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In late September, the U.S. Department of Labor (DOL) issued a notice of proposed rulemaking revising its interpretation of independent contractor status under the Fair Labor Standards Act (FLSA) with a streamlined economic reality testing to promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.
In determining a worker’s status as an employee or independent contractor, the proposed rule examines a workers’ economic independence based on: (1) the nature and degree of workers’ control over the work (i.e. setting your own schedule; selecting your own projects; ability to work for others); and, (2) the workers’ opportunity for profit and losses based on workers’ investment (i.e. individual management of investment or capital expenditure on material to further work). Should additional analysis be needed, DOL proposed three additional guideposts for deciding a worker’s status based on: (1) the amount of skill required for work; (2) the degree of permeance of the working relationship between the worker and the potential employer; and, (3) whether the work is part of an integrated unit of production.
NAR submitted a comment on the proposed rule, advocating for minimal disruption to the real estate industry that greatly benefits from the ability to be classified as an independent contractor. Many states and some federal laws have codified the ability of real estate professionals to be classified as independent contractors, but there continues to be ongoing scrutiny and challenges to this status. NAR supports DOL’s efforts to provide a clear and consistent standard for evaluating a worker’s status, while preserving existing worker classification authority that allows real estate professionals to be independent contractors.
More than 1,700 comments were submitted on the proposed rule during the public comment period that closed on October 26, 2020. DOL will now analyze this feedback and work to issue a final rule based on those comments by the end of the year. Depending on how long this takes, a final regulation could be subject to repeal under the Congressional Review Act or by a change in the Administration. Stay tuned to nar.realtor for the latest information.