On October 11, 2022, the U.S. Division of Labor launched a proposed rule decoding how a employee is assessed underneath the Honest Labor Requirements Act (FLSA).The proposed rule doesn’t impression the classification of actual property professionals as unbiased contractors underneath the Inside Income Code (26 U.S.C. §3508).
The DOL has proposed the rule to make sure coated employers are offering employees, together with “gig employees,” with minimal wage and time beyond regulation pay as required underneath the FLSA, to make sure consistency with current judicial precedent and the Division’s longstanding steering. The proposed rule adopts an “financial realities take a look at,” the place the usual for figuring out if a employee is an worker or an unbiased contractor is predicated on whether or not the employee is economically depending on the employer for work or is in enterprise for themselves. To judge the financial dependence, the proposed rule conducts a “totality-of-the-circumstances” evaluation, contemplating a number of elements, fairly than remoted standards to find out employment standing. Whereas there are a variety of things thought of on this evaluation, they often embody:
- The chance for revenue or loss relying on managerial talent;
- Investments by the employee and the employer;
- Diploma of permanence of the work relationship;
- Nature and diploma of management by the employer over the employee;
- Extent to which the work carried out is an integral a part of the employer’s enterprise; and,
- Talent and initiative.
Beneath the totality-of-circumstances evaluation, the financial actuality elements will not be exhaustive, will not be assigned a predetermined weight, and are every given full consideration. The proposed rule doesn’t undertake the “ABC take a look at” or the “widespread regulation take a look at” for classifying unbiased contractors, which DOL believes is prohibited from adopting as a consequence of “authorized limitations.” The proposed rule underneath the FLSA additionally doesn’t impression actual property professionals’ specific safety within the Inside Income Code, 26 U.S.C. §3508, which supplies the framework to categorise them as statutory non-employees for federal tax functions
NAR helps the safety of, and efforts to additional safe, the proper of actual property gross sales individuals to work as unbiased contractors and for brokers to decide on to categorise actual property salespeople as unbiased contractors. NAR will submit a touch upon the proposed rule in the course of the 45 day public remark interval.
See extra info on NAR’s advocacy to guard unbiased contractors.