U.S. Department of Labor Issues Administrative Guidance Regarding Classification of Workers as Independent Contractors or Employees: Guidance Takes A Stringent Position on the Determination of Whether Workers Can Be Considered Independent Contractors

Sullivan & Cromwell LLP - July 17, 2015

On July 15, 2015, the U.S. Department of Labor issued an Administrative Interpretation (the “Guidance”) setting forth the Department’s position on when workers can be considered independent contractors instead of employees covered by the Fair Labor Standards Act (the “FLSA”).  The Guidance states that the Department believes that “most workers are employees under the FLSA’s broad definition” of “to employ” and the test it enunciates similarly is rigorous.  The Guidance describes and sets out the Department’s interpretation of six factors that courts have used to determine whether a worker should be classified as an employee covered by the FLSA, and thus subject to provisions such as the minimum wage and overtime pay, or as an independent contractor, and provides examples designed to illustrate the application of each factor.  The Guidance, which comes shortly after a proposal regarding changes in overtime regulations, is part of the Department’s larger effort to expand the scope of the FLSA coverage, including by “curtailing” what it considers the increasing “misclassification” of employees as independent contractors.