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The National Association of Home Builders (NAHB) announced that the U.S. Department of Labor (DOL) has issued a final rule on independent contractor status under the Fair Labor Standards Act (FLSA). The rule, which will be published in the Federal Register on Jan. 7, is scheduled to take effect on March 8, 2021. The rule adopts an economic reality test to determine whether an individual is an independent contractor or an employee under the FLSA. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee). The rule identifies two core factors that are most probative to the question of whether a worker is economically dependent on someone elses business or is in business for himself or herself: The nature and degree of control over the work. The individuals opportunity for profit or loss. If both of these core factors point to the same classification, they are given greater weight in the analysis. If the two core factors conflict, the other factors are examined to determine whether they point to the worker being an employee or an independent contractor. The rule also identifies 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. These factors are: The amount of skill required for the work. The degree of permanence of the working relationship between the worker and the potential employer. The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible. NAHB has long advocated for a rule that provides a clear and workable test to determine independent contractor status. The association has submitted numerous comment letters and testified before Congress on the need for a new test that provides employers with clarity and certainty. The DOLs final rule is a positive step in the right direction, but it is not a panacea. NAHB will continue to work with Congress and the DOL to ensure that the rule is implemented in a way that provides a clear and workable test for determining independent contractor status. For more information, contact Alexis Moch at 800-368-5242 x8407 or David Jaffe at x8317. Related The rule is a step in the right direction. The key will be how the DOL and the courts interpret and apply the rule. Will they be consistent in their application or will they continue to apply the tests in the way that suits their political or ideological views? The recent decision by the CA Supreme Court in the Dynamex case is an example of the latter.
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