Defining Independent Contractor Status

• Adding a regulatory provision, which expressly states that an independent contractor who renders services to a person is not an “employee” of that person under the FLSA.
• Adding a regulatory provision, which expressly adopts the economic reality test as the method courts must use to determine a worker’s status as an employee or an independent contractor under the FLSA.
• Simplifying and clarifying the economic realities test by focusing it on two core factors: (a) the nature and degree of the worker’s control over the work; and (b) the worker’s opportunity for profit or loss. The proposed regulation expressly states that these two factors should be given more weight than any of the other factors.
• Adding regulations that clarify what is meant by “skill required.” The proposed regulation “explains that the ‘skill required’ factor weighs in favor of classification as an independent contractor where the work at issue requires specialized training or skill that the potential employer does not provide. Otherwise, it weighs in favor of classification as an employee.” 
• Adding regulations that clarify the meaning of the factor addressing the “permanence of working relationship.” The proposal states that this factor “would weigh in favor of classification as an employee where the individual and the potential employer have a working relationship that is by design indefinite in duration or continuous.” In comparison, where the relationship is temporary or sporadic, it would weigh in favor of an independent contractor relationship. 
• Adding regulations that clarify the “integrated unit” factor. The proposed regulation “focuses the ‘integrated unit’ factor on whether an individual works in circumstances analogous to a production line.” If a worker is “a component of a potential employer’s integrated production process, whether for goods or services,” then the factor weighs in favor of employee status. It further explains that “if the individual’s work is not integrated into the potential employer’s production process, the factor would favor classification as an independent contractor. This includes where an individual service provider is able to perform his or her duties without depending on the potential employer’s production process.” 
• Adding regulations, which expressly state that the actual practice of the parties involved – both the workers at issue and of the potential employer – is more relevant than what may be contractually or theoretically possible.

Author Bio

Brian Peterson is an Attorney at Spencer Fane LLP in the firm’s Kansas City, Missouri, office. Visit www.spencerfane.com Follow @SpencerFane