The Department of Labor (DOL) recently published a final rule to provide guidance to help businesses and workers understand how to differentiate employees from independent contractors who are in business for themselves under the Fair Labor Standards Act (FLSA). The rule, which follows longstanding judicial precedent and rescinds the 2021 Independent Contractor Rule, goes into effect on March 11, 2024.
“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su on January 9, 2024. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”
The final rule has several similarities to the rescinded rule. They both advise that independent contractors are workers in business for themselves, while employees are workers who economically depend on an employer for work. The new rule considers six factors (instead of the old rule’s five), including the investments made by the worker and the potential employer. Scheduling, supervision, price-setting, and the ability to work for others are to be considered when analyzing the nature and degree of control over a worker, as well as whether the work is integral to the employer’s business (rather than whether it is exclusively part of an “integrated unit of production”). Interestingly, the new rule omits a provision from the 2021 Independent Contractor Rule which minimized the relevance of an employer’s reserved but unexercised rights to control a worker. The Wage and Hour Division of the DOL is committed to protecting rights across America. This new ruling is believed to improve compliance, prevent confusion, and better protect vulnerable, hardworking employees and freelancers alike.
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