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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Rules and Regulations
purpose of broadly covering workers as employees.128
A number of commenters who supported withdrawal agreed that the Rule would have impermissibly narrowed how the factors are applied.
For example, the National Employment Lawyers Association NELA and the Womens Law Project stated that the words of the FLSA are unrecognizable in the Rules cramped reading of the law and its adoption of entirely irrelevant factors, twisting of the meaning of other factors, and narrowing of the measure of what it means to be an employee. According to AFSCME, the Rule would have redefined the factors, narrowing and confining the depth of each factors inquiry. The State Officials added that the Rule would have unreasonably excluded relevant criteria from the determination of whether a worker is covered by the FLSA and would not have considered the full details of a working relationship, as decades of precedent require. The National Employment Law Project commented that the Rule described a set of narrow core factors taken from a cramped version of the narrowly-scoped common law, which is not the test for employment coverage under the FLSA, asserted new factors never before considered relevant by the courts, and prevented consideration of factors that the Supreme Court has always deemed critical to determining whether an employment relationship exists.
Of the commenters who opposed the proposed withdrawal of the Rule, the National Association of Home Builders supported the Rules adopting a narrower economic reality test to determine a workers status as an FLSA
employee or an independent contractor and rejected the contention and justification offered as support for withdrawing the Rule. Other commenters disputed the Departments concern that the Rule would narrow the application or the factors and/or that any narrowing is a basis for withdrawing the Rule. For example, the Competitive Enterprise Institute disputed the concern, arguing among other things that the underlying determining factors would remain the same and that the Rule did not prevent courts from weighing all factors, but instead merely offered guidance, as a rulemaking should. The U.S. Chamber of Commerce characterized the proposals concern that the Rules narrowing of the analysis would result in more workers being classified as independent contractors as 128 See
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misguided and presuming conclusions that the Rule does not guarantee. Other comments asserted that the Rules explanation of the factors eliminated confusion and overlap among the factors. See, e.g., Seyfarth Shaw on behalf of Coalition for Workforce Innovation asserting that the Rule provided clear guidance regarding . . . which facts fall within the various and sometimes blurred factors, increasing legal certainty in application of the economic realities test.
Having considered the comments and the issues further, the Department believes that, by removing from the analysis several facts and concepts that have a strong foundation in both the courts and WHDs application of the analysis, the Rule would have improperly narrowed the scope of facts and considerations comprising the analysis of whether a worker is an employee for purposes of the FLSA or an independent contractor. Narrowing the facts and considerations that comprise the analysis would have been inconsistent with the court-mandated totality-of-the-circumstances approach to determining whether a worker is an employee or an independent contractor.129 The Department elaborates on this below in its discussion of several examples of how the Rule would have narrowed application of the factors. In addition, upon further consideration, the Rules narrowing of factors would, in the Departments view, have likely resulted in more workers being reclassified or misclassified as independent contractors not entitled to the FLSAs protections. Not only would such a result have been contrary to the Acts purpose of broadly covering workers as employees,130 but to the extent that women and people of color are 129 See, e.g., Ellington v. City of East Cleveland, 689 F.3d 549, 555 6th Cir. 2012 This economic reality standard, however, is not a precise test susceptible to formulaic application . . . . It prescribes a case-by-case approach, whereby the court considers the circumstances of the whole business activity. quoting Donovan v. Brandel, 736 F.2d 1114, 1116 6th Cir. 1984; Morrison v.
Intl Programs Consortium, Inc., 253 F.3d 5, 11 D.C.
Cir. 2001 No one factor standing alone is dispositive and courts are directed to look at the totality of the circumstances and consider any relevant evidence.; Snell, 875 F.2d at 805 It is well established that no one of these factors in isolation is dispositive; rather, the test is based upon a totality of the circumstances.; Superior Care, 840 F.2d at 1059 2d Cir. 1988 No one of these factors is dispositive; rather, the test is based on a totality of the circumstances . . . . Since the test concerns the totality of the circumstances, any relevant evidence may be considered, and mechanical application of the test is to be avoided..
130 See, e.g., supra notes 810, and accompanying text.

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overrepresented in low-wage independent contractor positions where misclassification is more likely as a number of commenters asserted, this result would have had a disproportionate impact on these workers. Citing a study finding that seven of the eight high misclassification occupations were held disproportionately by women and/or workers of color, the National Womens Law Center, Kentucky Equal Justice Center, Center for Law and Social Policy, Shriver Center on Poverty Law, and other commenters asserted that it is no coincidence that corporate misclassification is rampant in lowwage, labor-intensive industries where women and people of color, including Black, Latinx, and AAPI workers, are overrepresented. These commenters, as well as numerous individual commenters, added that the Rule would have inflicted the most damage on workers of color who predominate in the low-paying jobs where independent contractor misclassification is common. The Department agrees that if the Rule had resulted in an increase in the use of independent contractors in low-wage industries where independent contracting is common, it could have had a disproportionate effect on women and workers of color.
In sum, the Rules narrowing of the application of the economic realities factors, as further described below, warrants withdrawal of the Rule.
a. Making the Opportunity for Profit or Loss Factor Indicate Independent Contractor Status Based on the Workers Initiative or Investment The Independent Contractor Rule would have provided that the opportunity for profit or loss factor indicates independent contractor status if the worker has that opportunity based on either his or her exercise of initiative such as managerial skill or business judgment or management of his or her investment in or capital expenditure on helpers or equipment or material to further his or her work.131 The worker does not need to have an opportunity for profit or loss based on both for this factor to weigh towards the individual being an independent contractor. 132 In other words, the factor would have indicated independent contractor status if the worker either: 1 Made no capital investment but exercised initiative or 2
had a capital investment but exercised no initiative. Most courts currently consider investment as its own factor in the analysis, but the Rules change 131 See
86 FR 1247 795.105d1ii.

132 Id.

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