On October 13, 2022, the Department of Labor (“DOL”) published a Notice of Proposed Rule Making to revise the DOL’s guidance on how to determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act. The proposed rule would rescind the prior rule implemented in January 2021 by the Trump Administration. The Trump Administration’s rule emphasized two “core factors” for primary consideration, (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit and loss. The DOL’s proposed rule would return to the totality of circumstances test previously applied by the DOL. The DOL accepted public comment on the proposed rule through December 13, 2022 and several notable industry groups provided comment. 

The Associated Builders and Contractors submitted comments opposing the proposed rule asserting that prior rule’s emphasis on the two “core” factors were paramount to making the independent contractor determination. Associated Builders and Contractors urged the DOL to withdraw the new proposed role and retain the prior final rule. 

The Associated General Contractors of America also submitted comments opposing the proposed rule asserting that Trump Administration’s rule “adopted a consistent, clear and common-sense standard for determining independent contractor status under the FLSA.”

The American Subcontractors Association along with the Small Business Legislative Counsel submitted comments on the proposed rule that emphasized the need for flexibility in determining employee versus independent contractor status. The ASA took no specific stance on the economic realities test but asserted that the existing guidance created through years of developed case law makes using an economic realities test or one similar to it easier to navigate. The ASA and SBLC applauded the DOL for declining to adopt an ABC test that would require a stringent factor test and eliminate flexibility. 

The comment period has closed and the rule making process will move forward with internal comment review as the DOL moves towards a final rule. HPSS will continue to monitor the rulemaking process and provide updates as new information is received.