A Final Rule was recently issued by the U.S. Department of Labor, Wage and Hour Division clarifying the status between an employee verses independent contractor under the Fair Labor Standards Act (FLSA). This rule will be effective March 8, 2021.
The Rule reaffirmed the “economic reality” test, which seeks to determine whether the individual is able to procure work for themselves (i.e., an independent contractor), or is the individual dependent on an employer to provide the work (i.e., an employee). The Rule clarifies that two major factors should be considered in the analysis:
- The nature and degree of control over the work,
- The worker’s opportunity for profit or loss based on initiative and/or investment.
Beyond these two core considerations, three additional factors may be used to further clarify the analysis:
- 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 Final Rule further specifies that the “actual practice of the parties involved is more relevant than what may be contractually or theoretically possible”. Further details can be found with the following link