Independent Contractor Classification Rule Update
On January 10, 2024, the U.S. Department of Labor published a final rule Employee or Independent Contractor Classification Under the Fair Labor Standards Act
To analyze if a worker is an employee or independent contractor, the final rule provides six factors that businesses and workers should consider when analyzing the economic realities of the working relationship. These factors, described in the economic reality test of the final rule, are:
(1) opportunity for profit or loss depending on managerial skill;
(2) investments by the worker and the potential employer;
(3) degree of permanence of the work relationship;
(4) nature and degree of control;
(5) extent to which the work performed is an integral part of the potential employer’s business; and
(6) skill and initiative.
No one factor or subset of factors determines if a worker is an employee or independent contractor. Rather, all the circumstances of the relationship should be examined. The weight given to each factor may depend on the facts and circumstances of the particular relationship. Also, additional factors may be relevant if they in some way indicate if the worker is in business for themself as opposed to being economically dependent on the employer for work.
Note that there is currently a lawsuit pending (as of April 2024) to block the final rule.
Links to Resources from the Department of Labor regarding the Independent Contractor Classification Rule: