The U.S. DOL Finalized its Employee or Independent Contractor Classification Rule
On January 10, 2024, the U.S. Department of Labor (USDOL) published its final rule defining “independent contractor” under the Fair Labor Standards Act (FLSA). The final rule becomes effective March 11, 2024. The final rule rescinds the USDOL’s 2021 rule, which had arguably expanded the definition of an independent contractor under the FLSA. The USDOL has also published “Frequently Asked Questions” about the final rule.
According to the USDOL, the final rule is designed to ensure that workers who are employees are paid the minimum wage and overtime they are entitled to under the FLSA. The final rule is also intended to return the analysis of whether a worker is an employee or independent contractor to the “economic realities test” used prior to the adoption of the 2021 rule.
Under the final rule courts and the USDOL will look at six factors to determine whether workers are employees or in business for themselves (i.e., independent contractors). Those factors are:
1. The worker’s opportunity for profit or loss depending on managerial skill;
2. The investments by the worker and the potential employer;
3. Permanence of the work relationship;
4. The nature and degree of control exercised by the potential employer;
5. Whether the work performed is integral to the potential employer’s business; and
6. The worker’s use of skill and initiative.
None of those factors are given more weight than another and the USDOL has stated that other factors may be relevant if they indicate whether workers are in business for themselves, as opposed to being economically dependent on the employer for work.
New Jersey employers should be reminded that New Jersey’s “ABC Test” uses a much more expansive definition of “employee” and workers who might qualify as independent contractors under the FLSA may be employees under New Jersey law.
Employers that are utilizing independent contractors should consult with experienced counsel to determine whether the final rule impacts those workers’ independent contractor status.
If you have questions about the classification or your business’s workers, please schedule a complimentary consultation with us through our online scheduling system.
Information contained in this blog is provided for informational purposes and does not constitute legal advice or opinion. You should consult with an attorney regarding the specifics of your matter or legal issue.