Posts

UPDATE: U.S. Dept. of Labor withdraws independent contractor rule

Independent Contractor graphic image

By Michele C. Spillman

The United States Department of Labor is withdrawing its new rule regarding classification of workers as independent contractors under the Fair Labor Standards (FLSA) on May 6, 2021. According to DOL, the rule was “inconsistent with the FLSA’s text and purpose, and would have a confusing and disruptive effect on workers and businesses alike due to its departure from longstanding precedent.”

Spillman portrait

With a background in both commercial litigation and labor and employment law, Michele C. Spillman offers clients comprehensive solutions to meet their business goals.

The FLSA entitles employees, but not independent contractors (aka “freelancers,” “gig workers,” and “consultants”) to certain protections, such as minimum wage and overtime requirements. Classification of workers has long been a confusing issue for employers because neither the FLSA nor its regulations define “employee” or “independent contractor.”

In January 2021, under the prior administration, DOL published a final rule titled “Independent Contractor Status Under the Fair Labor Standards Act” (the “Independent Contractor Rule”). The rule was set to take effect on March 8, 2021 and would have modified the “economic reality” test historically used by DOL to determine whether a worker is an employee or independent contractor.

Under the economic reality test, “[I]n the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.” Department of Labor. (2008). Employment Relationship Under the Fair Labor Standards Act [Fact Sheet 13].

The Independent Contractor Rule reaffirmed the “economic reality” test, but identified and explained two “core factors” that are most probative to the question of whether a worker is in business for herself (an independent contractor) or someone else (an employee):

  1. The worker’s nature and degree of control over the work.
  2. The worker’s opportunity for profit or loss based on initiative and/or investment.

DOL stated that the Independent Contractor Rule was withdrawn because its “prioritization of two ‘core factors’ for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring review of the totality of the circumstances related to the employment relationship.”

It seems unlikely DOL plans to adopt a new rule regarding worker classification. According to Jessica Looman, principal deputy administrator for the DOL Wage and Hour Division, “We are going back to the decades-old analysis and…really feel that this is the space where we can best protect workers.”

We will continue to post updates on new guidance from DOL and other federal agencies on our website. For more information, consult with a Phillips Murrah labor and employment attorney.

RELATED STORIES:


For more information on how the information in this article may impact your business, please call 214.615.6365 or email Michele C. Spillman.

facebook icon

Follow our coverage on FACEBOOK

Employee or independent contractor? DOL finalizes new rule

By Michele C. Spillman

The United States Department of Labor announced a new final rule on January 6, 2021 regarding classification of workers as independent contractors under the federal Fair Labor Standards Act (FLSA).  “Streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility,” said DOL Wage and Hour Division Administrator Cheryl Stanton.  The rule takes effect on March 8, 2021, absent action by the new administration (more on that below).

The FLSA entitles employees, but not independent contractors (aka “freelancers,” “gig workers,” and “consultants”), to certain protections, such a minimum wage and overtime requirements. Classification of workers has long been a confusing issue for employers because neither the FLSA nor its regulations define “employee” or “independent contractor.”

contract gig workerDOL has historically used the “economic reality” test to determine whether a worker is an employee or independent contractor. Under the economic reality test, “[I]n the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.” Department of Labor. (2008).  Employment Relationship Under the Fair Labor Standards Act [Fact Sheet 13].

In applying the economic reality test, DOL relied on six factors developed by the U.S. Supreme Court. But these factors often proved difficult to apply and led to conflicting results across various employers and industries, making worker classification a moving target and a hotly debated issue.

The new rule reaffirms the “economic reality” test, but identifies and explains two “core factors” that are most probative to the question of whether a worker is in business for herself (an independent contractor) or someone else (an employee): (1) the worker’s nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment.

DOL identified three other factors that “may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification”: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the worker and the potential employer; and (3) whether the work is part of an integrated unit of production.

Despite this clarification, worker classification remains a very fact-specific inquiry. As DOL cautions, “the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.”

Whether the final rule will become effective as planned remains a question. President-Elect Biden has pledged to combat worker misclassification, and many predict he will freeze the rule when he takes office on January 20, 2021.

We will continue to post updates on new guidance from DOL and other federal agencies on our website.  For more information, consult with a Phillips Murrah labor and employment attorney.


Spillman portrait

With a background in both commercial litigation and labor and employment law, Michele offers clients comprehensive solutions to meet their business goals.

For more information on how this DOL guidance may impact your business, please call 214.615.6365 or email Michele C. Spillman. Click HERE to visit her profile page.

