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News Jan. 12, 2021

Final rule clarifies independent contractor status

The Department of Labor has announced a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act, according to dol.gov.

The final rule includes the following clarifications:

  • Reaffirms an “economic reality” test to determine whether an individual is in business for himself or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee)
  • Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for himself or herself: the nature and degree of control over the work and 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, particularly when the two core factors do not point to the same classification: the amount of skill required for the work; the 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
  • 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 March 8. View more information.

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