MBO Fights for Independents

For the first time since the end of World War II, the Department Labor looking at what makes one an employee under the Fair Labor Standards Act (FLSA).

This Proposed Rule would utilize the economic realities test as a straightforward standard around what actions one must take to be classified as an independent contractor, or if they should be considered economically dependent on an employer for work, and instead deemed an employee.

As part of this rulemaking, the Department will:

• Adopt 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 themselves (independent contractor) or is economically dependent on a putative employer for work (employee);
• Identify and explain 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 themselves;
• Identify three other factors that may serve as additional guideposts in the analysis including 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
• Advise 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.

MBO believes that the Independent Contractor Rule offers much-needed clarity in the existing law. If passed, it will allow you, as an independent professional, greater freedom to work in the manner you choose with your clients.

The Rule was scheduled to take effect on March 8, 2021. It has presently been delayed and re-opened for comment as part of the changeover in administration.