DOL’s Proposed FLSA Independent Contractor Rule: Control and Scheduling

From JDSupra, Andrew McKinley, Alex Simon, and Kyle Winnick discuss the Department of Labor’s proposed independent contractor rule and its approach to flexibly spending as a factor in determining if a worker is an independent contractor or an employee. Andrew, Alex, and Kyle write:

On October 11, 2022, the Department of Labor (DOL) issued a notice of proposed rulemaking (“NPRM”) defining employee versus independent contractor status under the Fair Labor Standards Act.  We previously discussed the way in which the NPRM proposes to shift the analysis of the control factor, particularly as related to legal, safety, contractual, and other similar requirements, while simultaneously putting a thumb on the scale in favor of employee status. This post looks at the manner in which the NPRM similarly shifts considerations related to scheduling and worker flexibility.

Flexible scheduling is—and has always been—one of the main draws for independent contractors. Particularly with the growth of the gig economy, independent contractors have enjoyed an ability to accept, reject, and structure work opportunities as they see fit; to reserve the ability to pick between projects that are the most lucrative for them; and ultimately to determine when and how they perform their work. Indeed, it is this independence in structuring their work that is a core element of independent contractor status.

At odds with this defining characteristic of independent contractor status, citing a “totality-of-the-circumstances” approach, the NPRM announces a new standard that “scheduling flexibility is not necessarily indicative of independent contractor status where other aspects of control are present.” That, however, conflates what is indicative with what is dispositive. True enough, scheduling flexibility alone cannot establish independent contractor status, and other individualized facts may limit the weight attached in the overall analysis. But the suggestion that scheduling flexibility may be afforded no weight simply because other indicia of control are present fundamentally misunderstands the purpose of a balancing test—i.e., to balance all relevant facts.

Although the NPRM overreaches in its characterization of scheduling flexibility generally, the underlying concern appears to be with “sham” flexibility—i.e., claims of flexibility that, in reality, give a worker no true autonomy. The NPRM indicates that it would not be impressed by a putative independent contractor’s ability to dictate his or her own hours if:

  • The ability to pick one’s shift is offset by the limited hours provided by the employer;
  • The employer exerts so much control over the amount or pace of the work as to negate any meaningful scheduling flexibility;
  • The work is arranged in a way that makes finding other clients impossible; or
  • The worker can be disciplined for turning down work.

This thin veneer of “examples,” however, gives little in the way of  guidance as to when any why these scenarios are truly evidence of a lack of choice. For example, a homeowner who tells his electrician that she may perform the work only between the hours of 12-3 p.m. in a day might be said to have offered the electrician only “limited hours.” But the reality is that the electrician is still able to either accept or decline this job, choose the days on which she works, and schedule the rest of her assignments in a way that optimizes for her own interests in maximizing profit and setting her own schedule.

Similarly, the NPRM provides no guidance as to when an employer has too much control over the “amount or pace” of work. Business-to-business agreements, after all, regularly dictate a scope of work and deadlines for the same, which a contractor is free to accept or reject. The NPRM provides no guidance as to what would be an arrangement of work that “makes finding other clients impossible.” And it wholly fails to account for when that arrangement is a consequence of the worker’s exercise of his own business initiative.

These examples indicate that the Department of Labor is currently proposing to evaluate “employment” from the perspective of the employer, rather than the worker. That is, it limits inquiry into whether the worker is acting in a manner that is consistent with her own economic independence.

In the end, the NPRM attempts to minimize the well-established importance of flexible scheduling to independent contractors status, while providing little in the way of useful guidance as to when, how, and why that minimization should occur. Thus, courts will be left to fill the gaps, while businesses face increased uncertainty as to their independent contractor workforce.

Source: DOL’s Proposed FLSA Independent Contractor Rule: Control and Scheduling | Seyfarth Shaw LLP – JDSupra

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