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Federal Register / Vol. 86, No. 86 / Thursday, May 6, 2021 / Rules and Regulations would have resulted in investment no longer being its own factor. In addition, courts may currently consider initiative as part of the skill factor, but the Rules change would have resulted in initiative being considered only as part of the opportunity for profit or loss factor. The proposal to withdraw the Rule expressed the concern that, by articulating the factor in this manner, the Rule would completely remove investment or initiative from consideration in certain cases.133 The proposal suggested that, for example, if the worker exercised initiative, the opportunity for profit or loss factor would indicate independent contractor status even if the worker made no capital investment.134
Few commenters addressed the Rules exact articulation of the opportunity for profit or loss factor. AFSCME
commented that although this factor was initially formulated to determine whether an independent contractor can grow and expand their business through investment, the Rule would have looked only to whether a workers success or failure in earnings can be attributable to individual initiative or management but need not involve both. The International Brotherhood of Teamsters objected to the Rules reframing of the opportunity for profit or loss factor, arguing that it would overemphasize workers theoretical ability to increase their earnings through minimal investment or personal initiative. Other commenters who supported the proposed withdrawal generally questioned whether the opportunity for profit or loss should be determinative. See, e.g., AFLCIO; Womens Law Project. On the other hand, commenters who opposed withdrawal of the Rule generally supported the Rules articulation of the opportunity for profit or loss factor as being based on initiative or investment.
See, e.g., SHRM; Seyfarth Shaw on behalf of Coalition for Workforce Innovation; Associated General Contractors of America; see also American Society of Travel Advisors.
Having considered the comments and the issue further, the Department believes that the Rules articulation of the opportunity for profit or loss factor as indicating independent contractor status if the worker either exercises initiative or manages capital investment is not supported. No court articulates the opportunity for profit or loss factor as having these two prongs, only one of which need indicate independent contractor status for the factor as a
whole to indicate independent contractor status. Moreover, this articulation would have erased from the analysis in certain situations the workers lack of initiative or lack of capital investmentboth of which are longstanding and well-settled indicators of employee status. Because the workers initiative and investment would have been considered under the Rule only as the two prongs comprising the opportunity for profit or loss factor, if either one indicated an opportunity for profit or loss then the factor would have invariably indicated independent contractor status. The other prong need not be considered at all as it could not have reversed or weighed against that finding even if it indicated employee status as a matter of economic reality. In effect, the Rules subordination of initiative and investment as alternative considerations within the opportunity for profit or loss factor would have favored independent contractor status even when evidence of employee status was present.
b. Disregarding the Employers Investments The Independent Contractor Rule articulated investment as the workers management of his or her investment in or capital expenditure on, for example, helpers or equipment or material to further his or her work. 135
The Rules preamble provided that comparing the individual workers investment to the potential employers investment should not be part of the analysis of investment. 136 Thus, the Rule precluded consideration of the employers investment. The proposal to withdraw the Rule questioned the basis for the Rules limited consideration of investment.137
Few commenters addressed the issue in response to the proposal. For example, Farmworker Justice commented that the Department was correct to identify the Rules preclusion of consideration of the workers investment relative to the putative employers investment as inconsistent with the law. The International Brotherhood of Teamsters opposed both the Rules rejection of prior precedent which held that in determining whether or not a workers investment was significant, courts must compare it to the employers investment and the Rules suggestion that a minimal investment by a worker might be sufficient to find that a worker is an independent contractor even if the 135 86

FR 1247 795.105d1ii.
at 1188.
137 See 86 FR 14033.

133 See
86 FR 14033.
134 See id.

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employer made much more significant investments. Representative Scott, et al., when describing the factors almost uniformly used in federal courts of appeal as indicators of economic dependence, articulated the investment factor as the extent of the relative investments of the employer and the worker and cited AI 20151.
Commenters who opposed withdrawal of the Rule generally did not share any concerns with the Rules limiting of the investment factor to consideration of the workers investment. The Center for Workplace Compliance, for example, commented that there is significant overlap between the relative investment factor and the factor examining the opportunity for profit or loss and that not separately listing the relative investment factor removes any confusion caused by the overlap yet does not prevent an analysis of relative investment where appropriate. These commenters generally approved of the Rules articulation of the factors, including investment. See, e.g., Seyfarth Shaw on behalf of Coalition for Workforce Innovation; U.S. Chamber of Commerce.
Having considered the comments and the issue further, the Department believes that the Rules interpretation against considering the workers investment as compared to the employers investment was legally unsound. As support for the interpretation, the Rule cited decisions from the Fifth and Eighth Circuits in which courts gave little weight to the comparison of the employers investment in its business to the workers investment in the work in light of the facts presented in those cases.138
However, the decisions cited did make the comparison of the investments a part of the analysis, but found that the comparison had little relevance or accorded it little weight under those particular facts.139 Numerous other 138 See 86 FR 14033. The Fifth Circuit decisions cited were Parrish, 917 F.3d at 383, and Hopkins, 545 F.3d at 34446. The Eighth Circuit decision cited was Karlson, 860 F.3d at 1096.
139 See Parrish, 917 F.3d at 383; Hopkins, 545
F.3d at 34446. The Fifth Circuit recently again articulated the investment factor as the extent of the relative investments of the worker and the alleged employer. Hobbs, 946 F.3d at 829
quoting Hopkins, 545 F.3d at 343. In Hobbs, the Fifth Circuit affirmed the district courts finding that the relative investmentsthe potential employers overall investment in the pipe construction projects as compared to the workers individual investmentsfavored employee status.
Id. at 83132. The Fifth Circuit agreed with the district courts conclusion to give the factor little weight in its analysis in that case given the nature of the industry and work involved. Id. at 832 citing
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