(The Center Square) – Reversal to an independent contractor rule with two core factors rather than 2024’s change to six factors with none greater than the other is under proposal from the U.S. Department of Labor.
While it matters in North Carolina especially for agriculture and gig workers, whether it potentially does in the courts is up for interpretation.
“The U.S. Supreme Court has on a number of occasions indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA,” the North Carolina Department of Labor says on its website in explaining employee or independent contractor. FLSA is an acronym for the Fair Labor Standards Act.
“The court,” the statement goes on to say, “has held that it is the total activity or situation which controls.”
The state adds seven other factors in play as considered by the court and then notes some that are immaterial.
Agriculture is and has long been the No. 1 industry for North Carolina, with a 2024 estimate of 111.1 billion annual economic impact. Many jobs within it are independently contracted. Rough estimates say nearly 2 in 10 to as much as 3 in 10 across the state have some kind of “gig platform” work.
The Wage and House Division of the U.S. Labor Department on Thursday said the change goes back to that adopted in 2021. Saying it is consistent with precedents at the U.S. Supreme Court and other federal circuit courts, the rule uses core factors of “the nature and degree of control over the work” and the “worker’s opportunity for profit or loss based on initiative and/or investment.”
The 60-day comment period ends April 28 at 11:59 p.m. Eastern.
Changes to the rule are not new or simply tied to the Trump administration. In 2008, Fact Sheet No. 13 was issued by the Labor Department outlining a seven-factor “economic reality” test. The Trump administration changed Obama administration guidelines, and the Biden administration flipped them again.
“The rule we are proposing today is not only based on long-standing legal principles used in federal courts across the country but also is aimed at ensuring that workers and employers know how to apply those principles predictably,” Wage and Hour Division Administrator Andrew Rogers said in a release. “The department believes that streamlined regulations in line with Congress’s intent when it passed the Fair Labor Standards Act would improve compliance, reduce misclassification, and reduce costly litigation in an economic environment that needs flexibility and innovation.”
At the Owner-Operator Independent Drivers Association, the “backdoor attempt to mandate dangerous speed limiter devices” of the Biden-era rule getting ejected was praised.
“Today’s proposal largely mirrors the 2021 rule, ensuring owner-operators can continue working under their existing arrangements with carriers without fear of being reclassified as employees,” Collin Long, the organization’s director of Government Affairs, said in an email to The Center Square. “We applaud the Department of Labor for correcting a problematic speed limiter loophole in the previous rule that would have enabled carriers to micromanage their independent contractors. We look forward to reviewing all the details of the rule and ensuring independent truckers aren’t controlled like employees or forced to give up a business model that works for them.”
The half dozen considerations in place today are any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.”
Kristen Swearingen, vice president of government affairs at the Associated Builders and Contractors, said, “Instead of promoting much-needed economic growth and protecting legitimate independent contractors, the 2024 final rule results in more confusion and expensive, time-consuming, unnecessary and often frivolous litigation, as both employers and workers will not understand who qualifies as an independent contractor.”
