The Department’s “Independent Contractor Status Under the Fair Labor Standards Act” rule, published at 86 FR 1168 on January 7, 2021, is currently scheduled to be effective on March 8, 2021. However, in accordance with the memorandum of January 20, 2021, from the Assistant to the President and Chief of Staff, titled “Regulatory Freeze Pending Review,” the Department has proposed to delay the rule’s effective date to May 7, 2021. See Federal Register 2021-02484. The Department encourages interested parties to submit comments on this proposed delay after publication of the Notice on February 5, 2021 by 11:59 pm ET on February 24, 2021. The Department will consider only comments about its proposal to delay the rule’s effective date. Any other comments will be considered to be outside the scope of this proposal. Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record and will be posted without change to www.regulations.gov. Any comment from an individual gathered and submitted by a third-party organization as a group to WHD and posted under a single document ID number on www.regulations.gov, will likewise be posted without change, including any personal information provided.
On January 6, 2021, the Department of Labor (Department) announced a final rule clarifying the standard for employee versus independent contractor under the Fair Labor Standards Act (FLSA). The effective date of the final rule is March 8, 2021.
In the final rule, the Department:
- Reaffirms an “economic reality” test to determine whether an individual is in business for him 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 him or herself:
- The nature and degree of control over the work.
- 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 factors are:
- The amount of skill required for the work.
- The degree of permanence of the working relationship between the worker and the potential employer.
- 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 final rule was published in the Federal Register on January 7, 2021.