Department of Labor Issues Guidance on Independent Contractors

by Tom Woods, Chairman, National Association of Home Builders

The U.S. Department of Labor (DOL) on July 15 issued guidance regarding application of the criteria used to assess whether a worker is properly classified as an independent contractor under the Fair Labor Standards Act, which determines overtime, unemployment insurance and other obligations. Independent contractors are not covered under the act.

The test used under the FLSA is one of several used at the federal level to determine worker classification. The Internal Revenue Service, the National Labor Relations Act, and Employee Retirement Income Security ACT (ERISA), each use a different test to distinguish independent contractors from employees.

The DOL document does not appear to signal a shift or change in the law as it relates to how workers are classified as either employees or independent contractors. Rather, it clarifies the factors to be considered in making such a determination.

On its face, this "interpretation" does not appear to place any new or additional burdens on the industry. However, given the emphasis on the construction industry to date, and in the guidance document, NAHB will have to be vigilant in monitoring enforcement to determine how DOL is applying the "economic realities" test in the field. Arguably, the factors leave a lot of room for interpretation, and the document confirms there is clearly a bias towards worker status as employees.

We are also concerned that the Administration is too focused on enforcement and providing less individualized assistance to employers who are in need of compliance information. NAHB plans to urge Congress to use its oversight authority to ensure DOL hasn't overstepped its boundaries.

NAHB has provided analysis on the DOL guidance to help you determine whether a worker is an independent contractor or employee.

We will continue to monitor this situation closely.