Department of Labor Issues Final Rule on Employee or Independent Contractor Classification

This week, the U.S. Department of Labor (DOL) announced the issuance of the final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, effective March 11, 2024. This final rule revises the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). Per the final rule, a worker is not an independent contractor if they are, as a matter of economic reality, economically dependent on an employer for work. Consistent with judicial precedent and the Department’s interpretive guidance prior to 2021, the final rule applies the following six factors to analyze employee or independent contractor status under the FLSA:

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.

The new rule rescinds one issued during the final days of the Trump administration in January 2021. To assist with understanding the final rule, the DOL has published frequently asked questions.