
Economic Realities Test
Currently, there is no single rule or test for worker classification under the Fair Labor Standards Act (FLSA). This proposal would establish a five-factor “economic realities test” to determine a worker’s status under the FLSA. The five factors are:
The proposed rule identifies the first two factors as “core factors,” leaving the remaining three as “additional guideposts” in the analysis.
Emphasis on Actual Practice Finally, the proposed rule recommends that during the classification process, employers should evaluate the workers’ actual job responsibilities, rather than his or her contractual or theoretical job description.
The proposed rule will have a 30-day comment period from its publication date in the Federal Register. This publication is currently pending.
Source – Zywave, Inc.