U.S. Department of Labor Changes Employee vs. Independent Contractor Test

On January 9, 2024, the U.S. Department of Labor (“DOL”) announced its final rule revising the standard for determining whether a worker is an independent contractor or an employee.  The final rule goes into effect March 11, 2024, and also rescinds the present rule, which has been in place since 2021.  The new rule restores the multifactor, totality-of-the-circumstances analysis used by the DOL prior to 2021.  In short, when determining whether a worker is an employee or an independent contractor, the DOL will focus on six non-exhaustive factors:

1. The opportunity for profit or loss a worker might have;
2. The financial stake and nature of any resources a worker has invested in the work;
3. The degree of permanence of the work relationship;
4. The degree of control an employer has over the person’s work;
5. Whether the work the person does is essential to the employer’s business; and
6. A factor regarding the worker’s skill and initiative.

The final rule may be found here:  https://bit.ly/3tKagEJ.  The new rule makes it more likely that a worker is considered by the DOL and courts to be an employee rather than an independent contractor.  As such, it is critical that businesses examine their independent contractor relationships to ensure that they have individuals properly classified. Businesses that violate the rule could face penalties and claims under the Fair Labor Standards Act.

If you have specific questions about independent contractor relationships, contact Nikole Canute, Scott Dwyer, Nate Wolf, Kimberly Large, Dominic Clolinger, or Kathryn Stegink as soon as practicable.