US Department of Labor proposes rule to combat worker misclassification

Listen to this article

The federal department for labor will propose a rule to help combat employee misclassification, federal officials said on Tuesday. 

The U.S. Department of Labor will publish a Notice of Proposed Rulemaking on Wednesday with a framework where employers will classify workers or independent contractors under the Fair Labor Standards Act. Federal officials said they had seen employers misclassify workers as independent contractors, which deprives them of federal labor protections including the right to full wages. 

Under the proposed rule, the department would apply a previously used analysis to determine whether a worker is an employee or an independent contractor and use the courts’ interpretation of the FLSA when approaching cases. The rule would revert to the economic reality factors including investment, control and opportunity for profit or loss, and rescind the 2021 Independent Contractor Rule. 

The proposal is consistent with longstanding judicial precedent, would preserve essential worker rights and provide consistency for regulated entities, federal officials added. 

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Secretary of Labor Marty Walsh in a news release. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.” 

The department’s goal is to ensure employers don’t misclassify workers as independent contractors when they are covered by the FLSA, and then deprive them of legal wage and hour protections. Misclassification can deny workers basic protections like minimum wage and overtime pay and affects workers in a wide range of roles including construction. 

Stakeholders can submit comments online when the rule is posted to the Federal Register from Wednesday to Nov. 28. The department’s Wage and Hour Division reviewed stakeholders’ feedback in forums during the summer of 2022 and will solicit comments from those who are interested. People who are interested can also submit their comments in writing to the department’s office in Washington, D.C.