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U.S. Department of Labor: Final Rule on Independent Contractor Status Under the Fair Labor Standards Act

March 9, 2021

UPDATED: The U.S. Department of Labor Wage and Hour Division has announced that the final rule on independent contractor status' effective date is delayed until May 7, 2021 “to allow the Department to review issues of law, policy, and fact raised by the rule before it takes effect.” 

On January 6, 2021, the U.S. Department of Labor finalized its rule concerning the classification of workers as employees or independent contractors under the Fair Labor Standards Act (FLSA), which is scheduled to be published on January 7, 2021. This rule will be effective 60 days after the publication, on March 8, 2021.

The finalized rule does the following:

Core Factors

Weight in favor independent contractor status

Weight in favor employee status

The nature and degree of control over the work. 

The individual exercises substantial control over key aspects of the performance of work (e.g., setting schedule, selecting projects, being able to work for others). 

The potential employer exercises substantial control over key aspects of the work, such as controlling the individual’s schedule or workload and or requiring the individual to work exclusively for the potential employer. 

However, requiring the individual to comply with specific legal obligations, satisfy health and safety standards, carry insurance, meet contractually agreed-upon deadlines or quality control standards, or satisfy other similar terms typical of business relationship (as opposed to employment relationships) does not constitute control for the purposes of employee classification.

The individual’s opportunity for profit or loss.

The individual can earn profits or incur losses with his or her exercise of initiative (e.g., managerial skill or business acumen or judgment) or management of his or her investment or capital expenditure.

The individual is unable to affect his or her earnings or is only able to do so by working more hours or faster.

Other Factors

Weight in favor independent contractor status

Weight in favor employee status

The amount of skill required for the work

The work at issue requires specialized training or skill that the potential employer does not provide.

The work at issue requires no specialized training or skill and/or the individual is dependent upon the potential employer to equip him or her with any skills or training necessary to perform the job.

The degree of performance of the working relationship between the individual and the potential employer

The work relationship is by design definite in duration or sporadic, which may include regularly occurring fixed periods of work, but the seasonal nature of work by itself would not indicate independent contractor classification.

The work relationship is by design indefinite in duration or continuous.

Whether the work is part of an integrated unit of production

The individual’s work is segregable from the potential employer’s production process.

The individual’s work is a component of the potential employer’s integrated production process for a good or service.

If you have questions about this new Department of Labor rule, please contact your Miller Canfield attorney or any of the authors of this alert