HR-3495-119
Supplemental report filed by the Committee on Education and Workforce, H. Rept. 119-494, Part II.
Sponsored by Kevin Kiley (I-CA)
What it does
This bill would amend the Fair Labor Standards Act to explicitly exclude "direct sellers" and "qualified real estate agents" (as defined in the Internal Revenue Code) from the definition of "employee." This would mean these workers would not be covered by federal minimum wage, overtime, and related wage protections under that law, codifying their treatment as independent contractors for FLSA purposes.
Who benefits
Direct selling companies (such as door-to-door and multi-level marketing firms) and real estate brokerages, which would gain legal certainty that these workers are independent contractors rather than employees, avoiding minimum wage, overtime, and related payroll obligations. Workers who prefer flexible, commission-based independent contractor status and want to avoid reclassification disputes may also benefit from reduced regulatory ambiguity.
Who is hurt
Direct sellers and real estate agents who might otherwise be classified as employees under existing FLSA tests would lose access to federal minimum wage and overtime protections. State labor agencies and workers' advocates who argue some of these workers function like employees (subject to company control) may see this as foreclosing avenues for reclassification claims; workers who face low or inconsistent commission income could bear more financial risk without a wage floor.
Supporters argue
Supporters argue that direct sellers and real estate agents already operate as independent contractors under the tax code and most state laws, and that this bill simply aligns the FLSA definition with existing IRC section 3508(b) treatment, reducing confusing and costly litigation over misclassification. They contend that the flexible, commission-based structure these workers choose is incompatible with traditional wage-and-hour rules, and that legal certainty benefits both the industry and workers who value independence.
Opponents argue
Opponents argue that codifying blanket exclusion from "employee" status could strip legal protections from workers who, in practice, are closely controlled by companies and lack genuine independence, echoing broader concerns about misclassification in the gig economy. They contend that Congress should not preempt case-by-case judicial and administrative determination of employee status, since some direct sellers and agents may earn far less than minimum wage after expenses with no legal recourse.