United States of America: Opened consultation on Employee or Independent Contractor Classification Under the Fair Labor Standards Act

On 13 October 2022, the Department of Labor (DOL) opened a consultation on its new draft rule on "Employee or Independent Contractor Classification Under the Fair Labor Standards Act". The consultation will be open until 28 November 2022. In its draft rule, the DOL proposes a new framework for assessing the worker's status and classifying a worker as an independent contractor or employee. In particular, the DOL proposes applying the "economic reality test", including an analysis of the "control factor", which considers how prices are set and the worker's ability to provide services for others. Furthermore, the rule aims to consider if the "work is integral to the employer's business", which the DOL considers the "integral factor". Previously, independent contractors were "workers who, as a matter of economic reality, are in business for themselves", whereas employees were considered dependent on their potential employer. Determining who is dependent and who is not was determined based on five variables, with the most important being the extent of the person's control over their work and the probability of obtaining profit or loss. The other three variables were the skill required for the work, the extent to which the work was an "integrated unit of production", and the stability of the relationship between worker and employer.