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Labor Department moves ahead with independent contractor rule

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Will this mean that more gig workers will be considered employees?

The US Department of Labor will be moving forward with a new rule aimed at determining who is an employee and who is an independent contractor with the department announced today that it will publish a notice of proposed rulemaking on Thursday.

Its new rule will likely require more workers — including gig economy drivers — to be classified as employees rather than independent contractors, The New York Times reported.

Marty Walsh, Secretary of Labor commented: “While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers. Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

Specifically, the proposed rule would:

  • Align the department’s approach with courts’ Fair Labor Standards Act interpretation and the economic reality test.
  • Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
  • Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
  • Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
  • Assist with the proper classification of employees and independent contractors under the FLSA.
  • Rescind the Trump era 2021 independent contractor rule.

The current Trump-era independent contractor final rule was set to go into effect in March 2021 but was initially delayed by the incoming Biden administration and was withdrawn by the Department of Labor in May 2021. However, a federal court held the withdrawal was unlawful, and the rule remains in place.

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