Department of Labor Guidance Clarifies Classification of Employees Under Fair Labor Standards Act

Agency Rule-Making & Guidance

On July 15, the Wage and Hour Division of the Department of Labor (DOL) issued guidance to employers in determining whether a worker should be classified as an employee or independent contractor under the Fair Labor Standards Act (FLSA).  The Guidance first noted the “problematic trend” in misclassifying workers as independent contractors and the potential adverse effects of such misclassification, including the loss of workplace protections such as minimum wage, overtime compensation, unemployment insurance, and workers’ compensation, as well as the loss of tax revenues and the creation of an uneven playing field for employers.  Beginning with the expansive FLSA definition of “employ” and applying a detailed six factor “economic realities” test, rather than a narrower common law control test, the Guidance concludes that most workers are employees under the FLSA’s broad definitions.