The Department of Labor Made Their Final Rule The Department of Labor Made Their Final Rule

The Department of Labor made their final rule earlier this month, January 9, on how to classify workers as employees or independent contractors. They concluded that the six factors determining a worker’s classification ought to be weighed equally, with no factor being considered more important to the classification (previously, factors one and four listed below carried greater weight):

1. The worker’s opportunity for profit or loss depending on managerial skill.
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.
5. The extent to which the work performed is integral to the employer’s business.
6. The worker’s skill and initiative.

The DOL sees this rule as a way to protect workers, since the ruling encourages flexibility in interpreting the factors that determine classification. They state that “[t]he misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections. This final rule will reduce the risk that employees are misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves.” Ogletree Deakins’ Wage and Hour Practice Group agree, writing that “[t]he 2024 rule reinforces the DOL’s pro-employee view of worker classification and may create classification complications for companies reliant on independent contractors as well as workers participating in the gig economy”.

Some writers disagree, however, and predict that the rule may actually have negative consequences for workers. Writers at employment and labor law office Jackson Lewis explain, for example, that the Fair Labor Standards Act “guarantees a minimum wage for all hours worked and overtime pay for any hours worked over 40 per week for all covered, non-exempt employees. Individuals who perform services for a company as an independent contractor are not afforded the FLSA’s minimum wage and overtime protections because they are not ‘employees.’” Jackson Lewis also writes that the new ruling will lead to an increase in misclassification lawsuits, which workplace news site SHRM builds on: “The new independent contractor rule […] could spark an increase in misclassification lawsuits and make businesses less likely to hire gig workers[…].”

The new rule will take effect on March 11, 2024. Because misclassifying a worker can lead to fines of up to $2500 per misclassified worker per instance, and even imprisonment, it’s important to check the changes made by the ruling (via www.laworks.net).

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