E-Alert: Department of Labor Announces Final Rule Clarifying Independent Contractor Standard
Earlier today, the Department of Labor (DOL) issued its Final Rule clarifying the standard for classifying a worker as an independent contractor or employee according to the Fair Labor Standards Act (FLSA). A DOL spokesperson stated that the Final Rule did not contain any significant modification from its Proposed Rule published in September of 2020. The full copy of the Final Rule is available here.
The Final Rule was designed to address the modern “gig” economy and to relax the standard for permitting individuals to work in jobs without becoming an employee of the company. However, the Rule also re-affirms the “economic reality” test and upholds the importance of analyzing the nature and degree of control over the work. It establishes two “core factors”: (1) the degree of control a company exercises over the workers’ duties, and (2) the opportunity for profit or loss based on initiative, investment, or both.
The Rule also indicates that the actual practices of the worker and the potential employer are more relevant than what may be contractually or theoretically possible. Six examples are provided by the DOL in an effort to explain the application of the revised factors to actual scenarios.
The rule is scheduled to take effect on March 8, 2021. The incoming Biden administration may try to delay the implementation of the Final Rule, but to do so long term it must go through formal rulemaking procedures.
CGWG will continue to monitor developments concerning the independent contractor standard for FLSA purposes. If you have any questions about independent contractor status or any other aspect of employment law, please contact an attorney at our Firm.