“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su.
In a highly anticipated ruling, the DOL on January 9 announced a final rule to help employers and workers better understand when a worker qualifies as an employee and when they may be considered an independent contractor under the Fair Labor Standards Act.
The rule provides guidance on proper classification and seeks to combat employee misclassification, a serious problem that impacts workers’ rights to minimum wage and overtime pay, facilitates wage theft, allows some employers to undercut their law-abiding competition and hurts the economy at-large.
“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su, in a statement. “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 guidance provided by the final rule aligns with longstanding judicial precedent on which employers have previously relied to determine a worker’s status as either an employee or independent contractor. The new rule will preserve essential worker rights and provide consistency for entities covered by the Fair Labor Standards Act .
The new “independent contractor” rule restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor.
The rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.
The rule separately rescinds the 2021 Independent Contractor Rule that the department believes is not consistent with the law and longstanding judicial precedent.
In crafting the new rule, the department’s Wage and Hour Division considered feedback provided by stakeholders at forums in the summer of 2022 and during the comment period after the proposal’s announcement in October 2022. The final rule takes effect on March 11, 2024.
About the AuthorEHS Today's editorial staff includes:
Dave Blanchard, Editor-in-Chief: During his career Dave has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeek, EHS Today, Material Handling & Logistics, Logistics Today, Supply Chain Technology News, and Business Finance. In addition, he serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.
Adrienne Selko, Senior Editor: In addition to her roles with EHS Today and the Safety Leadership Conference, Adrienne is also a senior editor at IndustryWeek and has written about many topics, with her current focus on workforce development strategies. She is also a senior editor at Material Handling & Logistics. Previously she was in corporate communications at a medical manufacturing company as well as a large regional bank. She is the author of Do I Have to Wear Garlic Around My Neck?, which made the Cleveland Plain Dealer's best sellers list.
Nicole Stempak, Managing Editor: Nicole Stempak is managing editor of EHS Today and conference content manager of the Safety Leadership Conference.