US DOL Issues Final Rule on Independent Contractors

On January 9, 2024, the U.S. Department of Labor announced a new final rule revising the test for whether workers are considered to be employees versus independent contractors for purposes of the Fair Labor Standards Act. The rule was published in the Federal Register on January 10, 2024.

Before 2021, the DOL employed a “totality of the circumstances” test listing six non-exclusive factors to be considered when distinguishing between employees and independent contractors. In 2021, the DOL issued a new rule that focused on two core factors – the degree of control over the worker’s work and the worker’s opportunity for profit and loss. The new rule just issued by the DOL returns to the former six-factor test. The six factors are:

• The degree to which the employer controls how the work is done.
• The worker’s opportunity for profit or loss.
• The amount of skill and initiative required for the work.
• The degree of permanence of the working relationship.
• The worker’s investment in equipment or materials required for the task.
• The extent to which the service rendered is an integral part of the employer’s business.

While the new rule is not really “new” at all, the reintroduction of additional factors may contribute to some additional ambiguity and legal risk for businesses that engage with independent contractors. Employers with questions about the new rule or other independent contractor classification issues should contact the author or their regular Franczek attorney.