The Trump Administration has tried to help business and employers in many ways, including loosening USDOL rules (and views) over many things. One topic of special interest on this front has been on the independent contractor issue. The USDOL has taken another step now in that direction, by proposing a new rule on the classification of workers as independent contractors and this new rule would be a distinct deviation from prior issuances.
The proposed rule sets forth a five-factor test that will focus on the “economic reality” of a given relationship between a worker and a putative employer. Two of these are so-called “core factors,” which are the most significant in this calculus. They are: 1) the control that a worker has over their work; and, 2) the worker’s potential for profit or loss. The rule then posits that if both of these militate the same conclusion, then “their combined weight is substantially likely to outweigh the combined weight of other factors that may point towards the opposite classification. As the proposal states, “in other words, where the two core factors align, the bulk of the analysis is complete.”
The USDOL noted that the emphasis of these factors is a departure from judicial views on this important issue. The agency explained that it emphasized these factors because they are essential in determining whether an individual is in their own business or they are reliant on another entity for their livelihood. The DOL views the control factor as involving analysis of whether a worker can decide when to work, or not, and for what length of time.
These regulations jump off from earlier issued (4/2019) DOL guidance that sought to find workers in the on-demand’ or sharing’ economy” were independent contractors under a six-part test. The agency now explains that it is memorializing the test it had set out in an Opinion Letter, the goal being to set down a standard, uniform analysis, rather than the diffuse and numerous tests that have been applied.
As to the other major factor, profit and loss, when a person can earn a profit or suffer a loss based on that person’s “exercise of initiative (such as managerial skill or business acumen or judgment) or management of his or her investment in or capital expenditure on, for example, helpers or equipment or material to further his or her work” that will facilitate an independent contractor conclusion. If someone “is unable to affect his or her earnings or is only able to do so by working more hours or more efficiently,” they will likely be found to be an employee.” Thus, if a worker earns more money by working fifty, as opposed to forty, hours, this factor would point to “employee” status.
There is now a very short comments period, thirty days, instead of the usual sixty. It is clear that the agency, i.e. the Trump Administration, wants to finalize the rule before December 31. Even if the rule does go into effect, a new Congress could throw it out pursuant to the Congressional Review Act. But, I like it anyway.
It’s a good start…