Wednesday, January 10, 2024

DOL Issues Final Rule: Employee or Independent Contractor Under the FLSA

On Tuesday, the U.S. Department of Labor announced its Final Rule: Employee or Independent Contractor Under the Fair Labor Standards Act. A quick overview:

Effective Date: 

March 11, 2024

Why it matters: 

The FLSA sets a minimum wage and requires overtime pay (time and a half for hours over 40 worked in a workweek). It also imposes certain recordkeeping requirements, and prohibits retaliation for filing complaints about violations. Simply put, this all applies to employees but not independent contractors. 

Not official use.
Shut up and tell me the test!

The final rule utilizes the "economic realities test," examining the "totality of the circumstances" where "economic dependence is the ultimate inquiry." The rule provides a non-exhaustive list of six factors, none of which is dispositive on its own:

  1. Opportunity for profit or loss depending on managerial skill;
  2. Investments by the worker and the potential employer;
  3. The degree of permanence of the work relationship; 
  4. The nature and degree of control; 
  5. The extent to which the work performed is an integral part of the potential employer’s business; and 
  6. Skill and initiative.

If you're looking for more in-depth guidance on applying these factors - great news! - the final rule is 339 pages long. Sorry, too much? Check out the FAQ page for something in between this very brief overview and the full 339-page rule. 

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