Companies have increasingly used independent contractors for valid economic, business, and legal reasons to supplement their employee workforce. But the Department of Labor’s (DOL’s) recently issued Administrator’s Interpretation now attempts to expand coverage of the Fair Labor Standards Act (FLSA) and to dramatically alter the test for determining if an individual is an employee or an independent contractor. According to the DOL’s new interpretation of the “economic realities” test, “most workers are employees under the FLSA’s broad definitions.”
Citing “numerous complaints from workers alleging misclassification” and the history of “successful enforcement actions against employers who misclassify workers,” the DOL has reexamined each of the “economic realities” factors with the premise that the FLSA’s coverage should apply to the broadest extent possible. The Administrator’s Interpretation also attempts to legislate the weight afforded to each factor in a way that favors employee status, while inconsistently recognizing that “no single factor is determinative” and each factor “should be considered in totality” to determine whether a worker is an employee or an independent contractor.
For example, the DOL broadly interprets (in favor of employee status) the factor examining whether a worker performs functions integral to an employer’s business and then describes that factor as “compelling” in the independent contractor analysis. Conversely, the Administrator’s Interpretation affords minimal weight to the “control” factor and somehow concludes that neither working offsite (or at home) nor controlling one’s own hours, nor having little supervision, is “indicative of independent contractor status.” The DOL’s one-sided interpretation, however, ignores decades of legal precedent and relegates to “insignificance” concepts and factors that have long helped define the independent contractor relationship, such as whether a worker controls his or her own hours, has little or no supervision, and decides what tools and equipment to buy.