Employee or independent contractor? DOL’s final rule takes effect on March 11

The U.S. Department of Labor has announced the issue of a final rule to help employers determine whether workers should be classified as an employee or independent contractor under the Fair Labor Standards Act (FLSA).
In a press release, the agency said the rule provides guidance on proper classifications and aims to combat misclassification. Specifically, the final rule:
- Restores the multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA.
- Ensures that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
- Uses the longstanding interpretation of the economic reality factors, outlined below.
- Rescinds the 2021 Independent Contractor Rule that went into effect on March 8, 2021.
Employee or independent contractor? Use this test
Under the new rule, employers will use the totality-of-the-circumstances analysis, considering the following six factors:
- The worker’s opportunity for profit or loss
- Investments by the worker and the company
- The degree of permanence of the work relationship
- The nature and degree of control over how the work is performed
- The extent to which the work performed is an integral part of the company’s business, and
- The worker’s skill and initiative.
Under the previous 2021 rule, two factors – the opportunity for profit or loss and the nature and degree of control – carried more weight than the others.
That is no longer the case. Under the new totality-of-the-circumstances analysis, the six factors are not exhaustive and are equally important.
The final rule is scheduled to be published in the Federal Register on Jan. 10, 2024, and will go into effect on March 11, 2024.
The DOL has already compiled a comprehensive FAQ for employers and plans to release additional guidance. We’ll keep you posted.
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