The DOL released its Final Rule for determining whether an individual is an employee or independent contractor for purposes of the Fair Labor Standards Act (“FLSA”). Under the FLSA, employers must abide by minimum wage and overtime requirements for non-exempt employees. Independent contractors, however, are not subject to or necessarily protected under the FLSA. Accordingly, workers may sometimes be misclassified as independent contractors by employers in order to avoid FLSA’s requirements.
The DOL previously issued independent contractor regulations during the Trump Administration which allowed certain factors, namely the degree of control and opportunity for profit or loss, to be given more weight than other factors traditionally considered by the courts and DOL. Some argued that this greater weight allowed employers more flexibility to classify workers as independent contractors when they would otherwise be considered employees.
The DOL’s recently issued Final Rule rescinds the previous regulation and now requires a balancing of all six factors: (1)worker’s opportunity for profit or loss; (2) investments by the parties; (2) the work relationship permanency; (4) the nature and degree of control over the work; (5) whether the work is an integral party of the employer’s business; and (6) worker skill and initiative. The Final Rule will take effect on March 11, 2024.