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The Haunting Return of the Financial Actuality Check: U.S. Division of Labor Proposes Resurrecting the Pre-Trump Period Worker/Impartial Contractor Check

On October 13, 2022, the U.S. Division of Labor (“DOL”) printed its proposed rule concerning the classification of workers and unbiased contractors below the Truthful Labor Requirements Act (“FLSA”) in an try and resolve inconsistent analyses amongst the Federal Courts of Appeals. The proposed rule would return to a totality-of-the-circumstances evaluation of the “Financial Actuality Check” (with just a few modifications), which might have the impact of constructing it harder to categorise staff as unbiased contractors.

In Could 2021, the DOL withdrew the Trump-Period Impartial Contractor Rule, which created tiered elements within the classification evaluation. The primary tier, which contained two “core” elements—the employee’s nature and diploma of management and the employee’s alternative for revenue and loss—was outcome-determinative and most probative within the evaluation. The second tier contained three “non-core” elements: (1) the ability required for the job; (2) the diploma of permanence of the working relationship between the employee and employer; and (3) whether or not the work was a part of an built-in unit of manufacturing. Alone, it was “extremely unlikely” that these three non-core elements may skew the evaluation in favor of 1 classification, generally to that of an “worker.”

The DOL’s proposed rule would make it harder to categorise staff as unbiased contractors by returning to a “totality-of-the-circumstances” evaluation below the “Financial Actuality Check.” Particularly, the elements beforehand talked about (and a brand new, sixth issue contemplating “consideration of funding”[1]) would not fall below the Trump-era two-tiered evaluation. As an alternative, all six elements would carry the identical weight. Moreover, the DOL’s proposed rule would make clear and broaden on current elements by:

  • Offering further evaluation of the “management” issue by together with detailed discussions of how scheduling, supervision, price-setting, and the flexibility to work for others ought to be thought-about; and
  • Returning to the “longstanding” interpretation of the “integral” issue by increasing the evaluation as to whether the work is integral to the employer’s enterprise, reasonably than an built-in unit of manufacturing.

The DOL justifies the proposed rule change as a protection-mechanism for staff, stating that the earlier method tended to “enhance the danger of misclassification of workers as unbiased contractors.” And the DOL desires, in any respect prices, to “defend” staff who, if labeled as unbiased contractors, are usually not eligible to obtain minimal wages and time beyond regulation pay, and they aren’t supplied with unemployment insurance coverage or different worker advantages.

The proposed rule shouldn’t be but ultimate—the DOL is accepting feedback regarding the rule till November 28, 2022. Moreover, a employee’s classification could also be totally different below the FLSA than it’s below numerous state legal guidelines, the Nationwide Labor Relations Act and/or the Inside Income Code. Subsequently, employers ought to proceed to take steps to make sure correct classification of their staff, and stay cognizant of and adjust to relevant state and native legal guidelines, which can be totally different than federal legislation. Ought to you may have any questions regarding these points, employers ought to seek the advice of counsel for help.

*Alexandria Amerine is a legislation clerk within the agency’s Dallas workplace.


[1] The DOL’s sixth issue, consideration of funding, would think about whether or not a employee’s funding is capital or entrepreneurial in nature. It might additionally think about the employee’s investments on a relative foundation with the employer’s funding.


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