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DOL Proposes New Rule Regarding Independent Contractor Status - But How Will the Election Affect Its Future?

Client Alert
September 24, 2020

On September 22, 2020, the U.S. Department of Labor announced a new proposed rule regarding employee and independent contractor status under the Fair Labor Standards Act. The full text of the proposed rule is available here. The rule's drafters intend to reduce uncertainty and enhance the precision and predictability of the long-standing "economic reality" test, which currently relies on a multifactor balancing test. The proposed rule contains the following developments:

  • It sets forth a new approach to the economic reality test, which considers whether a worker is in business for themselves or is economically dependent on the putative employer by looking at five distinct factors.     
  • Two core factors would be given greater weight in determining whether or not the worker is economically dependent: the nature and degree of the worker's control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment.
  • Three other factors may also contribute to the analysis, including the amount of skill required for the work, the degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
  • The proposed rule emphasizes that actual practices are more relevant to the analysis than what is theoretically possible in determining whether a worker is an employee or an independent contractor.

This proposed rule would supplant the various approaches to the economic reality test that have evolved in federal courts, the DOL's subregulatory guidance, and industry-specific regulations. It's worth noting that the outcome of the November election could affect the future of this proposed rule. The rule is generally perceived as more business-friendly, and the Trump administration is seeking to fast track this rule for finalization before January 20, 2021. But if it is unable to do so, and Biden defeats Trump, the proposed rule would likely be in jeopardy. Or if Democrats flip the Senate the rule could potentially be undone by Congressional action.

The comment period has not yet begun, but the public will have 30 days to comment on the proposed regulation once it has been published in the Federal Register. The Employment and Labor team at Brennan Manna Diamond is available to assist if you would like to submit a comment regarding this proposed rule.

For more information, please contact Russell Rendall at 216.658.2205 or rtrendall@bmdllc.com. 

DOLU.S. Department of Laboremployee and independent contractor statusFair Labor Standards Acteconomic reality testemployeesIndependent ContractoremployersTrump administrationBiden2020 electioncongressional actionRussell T. Rendallemployment lawproposed rule
Client Alert

Ohio Hospitals and Healthcare Clinics: It’s Time to Revisit Your Billing and Collection Practices

February 1, 2021According to a recent Cuyahoga County case, certain healthcare entities may not be protected from liability when engaging in unfair or deceptive billing acts. This decision is consistent with the growing trend across the country to encourage price transparency and eliminate unfair surprise billing practices by health care organizations. Now is the time for hospitals and other health care organizations to revisit their billing and collection policies and procedures to confirm that they are legally defensible and consistent with best practices.Client Alert

HIPAA Business Associate Agreements: Why These Contracts Matter

January 27, 2021No one loves drafting, reading or negotiating HIPAA Business Associate Agreements (BAAs). Yet many of us need to do so, and some of us do so daily. They are often boring, dense and technical, but BAAs are important from both a legal and a business perspective, and they deserve our attention. Failure to enter a BAA when one is required can constitute a HIPAA violation that results in substantial liability, as demonstrated by certain recent Department of Health & Human Services (HHS) settlements.1 A business associate who makes a disclosure that is not authorized by the applicable BAA or required by law can be subject to civil and, in some cases, criminal penalties. Further, parties are often presented with BAAs that contain onerous one-sided indemnification and other provisions that can be devasting to an organization in the event of a HIPAA breach. The significance of a BAA is often not fully understood by the parties until something goes wrong (e.g., a HIPAA security incident or breach, an Office of Civil Rights (OCR) audit or a fracture in the relationship between the parties) and, at that point, there is limited opportunity to mitigate legal and business risk. Ideally, attention should be given at the commencement of the business associate relationship, when the parties are able, to thoughtfully addressing regulatory requirements, planning and preparing for potential adverse events and appropriately allocating risk among the parties. As with most healthcare regulatory compliance initiatives, a proactive approach with respect to BAAs is preferable. This article provides a broad overview of certain BAA requirements and some practical negotiating tips for the parties involved.Client Alert

“I’m Out Of Here!” Now What?

January 27, 2021We all know that the healthcare industry is experiencing a wave of integration. This trend has been evident for many years. Fewer physicians are willing to assume the legal, financial and other business risks associated with owning their own practices. More and more physicians, including anesthesiologists, are becoming employed by large physician groups, health systems and national providers. This shift necessarily involves not only entry into new employment arrangements but also the termination of existing relationships. And those terminations are often governed by written employment agreements, state and federal healthcare laws and employer benefit plans and other policies and procedures. Before pursuing their next opportunity, physicians should pause for a moment and first attend to the arrangement that they are leaving. Departing physicians need to understand their legal rights and obligations when leaving their current employment relationships in order to avoid unintended consequences and detrimental missteps along the way. Here are a few words of practical advice for physicians contemplating an exit from their current employment arrangements.Client Alert

Investment Training for the Second and Third Generations

January 19, 2021Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.Client Alert

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

January 15, 2021In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.
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