The United States Department of Labor published a new final rule regarding classification of workers as independent contractors under the Fair Labor Standards Act (FLSA) on January 10, 2024. The new rule is effective March 11, 2024. According to the DOL, the rule is “more consistent with judicial precedent and the [FLSA’s] text and purpose.”
The rule rescinds the 2021 Independent Contractor rule which focused on two core factors—control over the work and opportunity for profit or loss. The new rule utilizes six factors to analyze employee or independent contractor status:
- The degree to which the employer controls how the work is done.
- The worker’s opportunity for profit or loss.
- The amount of skill and initiative required for the work.
- The degree of permanence of the working relationship.
- The worker’s investment in equipment or materials required for the task.
- The extent to which the service rendered is an integral part of the employer’s business.
No one factor is determinative, and employers must evaluate these six factors on a case-by-case basis.
Consistent with long-standing guidance and court rulings, the DOL advises that independent contractors are workers “who, as a matter of economic reality, are in business for themselves.” In contrast, employees are workers “who are, as a matter of economic reality, economically dependent on the employer for work.”
If a worker is classified as an employee, she is entitled to the full protections of the FLSA, including minimum wage and overtime. Importantly, workers cannot voluntarily waive employee status and choose to be classified as independent contractors.
The DOL’s guidance on the new rule is available HERE.
We will continue to post updates on new guidance and rules from the DOL and other federal agencies on our website and social media channels. For more information, consult with a Phillips Murrah labor and employment attorney.
About the author:
Michele C. Spillman is a Shareholder who represents employers in a wide variety of industries and provides advice and counsel on federal and state employment laws and assists employers with human resources matters.
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