The Department of Labor Wage and Hour Division has released a proposal to revise the standards for determining whether a worker is an independent contractor or an employee. The proposal would rescind changes to the criteria made in the Biden Administration and revert back to the standards used in the first Trump Administration.

The department’s proposed rule would:

• Apply an “economic reality” test to determine whether a worker is in business for himself or herself as an independent contractor or is an employee economically dependent on an employer for work.
• Identify and explain two “core factors” that will be given greater weight to help determine if a worker is economically dependent on an employer for work or 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.
• Identify other factors to help determine a worker’s status as an employee or independent contractor, including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
• Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
• Provide eight fact-specific examples applying the factors to real-life circumstances.

The proposed rule states that certain employer requirements do not demonstrate a degree of control requiring employee classification. These include requiring a worker to comply with specific legal obligations, meet health and safety standards, carry insurance, or meet deadlines. This departs from the Biden-era rule as well, which stated that several of these things could be considered evidence of control in appropriate circumstances.

Unlike employees, who are covered under the Fair Labor Standards Act, independent contractors are not entitled to a minimum wage, overtime pay, unemployment insurance, and worker’s compensation. Commercial motor vehicle drivers who are subject to the federal hours of service regulations are separately exempt from overtime requirements under the FLSA.