July 19, 2022

In a June 3, 2022 blog post, the Department of Labor (DOL) announced it will issue a new proposed rule on determining employee or independent contractor status under the Fair Labor Standards Act (FLSA). The DOL held public forums soliciting stakeholder feedback, an employer forum on June 24 and a worker forum on June 29. The DOL has indicated they are aiming to release the draft Notice of Proposed Rulemaking later this summer.

Employees are entitled to minimum wage, overtime pay, and other benefits under the FLSA. Independent contractors are not entitled to these benefits, but generally have other flexibilities these employees do not, such as the ability to work for multiple companies and the ability to set their own schedules. The blog post, written by the acting administrator for the DOL’s Wage and Hour Division Jessica Looman, highlights that the anticipated rulemaking will focus on the misclassification of employees as independent contractors.

The current Independent Contractor Final Rule was issued in January 2021 by the Trump Administration. Scheduled to take effect March 2021, upon taking office the Biden Administration initially delayed the rule before formally withdrawing it in May 2021. However, a federal court in Texas held in March 2022 that the DOL’s delay and withdraw was unlawful, ruling that the Trump Administration’s rule has been in effect since its original effective date (March 8, 2021). The DOL has appealed that ruling, which is currently pending appeal by the U.S. Court of Appeals for the Fifth Circuit.

Next Steps

The FMLA may indirectly impact employer benefit programs depending on an employer-sponsored plan’s eligibility rules with respect to independent contractors. Employers should continue to comply with the existing DOL Independent Contractor Final Rule. Business Group on Health will continue monitoring regulatory developments.

Resources

• DOL Blog Post: Misclassification of Employees as Independent Contractors Under the Fair Labor Standards Act
• Final Rule: Independent Contractor Status Under the Fair Labor Standards Act (March 8, 2021)

If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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