UPDATE
- ON MAY 5, 2021, THE DEPT OF LABOR WITHDREW THE INDEPENDENT CONTRACTOR
FINAL RULE. ITS EFFECTIVE DATE HAD PREVIOUSLY BEEN DELAYED SO THE RULE
NEVER TOOK EFFECT.
On January 6, 2021, the U.S.
Department of Labor announced a final rule clarifying the standard for employee
versus independent contractor status under the Fair Labor Standards Act. It
outlines how employers can properly classify workers as independent contractors,
instead of as employees (and thereby, avoid minimum wage and overtime requirements when appropriate).
While the DOL final rule, scheduled to take effect on March 8, 2021, gives
employers more leeway in classifying workers as independent contractors, it remains
to be seen whether the Biden administration will favor the rule or delay its
implementation. Click here for the “nuts and bolts” of the final rule. The Q&A below is taken directly from the final rule.
Q: An individual is the owner and operator of a
tractor-trailer and performs transportation services for a logistics company.
The owner-operator substantially controls the key aspects of the work. However,
the logistics company has installed, at its own expense, a device that limits
the maximum speed of the owner-operator's vehicle and monitors the speed
through GPS. The company limits the owner-operator's speed in order to comply with
federally mandated motor carrier safety regulations and to ensure that she
complies with local traffic laws. The company also requires the owner-operator
to meet certain contractually agreed-upon delivery deadlines, and her contract
includes agreed-upon incentives for meeting, and penalties for missing, the
deadlines. Under the final rule, is the individual more likely an independent
contractor or employee?
A: The DOL says: The owner-operator exercises substantial control over key
aspects of her work, indicating independent contractor status. The fact that
the company has installed a device that limits and monitors the speed of the
owner-operator's vehicle does not change the above conclusion. This measure is
implemented in order to comply with specific legal obligations and to ensure
safety, and thus . . . would not constitute control that makes
the owner-operator more or less likely to be an employee under the Act. The
contractually agreed-upon delivery deadlines, incentives, and penalties are
typical of contractual relationships between businesses and likewise would not
constitute control that makes the owner-operator more or less likely to be an
employee under the Act.
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