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Adams and Reese attorneys Scott Hetrick and Ray Young, Jr. co-authored “Brace for Impact: The 2021 Independent Contractor Rule Might Have Major Impacts on Employers and Upend Compliance Issues, especially as the DOL’s Definition of an Independent Contractor is About to Change.”

The article was featured in “The 2023 Employment Law Issue” published by Best Lawyers.

For decades, the Department of Labor (DOL) and courts employed the economic reality test to determine whether a worker should be classified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA).

This test sought to determine if the worker was economically dependent on the employer for work (and thus an employee) or if the worker was in business for themselves (and thus an independent contractor). The classic standard was whether the employer had control over the result but not the means by which the worker achieved the result. The DOL and courts have historically used a “totality of the circumstances” analysis to make this determination. However, the DOL asserts that workers are being misclassified due to the 2021 rule’s focus on only a few factors, as opposed to taking a totality-of-the-circumstances approach."

On Oct. 13, 2022, the DOL published proposed rules on “Employee or Independent Contractor Classification Under the FLSA.” The DOL proposes rescinding the 2021 rule and returning to the totality-of-the-circumstances analysis of the economic reality test. The DOL proposes to return the consideration of “investment” to a standalone factor and rebirth of the “integral factor analysis,” which considers whether the work is integral to the employer’s business.

After the DOL published the proposed rule, it offered the public an initial 46-day window to offer written comments. The written comment window was extended to Dec. 13, 2022. Once the written comments are submitted, the DOL will review each comment and prepare a finalized rule. The rule is expected to be finalized in the first quarter of 2023. Whether the rule is enacted then will depend on if it is challenged in the courts.

Adams and Reese LLP is closely monitoring this process and any subsequent litigation.

Hetrick is the Labor and Employment Practice Team Leader and a Partner in the firm’s Mobile office. Hetrick is a management rights advocate who represents employers on federal and state labor and employment law compliance and dispute resolution. He also represents insurers with analysis of their defense and coverage obligations. He speaks frequently on employment law and human resource management issues at seminars for personnel managers and business owners and has published several articles on employment law. Hetrick has been recognized in Best Lawyers® in Employment Law since 2010, including named “Lawyer of the Year” in Mobile.

Young is an Associate in the Adams and Reese Jackson office. He is a litigator practicing across labor and employment, commercial litigation, immigration, insurance defense and coverage, and transportation and logistics. Young formerly worked as a federal law clerk for the Hon. Sharion Aycock, U.S. District Judge for the Northern District of Mississippi. Young graduated cum laude from Mississippi College School of Law. He was involved in Moot Court, as the Chair of External Affairs, received multiple advocacy honors, including induction into the National Order of Barristers and awards for academic excellence. As an undergraduate student at the University of Southern Mississippi, he completed his Bachelor of Arts degree in Political Science.