U.S. Department of Labor Issues New Final Rule For Independent Contractor Test

U.S. DEPARTMENT OF LABOR ISSUES NEW FINAL RULE FOR INDEPENDENT CONTRACTOR TEST

On January 9, 2024, the United States Department of Labor (DOL) issued a new final rule affecting the test employers must utilize to determine whether a worker is an employee versus an independent contractor. This determination is significant because employees, but not independent contractors, are entitled to minimum wage and overtime pay, if applicable. Previously, the U.S. DOL utilized a 2021 rule in which "control" and "opportunity for profit or loss" were the primary factors. The new test reverts to a six-factor test relied upon prior to 2021, in which no one factor is more important than any other.

In considering the totality of circumstances, employers must now once again consider: (1) the degree to which it controls how work is performed; (2) the worker's opportunity for profit or loss; (3) the amount of skill and initiative required for the work to be performed; (4) the degree of permanence of the working relationship; (5) the worker's investment in equipment or materials required to perform the work; and (6) the extent to which the service rendered is integral to the employer's business. In issuing the rule, the U.S. DOL seeks to provide guidance on proper classification, an area that has come under greater scrutiny in recent years. The new rule is set to go into effect on March 11, 2024. Employers who currently employ independent contractors should reconsider worker classifications, factoring in the six-pronged test, in advance of this deadline.

For further questions or assistance regarding worker classification, please contact Rachel Bossard (312-840-7029) or Alex Marks (312-840-7022).