On January 9, 2024, the U.S. Department of Labor unveiled the final details of the Independent Contractor test, which scrutinizes the classification of workers by companies.
This examination has been a subject of considerable discourse since the rejection of the last proposed rule by the Trump administration, now replaced by the current DOL's new regulation set to be effective on March 11, 2024.
The Independent Contractor rule delves into the "economic realities of the working relationship," assessing whether a worker is economically dependent on the company or operates as an independent business entity. The examination hinges on the "totality of the circumstances" and encompasses six key factors:
Opportunity for profit or loss contingent on managerial skill.
Investments made by both the worker and the company.
Duration and permanence of the work relationship.
Nature and degree of control over the worker, inclusive of technological means, supervisory rights, and imposed time constraints.
Extent to which the work performed is integral to the company's core operations.
Evaluation of the worker's skill and initiative, distinguishing between specialized skills brought to the job and those acquired through company training.
It is crucial to note that while these six factors are identified by the DOL, no single factor holds predetermined weight. Additionally, the DOL suggests that other "additional factors" may be relevant if indicative of the worker's entrepreneurial status.
In anticipation of the effective date, the DOL has thoughtfully provided a set of FAQs to assist businesses in navigating the intricacies of the rule, available at https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking/faqs. For tailored guidance based on specific business circumstances, it is advisable for businesses to seek professional counsel, such as consulting with an attorney at East West General Counsel.