The U.S. Department of Labor (DOL) has announced a final rule under the Fair Labor Standards Act setting forth factors for the classification of workers as employees or independent contractors. The final rule rescinds the 2021 Independent Contractor Rule put into place under the Trump administration, which primarily focused on two “core” factors – the nature or degree of control over the work and the worker’s opportunity for profit or loss.
Instead, the new rule purports to restore an earlier “totality of the circumstances” standard for determining whether a worker is an employee or independent contractor. The rule sets forth a multifactor analysis, considering factors such as profit or loss of opportunities, financial stake in the work, permanence of the work relationship, degree of employer control, the essential nature of the work, and worker skill and initiative. Notably, as several public commenters astutely observed, rather than simplifying the classification process, the DOL’s final rule creates less flexibility and brings more complexity to the analysis unnecessarily.
The final rule takes effect on March 11, 2024. The DOL has published a FAQ and small entity compliance guide, which can be found here.
If you or your business have questions regarding the final rule or employee classification issues, please contact the Walter Haverfield Labor & Employment Services Group.