Misclassification of Employees as Independent Contractors

On March 14, 2022 a district court in the Eastern District of Texas vacated the Department’s Delay Rule, Independent Contractor Status Under the Fair Labor Standards Act (FLSA): Delay of Effective Date, 86 FR 12535 (Mar. 4, 2021), and the Withdrawal Rule, Independent Contractor Status Under the Fair Labor Standards Act (FLSA): Withdrawal, 86 FR 24303 (May 6, 2021).  The district court further stated that the Independent Contractor Rule, Independent Contractor Status Under the Fair Labor Standards Act, 86 FR 1168 (Jan. 7, 2021), became effective as of March 8, 2021, the rule’s original effective date, and remains in effect.

On October 11, 2022, the U.S. Department of Labor announced the publication of a proposed rule to revise the Department’s guidance on how to determine who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The Notice of Proposed Rulemaking (NPRM) would rescind an earlier rule on this topic that was published on January 7, 2021, and replace it with an analysis for determining employee or independent contractor status that is more consistent with the FLSA as interpreted by longstanding judicial precedent. The Department believes that its proposed rule would reduce the risk that employees are misclassified as independent contractors, while providing added certainty for businesses that engage (or wish to engage) with individuals who are in business for themselves.

A worker is entitled to minimum wage and overtime pay protections under the Fair Labor Standards Act (FLSA) when there is an employment relationship between the worker and an employer and there is coverage under the FLSA. The Wage and Hour Division is responsible for determining whether an employee has been misclassified as an independent contractor and has been denied critical benefits and labor standards protections.