Proposed Rules on Classifying Employees

misclassification of employee

The Department of Labor has announced new rules it is presenting for proposed rulemaking related to what is an employee and what is an independent contractor. These are simply rules that are published as not final but meant for comment from the public about their applicability.

The classification of employees and independent contractors has been a problem for many years. When an employee is misclassified then they do not receive any protection under the Fair Labor Standards Act. The new rules would reinstate the economic reality test. This is a test that looks at control of the Employer over the independent contractor. It also looks at how the person is paid. Is there a profit or loss factor? The other big piece is whether the person is integral to the business.

The new rule would also rescind the 2021 Independent Contractor Rule enacted during the Trump presidency. Employers should be aware of these proposed rules and look for implementation in the near future.

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The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.