Voglio sapere a riguardo di…

Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations three regulatory alternatives are analyzed in qualitative terms, due to data constraints and inherent uncertainty in measuring the exact stringency of multi-factor legal tests and likely responses from the regulated community. The Department appreciates the feedback it received on these regulatory alternatives from commenters, which is described and addressed below.

jbell on DSKJLSW7X2PROD with RULES3

1. Codifying a Common Law Control Test The least stringent alternative to the final rules streamlined economic reality test would be to adopt a common law control test, as is generally used to determine independent contractor classification questions arising under the Internal Revenue Code and various other Federal laws.252 The overarching focus of the common law control test is the hiring partys right to control the manner and means by which work is accomplished, Reid, 490 U.S. at 751, but the Supreme Court has explained that other factors relevant to the inquiry include the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the parties relationship; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired partys discretion over when and how long to work; the method of payment; the hired partys role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party. Id. at 75152.
Although the common law control test considers many of the same factors as those identified in the final rules economic reality test e.g., skill, length of the working relationship, the source of equipment and materials, etc., courts generally recognize that, because of its focus on control, the common law test is more permissive of independent constraints prevent the selection of a regulatory action that best satisfies the philosophy and principles of Executive Order 12866, agencies should identify these constraints and estimate their opportunity cost. Such information may be useful to Congress under the Regulatory Right-to-Know Act.
252 See supra note 248. The Supreme Court has explained that the common law standard of employment applies by default under Federal law unless Congress clearly indicates otherwise.
Darden, 503 U.S. at 325; see also Community for Creative Non-Violence v. Reid, 490 US 730, 73940
1989 When Congress has used the term employee without defining it, we have concluded that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine..

VerDate Sep<11>2014

19:58 Jan 06, 2021

Jkt 253001

contracting arrangements than the economic reality test, which more broadly examines the economic dependence of the worker. See, e.g., Diggs v. Harris Hospital-Methodist, Inc., 847 F.2d 270, 272 n.1 5th Cir. 1988
observing that the economic realities test is a more expansive standard for determining employee status than the common law control test. Thus, if a common law control test determined independent contractor status under the FLSA, it is possible that some workers presently classified as FLSA employees could be reclassified as independent contractors, increasing the overall number of independent contractors and reducing the overall number of employees. The Department is unable to estimate the exact magnitude of such a reclassification effect, but believes that the vast majority of FLSA employees would remain FLSA
employees even under a common law control test.
As discussed in the NPRM, codifying a common law control test that is used for purposes of at least some other Federal statutes would create a simpler legal regime for regulated entities interested in receiving services from an independent contractor, thereby reducing confusion, compliance costs, and legal risk for entities interested in doing business with independent contractors. Entities would not have to understand and apply a different employment classification standard for FLSA purposes. Thus, adopting the common law control test would likely increase perpetual cost savings for regulated entities attributable to improved clarity and reduced litigation as compared to the final rule. It could, on the other hand, impose burdens on workers who might prefer to be employees subject to FLSA protections.
Moreover, the Supreme Court has interpreted the suffer or permit language in section 3g of the FLSA as establishing a broader definition of employment than the common law. See, e.g., Darden, 503 U.S. at 326; Portland Terminal Co., 330 at 15051.
A handful of business commenters addressed the merits of the common law control test as a regulatory alternative.
In a joint comment, Vanliner Insurance Company and the Great American Trucking Division implicitly requested adoption of the common law standard presently used under the National Labor Relations Act NLRA and the Social Security Act SSA, as they urged the Department to foster efficiency and consistency by creating uniformity for compliance with the FLSA, the NLRA, and the SSA. The American Society of Travel Advisors, Inc. ASTA asserted
PO 00000

Frm 00073

Fmt 4701

Sfmt 4700

1239

that the simplest means to accomplish a uniform classification standard under Federal law would be to revise the FLSA, either legislatively or through regulation, to replace the economic reality test with the right of control test. While appearing to support the common law control test on substance, the Workplace Policy Institute warned that any attempt by the Department to depart from the economic reality test likely would result in a successful legal challenge to this rulemaking, expressing support for the Departments proposed economic reality test in the spirit of dont let the perfect be the enemy of the good. See also Dr.
Palagashvili Although the DOL is constrained in adopting a common law control test, I suggest that lawmakers amend the FLSA to allow for codification thereof.. By contrast, the National Federation of Independent Business NFIB criticized the Departments conclusion in the NPRM
that it lacks the legal authority to implement a common law standard through rulemaking as unfortunate and questionable.
The Department appreciates the policy appeal of establishing a uniform Federal classification standard, and understands that the standard most familiar to the regulated community is likely the common law control test used for tax and other purposes. However, such an approach would be inconsistent with the Supreme Courts statement that FLSA employment is more inclusive than the common law control test. See, e.g., Walling v. Portland Terminal Co., 330 U.S. 148, 150 1947 In determining who are employees under the FLSA, common law employee categories . . . are not of controlling significance.. The overwhelming majority of commenters who mentioned the common law standard in their comment, including business commenters inclined to favor the relative permissiveness of a common law standard, expressed agreement with that conclusion.
2. Codifying the Six-Factor Economic Reality Balancing Test As discussed earlier in section IIB, WHD has long applied a multifactor economic reality balancing test to distinguish between employees and independent contractors in enforcement actions and subregulatory guidance. The six factors in WHDs multifactor balancing test, as recently articulated in WHD Opinion Letter FLSA20196, are as follows:
1 The nature and degree of the potential employers control;

E:FRFM07JAR3.SGM

07JAR3