U.S. Department of Labor issues final rule on Independent Contractor Classification.02/01/2024
The U.S. Department of Labor (DOL) has issued its final rule on the Independent Contractor Classification which will go into effect on March 11, 2024. This final rule revises the DOL’s previous guidance on how to analyze whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The DOL explains that the revised rule continues to affirm that a worker is not an independent contractor if they are, as matter of economic reality, economically dependent on an employer for work.
The final federal rule provides 6 factors to analyze:
- opportunity for profit or loss depending on managerial skill;
- investments by the worker and the potential employer;
- degree of permanence of the work relationship;
- nature and degree of control;
- extent to which the work performed is an integral part of the potential employer’s business; and
- skill and initiative.
Practically, however, the final rule returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors listed above is assigned any predetermined weight. In addition, the final rule does not preempt state, local or other federal law, so businesses must comply with all federal, state, and local laws that apply and ensure that they are meeting whichever standard provides workers with the greatest protection.
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