July 1, 2021 - Douglas Myser

Fair labor standards act. The U.S. Department of Labor issued a final rule, Independent Contractor Status, under the Fair Labor Standards Act, to clarify the standard for determining whether a worker should be considered an employee or an independent contractor. The new guidelines are to take effect March of 2021. Officials said the rule would bring needed clarity to the standards under the Fair Labor Standards Act, or FLSA. "This rule brings long needed clarity for American workers and employers," said U.S. Secretary of Labor Eugene Scalia in a statement. The final rule explains that independent contractors are workers who, as a matter of economic reality, are in business for themselves as opposed to being economically dependent on one employer for work. The inquiry into economic dependence is conducted by applying several factors, with no one factor being determinative. The final rule applies five distinct factors, instead of the five or more overlapping factors previously considered. Fair labor standards act.

The most stringent regulatory alternative to the Department's proposed rule would be to codify the "ABC" test recently adopted under California's state wage and hour law to distinguish between employee/independent contractor status. As described to the California Supreme Court in Dynamex, "the ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions that the worker is free from the control and direction of the hirer in connection with the performance of the work.

With respect to construction work, the worker does not have a meaningful opportunity for profit or loss based on his exercise or initiative or investment, indicating employee status. He is unable to profit, increase earnings, by exercising initiative or managing investments of the company. The employee would have to have the opportunity to show initiative and earn form that initiative, and have a financial interest in the company to be considered a partner, not a independent contractor. An employee would only have certain responsibilities, not a financial stake.

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