Dept. of Labor Proposes New Rule on Employee Classification By Michael E. Catania Misclassification of employees as Independent Contractors (IC’s) has long troubled the construction industry, resulting in government audits and expensive litigation. +At the Federal level, the U.S. Department of Labor’s (DOL) existing rules are seen as favoring employee versus IC classification. The DOL has proposed a new rule dealing with classifications under the Fair Labor Standards Act (FLSA) to change this, revising its interpretation of an IC so as to “promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.” Under the FLSA, employers must pay nonexempt employees federal minimum wage and overtime. These requirements do not apply to “independent contractors.” Unfortunately, the Act does not define the term “independent contractor.” Instead, the DOL previously established a multifactor test to be used for such determinations. The test centered upon the concept of “economic dependence.” Workers whose income was generated solely from a particular employer would typically be classified as that employer’s employee, and not an IC, under the FLSA. The DOL has determined that this test lacks “focus and has not always been sufficiently explained by courts or the Department.” It has proposed a new test, one it claims has a “more employer friendly approach” and shifts the focus from “economic dependence” to “economic reality.” It has 5 factors. The first 2 are defined as “core factors,” ON THE LEVEL:
each of which will be given far more weight than the others. If adopted, this new test would be the DOL’s “sole and authoritative interpretation” of classification under the FLSA. The factors are: • The nature/degree of the worker’s control over the work; • The worker’s opportunity for profit/loss based on initiative or investment; • The amount of skill required for the work; • The degree of permanence of the working relationship; and • Whether the work is part of an integrated unit of production.
Will this help the employer? Is this proposed rule a “more employer friendly approach?” That remains to be seen. However, the introduction of the 2 “core” factors does give some needed clarity to the analysis and could lead to fewer misclassifications. Regardless, the rule would apply to classifications under the FLSA only. New York laws, such as the Construction Industry Fair Play Act, will not be impacted. NY construction workers will continue to be classified as employees unless they meet Fair Play Act’s strict 3-part test, i.e., that they are 1) free from the employer’s control/direction; 2) perform work that is not part of the usual work performed by the Employer and 3), are an independently established business.
Michael Catania is a Managing Partner with Catania, Mahon & Rider, PLLC and head of the Construction Practice Group. mcatania@cmmrlegal.com
Update on OSHA Reporting For COVID-19 Cases Employers generally have 24 hours to report work related incidents that result in hospital admissions. With COVID-19 cases, OSHA measured the 24-hours from when the employee was confirmed to have contracted Covid-19. This led to some confusion and OSHA recently updated its regulations to give further guidance. The new regulations address questions such as:
Q: If an employee is exposed to Covid-19 on a Monday, but is not admitted to the hospital until a week later, dose the employer still have to report?
A. No. Per 29 CFR 1904.39(b)(6), employers only have to report Covid-19 hospitalizations that occur within 24 hours from the work-related exposure.
Q: If an employee contracts Covid-19 within the 24-hour time frame, how long does the Employer have to report it?
A. 24 hours from when it becomes aware of the employee’s in-patient hospitalization (assuming it is due to a work-related COVID-19 exposure). The above applies to reporting only and does not change an employer’s OSHA obligations as to recording work-related COVID-19 cases per 29 CFR 1904.4(a).
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