On Tuesday, January 9, 2024, the Department of Labor (“DOL”) announced its final rule on independent contractors under the Fair Labor Standards Act (“FLSA”). This final rule will be important to entities, including construction, where the line between employee and independent contractor is often at issue. Under the Final Rule, which largely tracks the rule as proposed in October 2022, DOL will consider six non-exhaustive factors to determine whether a worker should be treated as an employee versus a contractor, including

1. The worker’s opportunity for profit or loss. 
2. Investments made by the worker and the employer. 
3. The degree of permanence of the work relationship. 
4. The nature and degree of the employer’s control over the worker’s performance of the work. 
5. The extent to which the work performed is integral to the employer’s business.
6. The use of the worker’s skill and initiative. 

The factors set forth above are not a bright-line test. Instead, as noted by Jessica Looman, administrator of DOL’s Wage and Hour Division, “[i]t provides fact-based analysis that does need to be applied in each circumstance to determine whether a worker is an employee or independent contractor in business for themselves.” Thus, employers will need to consider the fact-specific nature of each independent contractor relationship to determine whether a worker is actually an employee. Employers in industries that routinely work with independent contractors need to be mindful of this new rule and should review their policies and procedures to ensure they are maintaining appropriate guardrails to avoid being found to have misclassified a worker as an independent contractor, which carries significant fines and penalties. 

The Final Rule will be published in the Federal Register on January 10, 2024, and is slated to take effect on March 11, 2024.  In addition, the DOL is rescinding the independent contractor final rule put in place in 2021 during the Trump administration. Legal challenges to this rescission, which the Biden administration previously attempted to rescind in May 2021 but was blocked by a federal court, are anticipated.