PO Box 7577, Columbia, SC 29202
INtouch
FEBRuary 2024
PRSRT STD US POSTAGE PAID COLUMBIA, SC PERMIT 168
Employee or Independent Contractor Classification Under the Fair Labor Standards Act All businesses that employ independent contractors will need to evaluate a complex “totality-of-the-circumstances” assessment according to the final rule recently issued by the U.S. Department of Labor. This rule is scheduled to come into effect on March 11, 2024. However, the NRA and AH&LA strongly object to this new regulation, stating that it presents difficulties for small businesses such as hotels and restaurants. They argue that the test results in inconsistent categorizations and heightened risks of legal disputes.
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Until the rule can be reversed, employers are required to comply with the rule starting on March 11th. The new rule, however, reverts to a “totality-of-the-circumstances” test with six complex factors. The factors in what is known as the “economic realities” test include:
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The Association supports the Employee Rights Act for its streamlined definition of “employee” across federal law. It promises to preserve the flexibility crucial to our industry and the broader gig economy.
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Legislative efforts are underway to challenge the rule. The House of Representatives approved H.J. Res 98, a joint resolution to nullify the NLRB’s joint employer rule, with a 206-177 vote tally. At the time of print, the focus is now on the Senate.
1. Opportunity for Profit or Loss: Evaluation of managerial skill affecting economic success.
SCRLA Annual Meeting Recap The Association’s Annual Meeting took place on Monday, January 22nd at the Hilton Columbia Center Hotel. During this meeting, Tony Tam, Vice President of IMIC Hotels, was elected as the Chair of the 2024 Board of Directors. Afterward, there was a membership and legislative forum where Susan Cohen, President and CEO, and Hank Davis, Vice President of Governmental Affairs and Community Relations, discussed the progress the Association has made on several bills under consideration at the State House. Thomas S. Mullikin, President and General Counsel of the South Carolina Coalition for Lawsuit Reform, provided an update on the Justice Act and ways for members to become more involved. Furthermore, Derek M. Underwood, Assistant Commissioner of the Consumer Protection Division at the South Carolina Department of Agriculture, informed the members about the ongoing transition of the DHEC Food Safety team to their agency, which is scheduled to occur on July 1 of this year. More information on this transition will be shared in the upcoming March Insider magazine.
February 2024 • SCRLA.org
2. Investments: Comparison of worker’s and employer’s capital or entrepreneurial investments.
Notably, platforms in the gig economy, such as appbased rideshare and delivery services, do not expect the new rule to alter the classification of their drivers.
Looking Ahead: The Association continues to advocate for regulations that support the operational realities of the hospitality industry. We believe reinstating the 2021 Final Rule would provide much-needed certainty and ease of compliance.
3. Permanence of Relationship: Assessment of the work relationship’s duration and exclusivity. 4. Control over Work: Consideration of the employer’s control, including reserved rights, over work performance and economic aspects. 5. Integration into Business: Determination of the work’s importance to the employer’s main business. 6. Skill and Initiative: Analysis of specialized skills and business-like initiative used by the worker. Impact on the hospitality industry: •
This change undermines the clarity and predictability essential for our industry to thrive. The complexity of the new rule will likely necessitate legal consultation, imposing a significant burden on small operators.
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The ambiguous nature of the “totality of circumstances” test and the potential for additional undefined factors could lead to inconsistent classifications and increased litigation risks.
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