The White House Office of Management and Budget (OMB) is reviewing a final rule that will revise the federal framework for determining whether a worker is an employee or an independent contractor. The U.S. Department of Labor (DOL) issued a proposed rule on this subject in October 2022, accepted comments through mid-December, and submitted the final rule to OMB on September 28, signaling that it has completed its work. As proposed, the rule would rescind a 2021 Independent Contractor Status rule and, among other changes, restore a “totality-of-the-circumstances” analysis to determining whether a worker is economically dependent upon an employer for work, versus being in business for themselves, under the Fair Labor Standards Act (FLSA).
This standard is important because the FLSA’s minimum wage and overtime pay protections do not apply to independent contractors, and many observers expect the new rule to result in more individuals being classified as employees than is the case under the current rule.
It is not known when the final rule will be published, but OMB review is the final step in the rulemaking process. We will monitor closely for release of the final rule and provide analysis for members.