DOL's Proposed FLSA Independent Contractor Rule: Control'Part I

• Jurisdiction: United States,Federal
• Law Firm: Seyfarth Shaw LLP
• Subject Matter: Corporate/Commercial Law, Employment and HR, Compliance, Health & Safety, Employee Rights/ Labour Relations
• Author: Mr Andrew M. McKinley, Kyle D. Winnick and Alex W. Simon
• Published date: 14 March 2023

Seyfarth Synopsis: This first part of a multi-part series explores the implications of the Department of Labor's proposed independent contractor rule under the Fair Labor Standards Act. Specifically, it focuses on proposed changes to the control factor concerning legal, safety, contractual, and other similar requirements.

As we detailed here, on October 11, 2022, the Department of Labor (DOL) issued a notice of proposed rulemaking ("NPRM") defining employee versus independent contractor status under the Fair Labor Standards Act. If promulgated, the NPRM would rescind and replace an interpretive regulation promulgated by the DOL in 2021 under the Trump Administration (the "2021 Rule"), which attempted to revamp and modernize the standard for determining employee status under the FLSA, as discussed here.

Courts have long held that the ultimate inquiry when determining employee versus independent contractor status under the FLSA is whether the worker is economically dependent on the putative employer.¹ One factor considered under this inquiry is the nature and degree of the worker's versus the putative employer's control over the work performed. In this first part of a multi-part series on the NPRM, we take a closer look at how the NPRM re-defines employer control, for purposes of determining employee status.

Not all control or oversight is voluntary. As any company in the airline, energy, financial services, healthcare, insurance, or logistics industry knows, regulatory compliance often requires businesses to exercise a certain amount of oversight and control over workers, irrespective of whether the individual is an employee or independent contractor. Such control is not dictated by the whims of the company to cabin a worker's judgment, but instead a reflection of restrictions imposed by federal and state laws and agencies. Aligning with a long line of cases,² and other regulatory guidance,³ the 2021 Rule opined that control stemming from compliance with legal requirements is not indicative of employee status, because laws apply to both workers and employees alike and because compliance with such laws'which are often designed to protect workers and consumers'should be encouraged. Indeed, even under the so-called ABC test employed in some states, which presumes a worker is an employee, courts have found that compliance with regulatory requirements does not evidence control for purposes of employment.⁴

Relatedly, prior to the NPRM, a long line of cases found...