Duff: Will New FLSA Employee Take a look at Change Something?| Employees Compensation Information

By Michael C. Duff

Monday, December 28, 2020 | 64 | 0 | min read

The Bloomberg Daily Labor Report recently said: “The US Department of Labor sent the White House to review a high-profile closing rule to facilitate the use of independent contractors by employers, and the Trump administration’s surge in deregulation in the weeks leading up to the Change of presidency continued. ”

Michael C. Duff

The rule relates to the classification of employees under the Act on Fair Labor Standards. Under applicable law, the FLSA uses a business reality test to distinguish between employees and independent contractors that takes seven factors into account:

• To what extent the services provided are an essential part of the client’s business.
• The permanence of the relationship.
• The amount of the putative contractor’s investment in facilities and equipment.
• Type and degree of control by the client.
• The odds of the presumed contractor’s profit and loss.
• The level of initiative, judgment, or foresight in competing in the free market with others that is required for the claimed independent contractor to succeed.
• The degree of independent organization and operation.

The Department of Labor pushed ahead with the new midnight rule which purports to clear the test of “economic realities” by using a five-factor test that highlights two “core factors” that should be given the greatest weight. The two key factors are:

• Type and degree of control of the worker over the work.
• The employee’s chance of profit or loss.

These factors are “very conclusive” for the study of economic dependency, according to DOL, as the ability to control one’s work and generate profits or losses is at the heart of what it means to be an “independent contractor”. If these two factors indicate a classification that the employee is an independent contractor, then the DOL rule believes that classification is likely to be correct.

The other three non-core factors are:

• The amount of skills required to do the job.
• The degree of permanence of the working relationship between an individual and the potential employer.
• The importance of the services provided to the company’s business.

The upcoming new test seems to me to be very controversial. It seems to impose primary and secondary analytical factors. However, it is easy to predict that in many (most?) Cases of the gig economy context, a real control analysis points in the direction of employee status (which is why the gig economy hates the control-oriented adaptation of the second part of the agency test). and an opportunity for profit or loss (on paper) may point in the direction of independent contractor status.

This opens up an analysis under the secondary, non-core factors, and we will have a five-factor test versus the old seven-factor test. (I leave it to the reader to take an impressionist look at the two clusters of factors).

Obviously, the departing Trump-ites must believe that overall more workers than independent contractors will be found under the new test. Could be. However, I do not see how this will lead to a summary dismissal of the sentence. There are enough factors that a lawsuit over the new test will likely feel typical, even if the test lasts more than eight or nine months, which I think is unlikely.

In any case, employment tests under state law, such as those used for employee compensation, can be influenced by the federal tests, but are never subject to them. Uber and Lyft have a long, long way to go before they achieve their goal of exploding the whole idea of ​​”employment”.

Michael C. Duff is Associate Dean of Student Programs and External Relations and Professor of Law at the University of Wyoming College of Law. This entry was republished with permission from the Blog of Professors for Employee Compensation Law.