Construction Bills: Recent Changes to Construction Laws

• Pages: 63-67
• Date: 01 January 2025
• Author: Hugh D. Brown,Catherine W. Delorey
• Subject Matter: Civil Law

Published in The Construction Lawyer Volume 44, Number 1, ©2025 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction Law The Construction Lawyer Winter 2025

63

CONSTRUCTION BILLS: RECENT

CHANGES TO CONSTRUCTION LAWS

By Hugh D. Brown and Catherine W. Delorey

Hugh D. Brown is a shareholder with Fabyanske Westra Hart & Thomson P.A. in Minneapolis,

Minnesota. Catherine W. Delorey is senior counsel in the San Francisco, California, office of Gordon Rees

Scully Mansukhani, LLP.

Diverging Approaches to Worker Misclassif‌ication

As with many industries, classication of workers in the construction industry is a prominent issue.

Federal employment law, including laws governing health and safety, wage and hour, and equal

employment standards, generally protect employees but not independent contractors. The same is true for

state and local employment laws, which also may condition coverage and obligations on a worker’s status

as an employee. Accordingly, application of federal and state laws protecting workers generally depend, as

a threshold matter, on whether a worker is an “independent contractor” or an “employee.” Construction

companies can avoid signicant wage, tax, and other obligations by engaging independent contractors

instead of employees, resulting in considerable cost savings and increased workforce exibility.

On January 10, 2024, the US Department of Labor (DOL)’s Wage and Hour Division issued its final rule

on Employee or Independent Contractor Classification Under the Fair Labor Standards Act (the FLSA).1

Included among the FLSA’s requirements, covered employers must pay their nonexempt employees at least

the federal minimum wage for every hour worked and overtime pay for each hour worked over 40 in a

workweek; it also mandates that employers keep certain records regarding their employees.2

However, only employees qualify for FLSA protection; independent contractors do not. The FLSA does

not define the term “independent contractor.” The FLSA defines “employer” in section 3(d) to “include[ ]

any person acting directly or indirectly in the interest of an employer in relation to an employee”;

“employee” in section 3(e)(1) to mean, subject to certain exceptions, “any individual employed by an

employer”; and “employ” in section 3(g) to include “to suffer or permit to work.”3 The US Supreme

Court has recognized that “there is in the [FLSA] no definition that solves problems as to the limits of

the employer-employee relationship under the [FLSA].”4 Although the Court defined employees broadly,

it also recognized that there were limits, and refused to deem all workers as employees.5 Accordingly, the

definition of “employee” was, until 2021, a matter left to courts.

In the course of addressing this problem, the US Supreme Court maintained that the economic reality

of a working relationship will determine whether an individual should be considered an employee

or independent contractor for FLSA purposes.6 Subsequently, federal appellate courts have generally

identified six factors as particularly probative for evaluating the economic reality of such a relationship:

(1) the nature and degree of the alleged employer’s control as to how the work is to be performed; (2) the

alleged employee’s opportunity for profit or loss depending upon their managerial skill; (3) the alleged

employee’s investment in equipment or materials required for their task, or their employment of workers;

(4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the

working relationship; and (6) the extent to which the service rendered is an integral part of the alleged

employer’s business.7