The U.S. Department of Labor has announced a final rule meant to clarify the standard for employee versus independent contractor status under the Fair Labor Standards Act.
The final rule, announced Tuesday:
- Reaffirms an “economic reality” test to determine whether an individual is in business for himself or herself as an independent contractor or is economically dependent on a potential employer for work as an FLSA employee.
- Identifies and explains two “core factors” for determining whether a worker is economically dependent on someone else’s business or is in business for himself or herself: 1) The nature and degree of control over the work and 2) The worker’s opportunity for profit or loss based on initiative and/or investment.
- Identifies three other factors that may serve as additional guideposts in the analysis: amount of skill required for the work; degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production.
- States that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
- Provides six fact-specific examples applying the factors.
The rule will take effect on March 8, 60 days after publication on the Federal Register.
