Comments are due Nov. 28, 2022.
Last week, NSBA reported a new proposed rule from the U.S. Department of Labor (DOL) that will adjust how employers determine whether a worker is an employee or a contractor. The proposal would largely roll-back a similar rule-making that occurred during Trump Administration.
When determining a worker’s status, the Biden administration will use a multi-factor economic realities test that considers factors of the working relationship to determine whether the worker is truly in business for themselves. The proposed changes would be a return to a “totality-of-the-circumstances” analysis, according to the proposal, evaluating all of the factors involved in the working relationship equally.
The rulemaking also would rescind a Trump-era rule that outlined a similar multi-factor test, but that gave greater weight to how much control workers have over their job duties and their opportunities for profit or loss when determining whether a worker is an employee or an independent contractor. Biden DOL officials said the simplified Trump independent contractor test is inconsistent with federal court decisions and would result in more workers being misclassified as independent contractors when they should be employees.
The Trump test included five factors, but two were given far greater weight: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment. The new Biden proposal would consider those two factors and four others: investments by the worker and the employer, the degree of permanence of the working relationship, the extent to which the work performed is an integral part of the employer’s business, and the degree of skill and initiative exhibited by the worker.
The DOL may also consider “additional factors” beyond those six, if they indicate the worker may be in business for themselves, according to the proposal.
The proposed rule also provides additional analysis of the control factor, “including how scheduling, supervision, price setting and the ability to work for others should be considered when analyzing the degree of control over a worker.”
The Labor Department couldn’t be definitive on the proposal’s impact because it “does not have data on the number of misclassified workers and because there are inherent challenges in determining the extent to which the rule would reduce this misclassification.”
The rule change would cost affected companies, independent contractors, and local governments $188.3 million, the DOL estimated.
The proposed regulation was officially published in the Federal Register on Oct. 13, and comments are due Nov. 28, 2022. NSBA will be submitting comments and will help its members do the same.
Please click here to read the proposal.