On January 12, 2024, the US Department of Labor (DOL) issued a new ruling on the classification of employees and independent contractors under the Fair Labor Standards Act (FLSA). This replaces the 2021 rule previously set by the Department.
Acting US Secretary of Labor Julie Su and the DOL’s goal is to address the issue of employee misclassification by clarifying the roles of employees and independent contractors and how each is defined.
As part of the process, the DOL has set up an “economic reality test” to determine if the worker depends on the employer and should be classified as an employee, or the worker is genuinely self-employed and therefore an independent contractor. The DOL test considers the “totality of the circumstances” with six predominating factors:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and potential employer
- Degree of permanence of the work relationship
- Nature and degree of control
- The extent that work performed is an integral part of the potential employer’s business
- Skill and Initiative
Since the determination is based upon the “totality of the circumstances”, no single factor is determinative and factors other than those listed above may be considered. Each factor’s weight depends on the case’s unique facts and circumstances.
The difference in determining if a worker is an employee vs. an independent contractor will have some important implications for business owners. Specifically, for employers and employees, compliance with FLSA requirements including:
- Payment of at least the federal minimum wage
- Time-and-a-half for hours worked beyond 40 in a work week
- Adherence to specific record keeping requirements
The new rule is set to go into effect on March 11, 2024, although legal challenges may delay its implementation.
You can review the Department of Labor’s final rule here.
If you have any questions on how this ruling applies to your business, or if you need assistance with other employment matters, please reach out to a Buckley Fine attorney today at 847-381-0011 or email@example.com.