In response to proposed new independent contractor regulations under the Fair Labor Standards Act (FLSA), on December 13, 2022, TechServe Alliance filed comments with the U.S. Department of Labor (DOL). TechServe Alliance CEO Mark Roberts affirmed TechServe’s support for the 2021 Final Rule on Independent Contractor classification. Expecting DOL to move forward with a new rule, Roberts urged DOL to provide compliance guidance:
“At this time, we reassert our support for the 2021 Final Rule, which clarified worker classification for the IT/Engineering staffing industry. If the DOL finalizes the Proposed 2022 Rule, we urge the agency to incorporate more examples of independent contractor/employee status that pertain to knowledge workers, including but not limited to, IT and engineering consultants who offer their services as independent contractor firms,” Roberts wrote.
In October 2022, DOL proposed to withdraw and replace the 2021 Final Rule with the previously long-standing seven-part totality of the circumstances test. The 2021 Final Rule has been in force for less than a year and provided more certainty for classifying IT and engineering independent contractors focusing on two key factors – (1) nature and degree of control over the work; and (2) a worker’s opportunity for profit/loss.
The Proposed 2022 Rule would reinstate the subjective “totality of the circumstances” seven-part economic reality test followed by courts, and will focus on the following non-weighted criteria: (1) opportunity for profit and loss based on managerial skill; (2) investments by the worker and employer; (3) degree of permanence of the relationship; (4) nature and degree of control, including reserved control; (5) extent to which the work performed is an integral part of the employer’s business; (6) skill and initiative; and (7) other (undefined) factors.
Techserve’s comments noted the technical talent shortage and described how many IT independent contractors offer their services qualifying them as independent contractors under the Proposed 2022 Rule. Roberts also urged DOL to consider the degree of independent business formalization (incorporation, licenses, taxes) in analyzing IT IC status as part of the 7th factor in the totality of the circumstances test.
More than 50,000 workers, companies, and associations submitted comments to the DOL. We will continue to monitor developments and keep TechServe members informed. In the meantime, please contact the Government Affairs Team with any questions.
