Aigner S. Carr
Mollie G. Mohan
Robert A. NickelOn January 9, 2024, the U.S. Department of Labor (DOL) issued its final rule regarding how to determine who is an employee versus an independent contractor under the Fair Labor Standards Act (FLSA).
The final rule rescinds the DOL’s 2021 Independent Contractor Rule that was published on January 7, 2021. Previously, the DOL announced on March 11, 2021 that this rule would be rescinded and replaced, with the proposed rule being published on October 13, 2022.
The Department believes that the new rule will decrease the risk that an employee is misclassified as an independent contractor. Such misclassifications are important because independent contractors are exempt from federal minimum wage and overtime requirements under the FLSA. Further, the final rule is more closely aligned with longstanding case law and the Department’s previous subregulatory guidance.
Like the proposed rule, the final rule restores the “totality-of-the-circumstances” analysis to determine whether a worker is “economically dependent” on an employer. See Tueth Keeney’s prior insights on the proposed rule and the 2021 rule.
Under the new rule, the Department will consider six factors to assess whether a worker is an employee or an independent contractor under the FLSA:
- opportunity for profit or loss depending on managerial skill;
- investments by the worker and the potential employer;
- degree of permanence of the work relationship;
- nature and degree of control;
- extent to which the work performed is an integral part of the potential employer’s business; and
- skill and initiative.
The Department states that no single factor is determinative, rather all of the factors are to be considered in light of the economic reality of entire enterprise.
The final rule went into effect on March 11, 2024.
Attorneys at Tueth Keeney will continue to monitor and report on developments with respect to the final rule.
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Labor and Employment – Tueth, Keeney, Cooper, Mohan & Jackstadt, P.C. has successfully represented a number of businesses, large and small, throughout the Midwest in labor and employment matters. Our broad range of experience includes employment discrimination litigation, wage-hour investigations, affirmative action revision plans development, INS audits, and a variety of traditional labor matters.