On January 6, 2021, the U.S. Department of Labor announced a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act. It outlines how employers can properly classify workers as independent contractors, 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, gives employers more leeway in classifying workers as independent contractors, it remains to be seen whether the Biden administration will favor the rule or delay its implementation. Click here for the “nuts and bolts” of the final rule. The Q&A below is taken directly from the final rule.

Q: An individual accepts assignments from a company that provides an app-based service linking those who need home-repair work with those who perform home-repair work. The individual is able to meaningful increase his earnings by exercising initiative and business acumen and by investing in his own equipment. The company, however, has invested millions of dollars in developing and maintaining the app, marketing itself, maintaining the security of information submitted by actual and prospective customers and workers, and monitoring customer satisfaction with the work performed. Under the final rule, is the individual more likely an independent contractor or employee?

A: The DOL says: The opportunity for profit or loss factor favors independent contractor status for the individual, despite the substantial difference in the monetary value of the investments made by each party. While the company may have invested substantially more in its business, the value of that investment is not relevant in determining whether the individual has a meaningful opportunity for profit or loss through his initiative, investment, or both.

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