If you’re a freelancer or independent contract worker, you may be keeping tabs on the recent proposed changes regarding rules with employee versus independent contractor. Here we’ll break down the new rules and what it means for you – and why the changes aren’t as drastic as the headlines make it seem.
What is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act (FLSA), establishes minimum wage, overtime pay, recordkeeping, and youth employment standards. FLSA applies to employees in the private sector and in all levels of government jobs. In the changes proposed, the new rules give guidance as to how employers should classify workers and to prevent employee misclassification.
FLSA regulations have changed multiple times slightly over the years to match the goals of the current Federal administration. The framework proposed is more consistent with the longstanding judicial precedent on which employers have long relied on to classify their workers, as employees or independent contractors, under the FLSA guidelines.
Why the Change
Independent contractors play an important role in our workforce. However, occasionally employees are misclassified as independent contractors causing that person to miss out on the wages, overtime, and more that is not given to independent contractors. Misclassification deprives workers of federal labor protection and while it may not be intentional, it often affects more vulnerable workers.
The change is aimed to protected employees, not to take away from freelancers or independent contractors. Employees who are misclassified lose out on their basic worker protections. Independent contractors hold the control over what their prices are, what their hours are, and what work they chose to take on or not. Employees don’t have that control; they work the hours and projects they are given by their employer. By assigning employees as independent contractors they lose out on the benefits listed by FLSA that they have earned.
All the changes are being overseen by the Department of Labor and they would include:
- Align the department’s approach with the courts’ FLSA interpretation
- Restore the multifactor analysis to determine whether a worker is an employee or independent contractor under the FLSA
- Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors
- Return to the longstanding interpretation of the economic reality factors
- Assist with the proper classification of employees and independent contractors under the FLSA
- Rescind the 2021 Independent Contractor Rule
While it may seem like a new change to navigate, the aim by the Department of Labor is to help watch the backs of employees to ensure they’re getting all their wages and benefits. True independent contractors won’t be affected by the adjustments, but it’s always good to stay aware of what is happening.