New Rule Identifies Core Factors To Determine Worker Classification
On January 6, 2021, the Department of Labor (DOL) entered a Final Rule and revised its interruption of independent contractor status under the Fair Labor Standards Act (FLSA) clarifying the standard, to promote certainty for shareholders, reduce litigation and encourage innovation in the economy.
The Final Rule will take effect 60 days after publication in the Federal Register, on March 8, 2021.
In October, attorneys Frank Botta and Todd Pappasergi, of The Lynch Law Group, submitted comments on behalf of several transportation companies and proposed a “bright-line test” that would be limited to the two “core factors” identified in the Proposed Rule which supports the standard that has been adopted.
The Final Rule identifies and explains the “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself.
- The nature and degree of control over the work.
- The worker’s opportunity for profit or loss based on initiative and/or investment.
The Rule then identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors for consideration are:
- The amount of skill required to do the work.
- The degree of permanence of the working relationship between the worker and the potential employer.
- Whether the work is part of an integrated unit of production.
Anticipated Response From Biden Administration
Now that we have merely two weeks before President Trump leaves office, the Final Rule’s shelf life may be in doubt. The Rule could take effect, at least temporarily under the new Biden Administration, or could be challenged in the Courts. The agency has the ability to reopen the rulemaking by requesting public input on whether to modify the test for Independent Contractor Status and move in a different direction. President-elect Biden’s incoming press secretary has cited the independent contractors regulation as one of the “midnight” rules that may be frozen from taking effect in a memo on Inauguration Day.
It is anticipated that the new Administration will be committed to restoring the Obama Administration’s aggressive wage-hour/wage-classification agenda, among others.
The Lynch Law Group is available to assist you and answer your questions about the new regulation and how it impacts your business today and going forward, as the Biden administration commences. Please contact Frank Botta, at (724)776-8000 or firstname.lastname@example.org.
Frank C. Botta, Esq., is a partner and Chair of the Transportation Practice Group at The Lynch Law Group. Attorney Botta is a Past President of the Transportation Lawyers Association. Frank has decades of experience representing commercial enterprises governed by various federal and state regulatory agencies, including the U.S. Department of Labor and the U.S. Department of Transportation.