For ongoing coverage of information related to COVID-19, please visit our COVID-19 Resource Center.  

facebook icon

Follow our coverage on FACEBOOK

Sign of the Times: Department of Labor publishes guidance on electronic postings and telemedicine visits in light of pandemic changes

By Janet A. Hendrick

Janet Hendrick

Janet Hendrick is an experienced employment litigator who tackles each of her client’s problems with a tailored, results-oriented approach.

Recognizing ongoing changes the COVID-19 pandemic has brought to the way we work and receive medical treatment, the Wage and Hour Division of the United States Department of Labor issued employer guidance on December 29, 2020 on two issues:  electronic posting of required employment law notices and when a televisit with a health care provider counts as an in-person visit under the Family and Medical Leave Act. DOL’s guidance comes in the form of Field Assistance Bulletins, which provide guidance to the Wage and Hour Division field staff.

Field Assistance Bulletin No. 2020-7:  Electronic Statutory Postings

DOL published this guidance in response to “questions from employers regarding the use of email or postings on an internet or intranet website, including shared network drive or file system, to provide employees with required notices of their statutory rights.”  The bulletin provides guidance as to when these forms of electronic notice satisfy the notice requirements of the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Polygraph Protection Act, and the Service Contract Act.  DOL’s general view is that electronic postings should supplement, but not replace, physical postings in most cases.

Electronic communications graphicFirst, if a statute requires the posting of a notice “at all times,” DOL will only consider electronic posting an acceptable substitute where (1) all employees work exclusively remotely, (2) all employees ordinarily receive information from the employer electronically, and (3) all employees have access to the electronic posting at all times.  For employers that have both remote and on-site employees, the employer may supplement physical postings with electronic postings and in fact the DOL “would encourage both methods of posting.”

Second, if a statute, such as the Service Contract Act, permits employers to meet notice requirements by delivery of individual notices to each employee, an employer satisfies this requirement by emailing notices, but only if the employee customarily receives information from the employer electronically.  Otherwise, the employer must send a physical notice to satisfy the notice requirement.

Third, any electronic notice must be as effective as a physical, hard-copy posting to meet statutory requirements.  This means employees must be able to readily see a copy of the posting, which DOL says will “depend on the facts.”  At a minimum, DOL requires that the employees are capable of accessing the posting without having to request permission to view a file or access a computer.  DOL will not consider an employer to have complied with a posting requirement if:

  • The employer does not customarily post employee notices electronically;
  • The employer has not taken steps to inform employees where and how to access the notice electronically;
  • The employer posts the notice on an unknown or little-known electronic location, which DOL equates to “hiding the notice, similar to posting a hard-copy notice in an inconspicuous place, such as a custodial closet or little-visited basement”; or
  • The employees cannot easily determine which electronic posting applies to them and their worksite.

Following the general guidance, the bulletin provides further guidance specific to each relevant statute, with examples of when DOL will consider electronic postings compliant with the relevant statutory requirement.

Field Assistance Bulletin No. 2020-8:  Telemedicine and Serious Health Conditions under the FMLA

DOL’s Wage and Hour Division issued a frequently asked question (FAQ #12) in response to the COVID-19 pandemic that states “Until December 31, 2020, the WHD will consider telemedicine visits to be in-person visits . . ., for purposes of establishing a serious health condition under the FMLA.  To be considered an in-person visit, the telemedicine visit must include an examination, evaluation, or treatment by a health care provider; be performed by video conference; and be permitted and accepted by state licensing authorities.”  Bulletin 2020-8 provides guidance to DOL staff regarding telemedicine visits past December 31, 2020.

As a reminder, under the FMLA, eligible employees may take leave for their own or a family member’s “serious health condition.” A “serious health condition” requires either inpatient (overnight) care or “continuing treatment,” which in turn includes “examinations to determine if a serious health condition exists and evaluations of the condition.”  FMLA regulations provide that “treatment by a health care provider means an in-person visit to a health care provider,” and does not include a phone call, letter, email, or text message.”

Noting the rapid acceleration of telemedicine during the COVID-19 pandemic, and the Wage and Hour Division’s “experience . . . that health care providers are now often using telemedicine to deliver examinations, evaluations, and other healthcare services that would previously have been provided only in an office setting,” the bulletin states that “WHD will consider a telemedicine visit with a health care provider as an in-person visit,” provided certain criteria are met.

To be considered an in-person visit, the visit must include:

  • An examination, evaluation, or treatment by a health care provider;
  • Be permitted and accepted by state licensing authorities; and
  • Generally, be performed by video conference.

Phone calls, letters, emails, or text messages remain insufficient, alone, to satisfy the in-person visit requirement.

