USDOL rule would decimate Michigan’s gig economy and drive up costs

Last month, the US Department of Labor proposed changes to the Fair Labor Standards Act (FLSA) that would decimate the informal economy, increase costs for our nation’s small business community, and crush employers. While the FLSA governs regulations for employees related to issues such as minimum wage, overtime, and record-keeping, the rules and regulations have not previously applied to those classified as independent contractors. Under current rules, the parameters used to classify a person as an employee or independent contractor are relatively simple and clearly defined.

The proposed rule drastically alters the current tests used to determine whether an individual should be classified as an employee rather than an independent contractor under the FLSA. Unlike the current rule set, the proposed rule attempts to broaden the definition of employee through the use of arbitrary, overly broad, and highly subjective language. The proposed rule would also impose a new six-factor test to determine whether an individual is “financially dependent” on an employer under the “totality of the circumstances.” In addition, there is no predetermined weight for each of the tests. If one of the six tests fails, the federal bureaucracy could reclassify the individual worker as an employee.

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Confused yet? Well, it should be, because the parameters in this proposed rule are extremely confusing and will pull the rug out of our small businesses and independent contractors who are doing well under the existing rules. That is why the Michigan Small Business Association, of which I have been an active member for many years and have served as Chairman of its Board of Directors, strongly advocates against this rule change and encourages small business owners and allies across the state to join us.

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