The Independent Contractor Rule

Dec. 15, 2022

By Michael G. Charapp
Charapp & Weiss LLP


Whether to characterize workers as employees or independent contractors has been highly politicized for some time. When Democrats control the Executive Branch, they want workers to be employees, so they get the maximum benefits of the Fair Labor Standards Act (FLSA), such as earning minimum wage and premium overtime. Republicans prefer to treat a much broader range of workers as independent contractors who are not subject to the FLSA.

On October 11, 2022, the U.S. Department of Labor’s Wage and Hour Division proposed new regulations addressing whether, for the FLSA, a worker is an “employee” or an “independent contractor.” The proposed regulations state that whether a worker is an employee or an independent contractor turns on the “economic realities” of their relationship. Economic reality is determined on the totality of the circumstances, as viewed through analysis of six specific factors:

(1) The opportunity for profit or loss depending on managerial skill;

(2) The relative investments by the worker and the employer;

(3) The degree of permanence of the work relationship;

(4) The nature and degree of control;

(5) The extent to which the work performed is an integral part of the employer’s business; and

(6) The nature and degree of skill and initiative of the worker.

The proposed regulation also authorizes consideration of additional unidentified factors in determining the status of the worker. The notice of the proposed regulations can be found at:

What the proposed rule does is overrule the Trump era regulation. President Biden chose to do that without a formal rulemaking process, but he was judicially blocked from doing so soon after he was inaugurated.

The six factors in the proposed regulations track those used by federal courts before the Trump Rule that made it easier to classify a relationship as involving an independent contractor. As one would expect from a DoL in a Democratic administration, the proposed rule shows a strong preference for classification of workers as employees rather than independent contractors.

The proposed rule is open for comment until December 13, 2022, under an extension of the comment period recently announced by the Department. Thereafter, the Department will issue its final rule. If it is as biased toward employment as the proposal, the final rule is likely to face significant push back through appeals by businesses that depend on independent contractors.

While car dealers are not as dependent on independent contractors like some of the new business companies like Uber and Lyft, the final rule will be important to car dealers who use independent contractors as drivers for relocating inventory, delivering vehicles, get ready, and similar functions.