We will continue to post updates on new guidance from DOL and other federal agencies on our website.


For more information on how this DOL guidance may impact your business, please call 214.615.6391 or email Janet A. Hendrick.

For ongoing coverage of information related to COVID-19, please visit our COVID-19 Resource Center.  

facebook icon

Follow our coverage on FACEBOOK

Teleworking and an Employer’s Woes of Record Keeping

Portrait of Byrona J. Maule

Click to visit Byrona J. Maule’s profile page.

In this era of Covid-19, many employees who have never had the opportunity to telework are now, out of necessity, teleworking.  This creates many challenges for employers – and none is more important than the employer’s obligation to exercise reasonable diligence in tracking teleworking employees’ hours of work.

The Wage and Hour Division of the United States Department of Labor (WHD) issued Field Assistance Bulletin 2020-5 (FAB 2020-5) today on the employer’s obligation to track a teleworking employee’s hours of work pursuant to the Fair Labor Standards Act (FLSA).

FAB 2020-5 acknowledges the employers’ obligation to pay its employees for all hours worked – even if the work was not requested, if the employer “suffered or permitted” the employee to work.  This includes work performed at home.  If an employer knows or has reason to believe that an employee is performing work, the employer must count those hours as hours worked.  An employers’ knowledge may be either actual or constructive.

Employers may exercise reasonable diligence in tracking an employee’s teleworking hours by having a reasonable reporting procedure for unscheduled time and then compensating employees’ for all reported hours.  An employer may not prevent or discourage employees to accurately report all hours the employee works. If the employee fails to use the reasonable procedure “the employer is not required to undergo impractical efforts to investigate further to uncover unreported hours of work and provide compensation for those hours.”  If an employee fails to report unscheduled hours worked through the employer’s established procedure, the employer is generally not required to investigate further to uncover unreported hours worked.

FAB 2020-5 explores when an employer has “reason to believe that an employee is performing work.”  An employer has actual knowledge of the employees’ regularly scheduled hours, and an employer may have actual knowledge of hours worked, through employee reports or other notifications.  An employer has constructive knowledge if the employer should have acquired knowledge of such hours through reasonable diligence.  Reasonable diligence is defined as what the employer should have known – NOT what the employer could have known.  “Though an employer may have access to non-payroll records of employees’ activities, such as records showing employees accessing their work-issued electronic devices outside of reported hours, reasonable diligence generally does not require the employer to undertake impractical efforts such as sorting through this information to determine whether its employees worked hours beyond what they reported.”  Examples given of impractical efforts included in FAB 2020-5 included sifting through CAD records and phone records to determine if an employee was working unreported hours. However, Bulletin 2020-5 does not give a definitive rule that an employer never has to consult records outside of timekeeping records, noting it depends on the circumstances, and there may be instances where an employer’s non-timekeeping records may be relevant to issue of constructive knowledge of an employee’s unreported work hours.

In order for an employer to leverage the most protection from an employee seeking wages for unreported hours, an employer should:

  1. Have a reasonable policy/procedure setting forth clearly that an employee is to report all hours worked, whether scheduled or unscheduled.
  2. The employer should not discourage an employee from utilizing the procedure.
  3. The employer should train on the policy, or otherwise assure that employees are aware of the procedure, and when to use the procedure.

If an employer undertakes these steps, and an employee fails to utilize the procedure to report unscheduled hours worked, the employer’s failure to pay for the unreported hours worked should not be a violation of the FLSA.


For more information on this alert and its impact on your business, please call 405.552.2453 or email me.

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

facebook icon

Follow our coverage on FACEBOOK

How to Survive a Labor Law Investigation: USDOL offers free compliance assistance seminars for employers

Published on August 15, 2017

The United States Department of Labor (USDOL) is offering free seminars to educate employers about the Wage and Hour Division, its enforcement of federal labor laws, and common violations to avoid.

The USDOL encourages employers and representatives from all industries to attend. This training is provided at no cost to participants.

The seminars will cover issues regarding the Fair Labor Standards Act including minimum wage, overtime, record keeping, youth employment, exemptions, deductions, common violations, and bonuses and other payments.

Participants will be trained on the Family Medical Leave Act and issues regarding coverage, employee eligibility, qualifying conditions, employer/employee rights and responsibilities, maintenance of benefits, and notification and records requirements.

For more information and to register, follow these links:

On-site registration will begin at 12:30 PM for each seminar. Seating will be limited.

Disclaimer: This website post is intended for informational purposes only and does not constitute legal advice. Readers should not rely upon this information as a substitute for personal legal advice. If you have a legal concern, you should seek legal advice from an attorney.