DOL issues regulations on employee, independent contractor classifications

The National Retail Federation welcomed regulations issued by the Department of Labor that define the difference between workers who must be considered employees and those who can be classified as independent contractors.

DOL on Wednesday issued the final version of regulations that create a modern “economic reality” test to determine whether a worker is an employee covered by the Fair Labor Standards Act and its requirements for minimum wage and overtime or an independent contractor exempt from those requirements. Under the regulations, the determination will be based on two main factors: the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss based on initiative or investment.

“These rules provide much-needed legal certainty for employers, employees and independent contractors nationwide,” stated NRF senior VP for government relations David French. “The complexities of the modern workplace, especially when combined with substantial ongoing technological changes, demand absolute clarity in this important area of employment law.”

“Millions of workers enjoy the freedom and flexibility that independent contractor status provides them,” French continued. “Unfortunately, some state legislatures have imposed burdensome new regulatory regimes on these workers with predictably disastrous results. American businesses must be able to engage with these contractors without fear of frivolous litigation. These rules will allow them to do that and will support retailers’ efforts to spur job creation.”

NRF has led retailers’ efforts to clarify the status of independent contractors. Among other actions, NRF last year filed two legal briefs asking courts to overturn a California worker classification law that narrowed the circumstances under which an individual can work as a contractor, including one case in federal court involving truck drivers and another in state court involving ride share drivers.