DOL Issues Final Rule on FLSA Independent Contractor Status
On Jan. 6, 2021, the U.S. Department of Labor (DOL) issued a final rule that clarifies how to determine whether a worker is an employee who is protected under the Fair Labor Standards Act (FLSA) or an independent contractor who is exempt from it. The final rule becomes effective March 8, 2021.
The final rule reaffirms an existing “economic reality” test under which an employer must consider whether, as a matter of economic reality, a particular worker is dependent on that employer as opposed to being in business for him or herself. Two “core factors” that are most significant in this analysis are:
- The nature and degree of control over the work; and
- The worker’s opportunity for profit or loss based on initiative and/or investment.
Other relevant factors to consider, particularly when the two above do not point to the same classification, include:
- 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.
For these analyses, the final rule emphasizes that actual practices are more relevant than what may be contractually or theoretically possible. Also of key note, the rule appears to allow employers a little more freedom in offering benefits to independent contractors. In particular, it states that “the provision of certain health, retirement or other benefits suggests classification as an employee — that fact is not determinative by itself because other facts and factors must also be considered.” This statement appears to allow employers to offer independent contractors certain benefits without automatically triggering employee status, creating new opportunities for companies to provide incentives — as long as they are mindful of the rule’s other provisions.
The FLSA requires employers to meet wage, work hour and recordkeeping requirements for each of their employees. If a worker meets the standards for independent contractor status, those requirements would not apply. Employers should become familiar with the new final rule and how it may apply to their workforce.
DOL Issues Guidance on Electronic Posting of Labor Law Notices
On Dec. 29, 2020, the DOL issued Field Assistance Bulletin 2020-7, which addresses when the DOL will consider electronic posting by employers (by email or an internet or intranet website) sufficient to provide employees with required notice of their statutory rights under a variety of federal labor laws.
The Bulletin was issued in response to employer questions about the use of electronic means to post notices under the following laws, as more employees work remotely due to the COVID-19 pandemic:
- The Fair Labor Standards Act (FLSA);
- The Family and Medical Leave Act (FMLA);
- The Employee Polygraph Protection Act (EPPA); and
- The Service Contract Act (SCA).
A chart that lists all of the statutory posting requirements along with the electronic posting requirements can be found here.
Electronic notices supplement, but do not replace, the statutory and regulatory requirements that employers post a hard-copy notice in most cases. For example, the DOL encourages both methods of posting where an employer has employees on-site and other employees teleworking full-time. According to the DOL, whether notices are provided electronically or in hard-copy format, it is an employer’s obligation to provide the required notices to all affected individuals.
Multiple States Add New Laws Affecting Employers
Multiple states have new laws going into effect this year (or in the future) that can have an impact on your business. Minimum wage is being raised in more than 20 states in 2021, with Florida joining others in gradually increasing it to $15 per hour by 2026. Other states have continued to expand paid sick leave (Colorado adding it by 2024) or continued state-mandated COVID leave (New York). Additionally, recreational marijuana is now legal in New Jersey and Montana.
Multi-state employers need to be aware of laws affecting their businesses and employees. In addition to the laws referenced above, employers also need to be aware of any reporting requirements for states with individual mandate laws now that the federal individual mandate has been repealed. A list of those states and their reporting requirements (if any) can be found here.