Thursday, January 11, 2024

Content courtesy of: U.S. Department of Labor

Today, the U.S. Department of Labor announced the issuance of a final rule to help employers and workers analyze whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). The announcement follows a Notice of Proposed Rulemaking on October 13, 2022, which led to thousands of comments from a diverse array of stakeholders that helped inform the regulatory updates.

The final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, provides guidance on whether a worker is an employee or independent contractor under the FLSA. Misclassification is a serious issue that denies employees’ rights and protections under federal labor laws and hurts the economy at-large. The Department believes this final rule will protect workers from misclassification, while at the same time providing a consistent approach for those businesses that engage (or wish to engage) with independent contractors.

It is the Department’s obligation to administer and enforce the FLSA to ensure that workers who should be covered under the Act are properly classified as employees. This final rule ensures that such workers receive the FLSA’s wage and hour protections, and that employers that comply with the law are not placed at a competitive disadvantage when competing against employers that misclassify employees. The final rule also aligns the department’s approach with longstanding judicial precedent, which will reduce confusion, improve compliance, and better protect working people.

Specifically, the final rule does the following:  

• Restores the multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA. 
• Ensures that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors. 
• Uses the longstanding interpretation of the economic reality factors. These factors include opportunity for profit or loss depending on managerial skill, investments by the worker and the potential employer, the degree of permanence of the work relationship, the nature and degree of control, the extent to which the work performed is an integral part of the potential employer’s business, and the worker’s skill and initiative. 
• Rescinds the 2021 Independent Contractor Rule.

For more information, please visit: Employee or Independent Contractor Classification Under the Fair Labor Standards Act