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On January 6, 2021, the Department of Labor (DOL) announced a final rule clarifying the standard for employee versus independent contractor status, meaning the business they perform work for does not have to pay them either minimum wage or overtime, according to the Fair Labor Standards Act (FLSA). The final rule will go into effect March 8th, 2021, which allows the incoming presidential administration a window in which to withdraw it.

The factors used to determine employee versus independent contractor status are the same factors as the DOL proposed in September. The rule identifies and explains the two “core factors” that are most important to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself. Those two factors are the control a person has over their own work, and the worker’s opportunity for profit or loss based on initiative and/or investment.

The final rule also identifies three other factors that may serve as additional guideposts in the analysis, for when the two core factors do not point to the same classification. Those 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, and whether the work is part of an integrated unit of production.

The rule does not affect workers' eligibility to unionize or protection from discrimination, which flow from other laws that the DOL doesn't administer. To read the full announcement, click here.

If you have questions about this development and how it might affect your organization, please contact Johnson & Bell Shareholders Genevieve M. LeFevour, Christopher J. Carlos or Brian C. Langs.