Proposed Labor Rule to Differentiate Employees and Contractors

Cleaning businesses and franchises that hire contractors will be interested in a proposed new law that will clarify the difference between employees and independent contractors under the Fair Labor Standards Act (FLSA).

The proposed rule, which was announced yesterday by the U.S. Department of Labor, would make it easier to identify employees covered by the FLSA.

The proposed rule would:

• Adopt an “economic reality” test to determine whether works are in business for themselves (independent contractors) or are economically dependent on a putative employer for work (employee)
• Identify and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment
• Identify three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production
• Advise that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.

This proposed rule is available for review and public comment for 30 days after it is published in the Federal Register. The Department of Labor encourages interested parties to submit comments.