United States Department of Labor issues Final Rule on Independent Contractor Status

On Wednesday, the DOL issued new regulatory guidance with respect to determining whether a service provider is an employee or an independent contractor for purposes of the Fair Labor Standards Act.  https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor

The Final Rule has now been published in the Federal Register.  https://www.federalregister.gov/documents/2021/01/07/2020-29274/independent-contractor-status-under-the-fair-labor-standards-act

The Final Rule reaffirms an “economic reality” test to determine whether an individual is an independent contractor or employee.  According to the Final Rule, two “core factors” are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself.  These factors are:  (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment.  The Final Rule identifies three other factors that may serve as additional guideposts in the analysis: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the worker and the potential employer; and (3) whether the work is part of an integrated unit of production.

What is the significance of the new Final Rule?  Not much.  The “new” guidance is basically a restatement of what the test has been for many years.  More importantly, what is the likelihood that the Biden administration will accept this Final Rule from the Trump Department of Labor?  About as likely as snow in the Caribbean.

The effective date of the Final Rule is March 8, 2021.  Our advice is to take a “wait and see” approach to the Final Rule before making any changes to your internal policies or procedures with respect to classifying workers as employees or independent contractors.  Stay tuned.

If you have any questions regarding the Final Rule or need any assistance with questions regarding the proper classification of workers, please do not hesitate to contact the attorneys at Hoffman & Hlavac.  To stay updated on the key labor and employment law developments that affect your workplace, be sure to subscribe to our blog and follow us on social media.