Legal Analysts

Tuesday, January 16, 2024

Fed DOL Implements Multifactor Analysis for Worker Classification as Employee v. Independent Contractor

The Department of Labor (DOL) announced that on March 11, 2024, a new rule, 89 FR 1638, will go into effect restoring the multifactor analysis used by courts for decades in determining if an individual is an employee or Independent Contractor (IC) under the Fair Labor Standards Act (FLSA). 

Misclassifying workers as ICs rather than employees can result in wage claims with liquidated damages and attorneys' fees under the FLSA, which can be catastrophic for business to continue to exist. Simply, you have to get it right and ICs that are misclassified have excellent cases because liquidated damages are two (2) times the amount not received. 

This new rule is being announced because DOL had concerns about the 2021 IC Rule where it did not fully align with the FLSA's text and purpose. 

The six factors under the New Rule are:

  1. Opportunity for profit or loss
  2. Financial stake and nature of resources invested in the work
  3. Degree of permanence of the work relationship
  4. Degree of control the employer has over the person’s work
  5. Whether the work is essential to the employer’s business
  6. Worker’s skill and initiative

This new rule provides a consistent approach for conducting business with ICs and employes. 

You can read the Department of Labor's release on this new law here. You can read the final rule here