FINAL RULE ISSUED REGARDING CLASSIFICATION OF INDEPENDENT CONTRACTORS OR EMPLOYEES

On January 9, 2024, 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).

This final rule changes the guidance on whether a worker is an employee or independent contractor under the FLSA. This final rule rescinded a 2021 Independent Contractor rule which had changed the independent contractor/employee analysis and restored the rule to be more consistent with the analysis prior to the 2021 rule.

The final rule analyzes whether a person is an employee or independent contractor using six economic reality factors:

• Whether the worker has opportunities for profit or loss based on managerial skill;

• Investments by the worker and the potential employer and whether they are capital or entrepreneurial in nature;

• The degree of permanence of the work relationship;

• The nature and degree of control, including reserved control over the performance of the work and the economic aspects of the working relationship by the potential employer over the worker;

• The extent to which the work performed is an integral part of the potential employer’s business, and

• The worker’s skill and initiative. 

The factors are reviewed based on a totality-of-the-circumstances analysis and all of factors are to be analyzed without assigning a predetermined weight to a particular factor or set of factors. 

If you currently utilize independent contractors in your organization or have questions about whether a worker can or should be categorized as an independent contractor or an employee, contact one of the Blethen Berens employment law attorneys.