January 10, 2024
On January 9, 2024, the U.S. Department of Labor (DOL) released a final rule that changes the criteria for classifying independent contractors. The final rule will take effect on March 11 and requires companies to weigh a variety of economic factors to determine whether a worker is an employee or an independent contractor.
The final rule rescinds a 2021 rule in which two core factors – control over the work and opportunity for profit or loss – carried greater weight in determining the status of independent contractors. Under the new rule, employers use a totality-of-the-circumstances analysis, wherein all the factors carry equal weight.
The new test includes six factors:
- 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.
The new rule will lead to more workers being classified as employees and, under the federal Fair Labor Standards Act, employees are entitled to minimum wage, overtime pay and other benefits.
If you have any questions about the DOL’s final rule or any other employment matters, please contact Dean Leazenby at Warrick & Boyn, LLP.