DOL Revises Independent Contractor Rule – Change Takes Effect on March 8, 2021

On January 6, 2021, the U.S. Department of Labor issued a final rule revising its interpretation of independent contractor status under the Fair Labor Standards Act, 29 CFR Parts 780, 788, and 795.  This new rule is effective March 8, 2021, and provides that independent contractors are workers who as a matter of economic reality are in business for themselves as opposed to being economically dependent on an employer. 

The rule retains the economic reality test to determine whether an individual is dependent on an employer for work or is in business for himself.  However, the rule now categorizes two of the traditional five factors as "core factors" that carry greater weight in the analysis – (i) the nature and degree of the worker's control over the work and (ii) the worker's opportunity for profit or loss. 

The remaining three factors to be considered are:  (iii) the amount of skill required for the work, (iv) the degree of permanence of the working relationship between the worker and the potential employer, and (v) whether the work is part of an integrated unit of production. Other additional factors may be considered but will vary by case and will not likely outweigh the core factors.

The rule also allows employers to provide benefits for independent contractors without affecting their employment status if there are recognizable difference between an employer’s offered benefits plans for employees and independent contractors.

The Final Rule was published in the Federal Register on January 7, 2021, and can be accessed HERE.