US DOL Proposes Uniform Independent Contractor Rule for Federal Wage Hour Law
The IRS, NLRB, and other agencies have their independent contractor tests. And we know that California has AB 2257, which replaced AB 5. It’s as easy as ABC to keep track. SWIDT?
So the US Department of Labor decided to add its own independent contractor analysis to the mix. You can review the proposed regulation here. There is a 30-day notice and comment period, after which the DOL may review and revise the proposed rule and then publish a final rule. And I hear there’s an election coming up, so this all may mean nothing.
But, as it stands now, here’s how the DOL describes its proposed regulation:
- Adopt an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. 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);
- Identify and explain two “core factors,” specifically: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
- Identify three other factors that may serve as additional guideposts in the analysis including: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the putative employer; and whether the work is part of an integrated unit of production; and
- Advise that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.
These are not groundbreaking criteria for assessing independent contractor status. Here are some observations, though:
- Why this matters: Independent contractors are not employees. Employees are entitled to the benefits of the Fair Labor Standards Act (minimum wage, overtime, etc.); independent contractors are not.
- The DOL’s stated objective is to clear up confusing court rulings, opinion letters, and other guidance regarding how to tell an independent contractor from an employee under federal wage and hour laws.
- Like the “Borello” test in California (the one that was replaced by the tough ABC standard unless an exception applies), the DOL’s proposed regulation is a “totality of the circumstances” test. But only two factors are “core,” with three other “additional” factors entitled to some weight. The proposed test will make it easier to establish contractor status than the ABC Test certainly, and than under some formulations of the “economic realities test” developed by some courts.
- California employers, however, have little to cheer about. Under AB 2257, if the ABC Test applies, the employer / hirer has to prove all three factors, A-B-and C, or the worker is an employee. If you don’t know what I’m talking about, please review the analysis of AB 2257 here, and the previous posts linked there. Multi-state employers with operations outside California certainly will want these regulations to take effect.
- The federal Fair Labor Standards Act does not automatically preempt state and local wage and hour law, which is why this is a yawn for California employers. But where state wage and hour laws are preempted, such as with respect to certain interstate transportation workers, for example, this test may be applicable.
- As stated, a new administration could get rid of these proposed regulations, or could rescind them if they take effect.
So, we’ll see where this goes.
DLSE Proposes Retaliation Penalty Regulations
The Division of Labor Standards Enforcement is proposing to enact regulations in support of its authority to seek penalties for retaliation in violation of certain sections of the Labor Code. These regulations will be set out at 8 Cal. Code Regs. sections 13900-904. You can find the text proposed and more information here.
The proposed regulations state that a the maximum penalty of $10,000.00 for violations of statutes such as Labor Code section 1102.5, 98.6, etc., “generally” will apply. But then the regulation sets out factors that the Labor Commissioner considers when deciding whether to set the penalty below a statutory maximum. The burden of proof will be on the “respondents” seeking a reduction of the penalty.The rule also makes clear that penalties are “jointly and severally” assessed against all “respondents” (the defendants against whom there is a penalty assessed.)
Here are the factors the Labor Commissioner will consider when considering a reduction:
(1) The nature and seriousness of the violation.
(2) The size of the employer. Size may be determined by the number of employees employed around the time of the violation.
(3) The employer’s commitment to future compliance, as demonstrated by actions such as the employer’s unconditional offer to reinstate the affected employee within 18 months of the termination or revision of employment policies to comply with applicable laws.
DLSE’s Business Engagement Program
Nothing says “business engagement” like the California Labor Commissioner’s office. And to prove it, your employer-friendly pals at the DLSE have launched a business engagement program. You can read about it here. OK, I was a little snarky there. Stop laughing.
The DLSE’s first effort in business engagement is some free training, co-branded with payroll service provider ADP. You can find out more about the free webinar training in the news release linked above.
AB 2147 – Reversal of Convictions for Certain Inmates
The Governor signed AB 2147 which is here. This law will effectively reverse convictions of certain prison inmates who helped fight fires as part of a “conservation camp” operated by the state department of corrections. Some felonies are excluded, but most are not. Excluded felonies are:
(A) Murder.(B) Kidnapping.(C) Rape as defined in paragraph (2) or (6) of subdivision (a) of Section 261 or paragraph (1) or (4) of subdivision (a) of Section 262.(D) Lewd acts on a child under 14 years of age, as defined in Section 288.(E) Any felony punishable by death or imprisonment in the state prison for life.(F) Any sex offense requiring registration pursuant to Section 290.(G) Escape from a secure perimeter within the previous 10 years.(H) Arson.