?The U.S. Department of Labor (DOL) has extended the comment period for its proposed rule on classifying independent contractors by 15 days. Comments on the proposal were due by Nov. 28, but now the DOL has extended the comment period to Dec. 13.
Under the federal Fair Labor Standards Act (FLSA), employees are entitled to minimum wage, overtime pay and other protections. Independent contractors are not entitled to such rights, but they generally have more flexibility to set their own schedules and work for multiple companies.
We have collected a variety of articles on the topic from SHRM Online and other news sources.
More Time to Evaluate Regulation
The DOL decision comes after at least three different business groups and lawmakers have asked for more time to review the proposal, arguing that the potential impact of the regulation warrants more time for the public to digest the policy changes. Tech, construction and trucking industries that typically rely on independent contractors to operate their businesses have been following this worker classification issue closely. Companies have said they’ll face new legal liabilities if they’re required to classify their workers as employees.
The initial 46-day public comment period could have raised questions under the Administrative Procedure Act, a law that governs the agency rulemaking process and requires that agencies give the public a “meaningful” opportunity to provide feedback on the policy change, critics of the rulemaking say.
Next Steps
Once the comment period ends, the agency will review every comment and prepare to finalize the rule, a process that could take several months. When the rule is finalized—which is expected to happen in the first quarter of next year—opponents of the regulation will be able to challenge it in court, which some groups have suggested they plan to do.
Financial Services Industry Weighs In
The Financial Services Institute asked the DOL to extend the comment period on the rule, which would make it harder for independent broker-dealers to classify workers as independent contractors. The trade group opposes the rule, saying it will create “regulatory tumult” and make it more difficult for independent broker-dealers to treat professionals who want to hang out their own shingles as independent contractors.
The trade group sued the DOL and won in May, preventing the agency from revoking the 2021 Trump-era rule which clarified independent financial advisors’ independent contractor status. The DOL appealed the lawsuit, but then decided that proposing a new rule was a better legal workaround.
Deciding Factors for Classification
The DOL’s proposal, released on Oct. 11, would rescind a 2021 rule in which two core factors—control over the work and opportunity for profit or loss—carried greater weight in determining the status of independent contractors. Under the new proposed rule, employers would use a totality-of-the-circumstances analysis, in which all the factors do not have a predetermined weight. Those factors may include the amount of skill required in the work, the degree of permanence of the working relationship, the worker’s investment in equipment or materials required for the task, and the extent to which the service rendered is an integral part of the employer’s business.
Growing Trend
The gig economy continues to spread across industries, increasing the use of independent contractors for temporary assignments and as part of organizational infrastructures. This hub page includes a toolkit, Q&A and checklist for employers to use.
