On October 13, 2022, the U.S. Department of Labor published a Notice of Proposed Rulemaking regarding how to determine whether an individual is an employee or independent contractor. After an extension, that comment period finally closed this week. The DOL has continued its flip-flopping on this issue. You may recall on September 22, 2020 (during the Trump administration), the DOL issued a notice of proposed rulemaking that it would adopt the economic realities test, with two core factors. I blogged about that here. In January 2021, days prior to the change of administration, the DOL issued a Final Rule, basically adopting the two “core” factor test – the nature and degree of control over the work and the individual’s ability to make or lose money based on their initiative and/or investment. Not surprisingly, a few months later, the Biden administration officially withdrew that Final Rule, which a Texas court held was unlawful, restoring it in May 2022.
Where are we today?
The latest proposed rule basically nullifies the 2021 rule, and goes back to the DOL’s position prior to the Trump administration (pre-2017) in a swift 180. The new rule states that economic dependence is the “ultimate inquiry” and whether the worker is, in economic reality, in business for themself. Don’t be fooled, however, this does not mean the amount of income earned, or if they have other income streams (according to the DOL).
The DOL’s new rule is back to looking at 6 factors as a “guide” for the “assessment of the economic realities” with no one factor dispositive – oh, and the 7th factor of a catch-all, whatever else they deem important:
- Opportunity for profit or loss depending on managerial skill.
- Investments by the worker and the employer.
- Degree of performance of the work relationship.
- Nature and degree of control.
- Extent to which the work performed is an integral part of the employer’s business.
- Skill and initiative.
- “Additional factors”.
To keep this short, I won’t get into the examples for all of the above, but the DOL’s examples make it very clear that the starting point is they are an employee until proven otherwise. And finally, my simple advice to clients remains unchanged – if it looks like a duck, quacks like a duck…it’s probably a duck.