DOL Enacts New Independent Contractor Test
Posted on Feb 14, 2024 on Employment, Labor Management Issues, Wage and Hour by
On January 9, 2024, the Department of Labor (“DOL”) announced a six-factor test for determining whether a worker is an independent contractor or an employee under the Fair Labor Standards Act (“FLSA”). This new rule takes effect on March 11, 2024.
Classifying workers as independent contractors or employees is extremely important—independent contractors do not receive the protections afforded by the FLSA such as overtime pay, minimum wage, and other requirements.
The DOL’s six factor test considers:
- opportunity for profit or loss depending on managerial skill;
- investments by the worker and the potential employer;
- degree of permanence of the work relationship;
- nature and degree of control by the company;
- extent to which the work performed is an integral part of the potential employer’s business; and
- skill and initiative.
In addition, the DOL utilizes a totality-of-the-circumstances economic reality approach, which allows consideration of other relevant, but not named, factors, which “in some way indicate whether the worker is in business for themself.”
Consider the following checklist if your company engages independent contractors. It encompasses the Department of Labor’s (DOL) new six factors along with a series of questions posed by the DOL pertaining to each factor. Each question is accompanied by a parenthetical indicating whether it favors Independent Contractor or Employee status. Every instance where you mark a box designated as “Employee” or refrain from marking a box labeled as Independent Contractor increases the likelihood of your worker being classified as an employee. Keep in mind, this area of law is highly intricate, and the repercussions for misclassification are substantial. If you harbor any uncertainties, it is advisable to seek the guidance of competent legal counsel.
Brody and Associates regularly advises management on complying with the latest state and federal employment laws. The subject matter of this post can be very technical. It is also an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the new laws which may impact your business. It is not intended to serve as legal advice. We encourage you to seek competent legal counsel before implementing any of the new policies discussed above. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
Brody and Associates regularly advises management on complying with the latest state and federal employment laws. The subject matter of this post can be very technical. It is also an evolving area of law and very fact specific. Our goal here is to simply alert you to some of the new laws which may impact your business. It is not intended to serve as legal advice. We encourage you to seek competent legal counsel before implementing any of the new policies discussed above. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.