Beginning March 11, 2024, the U.S. Department of Labor (DOL) will implement a new rule for independent contractors to which employers must adhere. The new rule was previously in place prior to 2021 and is replacing the current two-core test to determine the status of an independent contractor, which only assessed control over the work and opportunity for profit or loss.
The new standard requires employers to weigh six economic factors to determine whether a worker is an employee or an independent contractor. Under the FLSA, employees are entitled to minimum wage, overtime pay, and other benefits while independent contractors are not.
Employers will now be required to weigh the totality-of-the-circumstances, none of which carries greater weight than another, when determining the status of a potential employee:
- 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; and
- The extent to which the service rendered is an integral part of the employer’s business.
A court may consider other relevant factors as well when making their determination.
Who will be affected most with this new rule?
The new DOL rule favors a more employee-friendly standard that will lean towards declaring many independent contractors as employees; leaning towards more uncertainty for employers when hiring independent contractors. However, this rule is likely to be challenged in court in the coming months.
Although all employers are to be bound by the rule, app-based employers who typically employ drivers as independent contractors and other industries such as construction, transportation, trucking, media, and small business, will be greatly affected.
If you are an employer that has more questions regarding the status of an independent contractor or employee, contact Fox Smith at 314-588-7000.