DOL Settles with Independent Contractor Rule Violator for $1,138,276

“Glass, China, and Reputation are easily cracked and never well mended”

– Benjamin Franklin

After a Department of Labor (“DOL”) investigation into Salim, Inc., operating as A Plus Personal Home Care, DOL entered into a settlement with the employers of Salim, Inc., in the amount of $569,138 in back wages and an equal amount in liquidated damages for misclassifying putative employees as independent contractors and not paying those employees overtime for hours worked over 40 during the week.  

The Fair Labor Standards Act (“FLSA”) covers over 143 million workers in the United States, but its overtime provisions only apply to employees rather than independent contractors. DOL published a Notice of Proposed Rulemaking (“NPRM”) on October 13, 2022, which proposes to make changes to the way the Department analyses the employment relationship. However, rather than perform its own investigation in determine the correct classification for A Plus Personal Home Care’s workers under even the existing more employer-friendly regulations issued by the  Trump Administration, the employer instead gave each employee a choice to be an employee and receive lower pay or be an independent contractor and receive higher wages. That didn’t meet what we call the straight-face test. The employer has the legal burden to impose the correct classification. It isn’t a matter of worker choice. As a result, A Plus gets an F and owes a considerable sum of money.

 And A Plus’s door number one or door number two employee option certainly wouldn’t meet the stricter independent test proposed by the Biden Administration. In DOL’s proposed rule, they intend to codify a more consistent framework with which they can evaluate the employer-employee relationship. The NPRM proposes to adopt an economic reality test which focuses on six different factors. They are:

 ·      Opportunity for Profit or Loss Depending on Managerial Skill

 ·      Investments by the Worker and the Employer

 ·      Degree of Permanence of the Work Relationship

 ·      Nature and Degree of Control

 ·      Extent to Which the Work Performed is an Integral Part of the Employer’s Business

 ·      Skill and Initiative

These proposed rules are not set in stone yet, and the Department has solicited comments from the industry to understand how these rules might affect the labor market.  https://www.federalregister.gov/documents/2022/10/13/2022-21454/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act . And DOL has extended the comment period and is now allowing comments until December 13, 2022. https://www.federalregister.gov/documents/2022/10/26/2022-23314/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act-extension-of. If you want to comment, it is time to get in gear.