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The United States Department of Labor (“DOL”) investigates complaints of alleged violations of the Fair Labor Standards Act (“FLSA”), including possible misclassification of an employee as an independent contractor. A finding of misclassification can potentially result in an employer being liable for significant taxes and penalties.

On September 22, 2020, the DOL issued a proposed rule to provide clarification in regard to the definition of an employee versus an independent contractor under the FLSA.

“The Department’s proposal aims to bring clarity and consistency to the determination of who’s an independent contractor under the Fair Labor Standards Act,” said Labor Secretary Eugene Scalia. “Once finalized, it will make it easier to identify employees covered by the Act, while respecting the decision other workers make to pursue the freedom and entrepreneurialism associated with being an independent contractor.”

The proposed rule, as outlined in a press release from the DOL, provides the following:

Cheryl Stanton, who is the Wage and Hour Division Administrator with the DOL, stated, “The rule we proposed today continues our work to simplify the compliance landscape for businesses and to improve conditions for workers.” Ms. Stanton further stated, “The Department believes that streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility.”

Interested parties can submit comments on the proposed rule, which is encouraged by the DOL. The comment period runs for thirty days after the Notice of Public Rulemaking is published in the Federal Register.

It is important to note that this proposed rule will not change the definitions of independent contractor as defined by other federal and state law.

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