NEWS ALERT- FINAL RULE ON EMPLOYEE VS. INDEPENDENT CONTRACTOR STATUS UNDER FLSA
January 6, 2021, the U.S.
Department of Labor announced a final rule clarifying the standard for
versus independent contractor status under the Fair Labor Standards
outlines how employers can properly classify workers as independent
instead of as employees (and thereby, avoid minimum wage and overtime
requirements when appropriate).
While the DOL final rule, scheduled to take effect on March 8, 2021,
employers more leeway in classifying workers as independent
contractors, it remains
to be seen whether the Biden administration will favor the rule or
The Nuts and Bolts!
In the final rule, the DOL:
- Reaffirms an “economic reality” test to
determine whether an individual is in business for him or
herself (independent contractor) or is economically dependent on a
potential employer for work (FLSA employee).
- Identifies and
explains two “core factors” that 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:
- The nature and degree of control over the work.
- The worker’s opportunity for profit or loss based on
initiative and/or investment.
- Identifies three other factors that may
serve as additional guideposts in the analysis, particularly when the
two core factors do not point to the
same classification. The factors are:
- The amount of skill required for the work.
- The degree of permanence of the working relationship
between the worker and the potential employer.
- Whether the work is part of an integrated unit of
- The actual practice of the worker and the potential
employer is more relevant than what may be contractually or theoretically
- Provides six fact-specific examples applying
Nothing in the rule prohibits states from adopting
more stringent standards.
Here is a link to the final rule.
*Posting and viewing of the information on this website is not intended to
constitute legal advice or create an attorney-client relationship. Read More of the Disclaimer
Back to Articles and Updates