DOL Issues Final Rule on Classifying Workers Under the FLSA

The Department of Labor (DOL) has issued a final rule under the Fair Labor Standards Act (FLSA) to clarify the distinction between employees and independent contractors. The rule aims to enhance employers’ and workers’ understanding of the distinction and reduce employee misclassification.

This issue affects workers’ eligibility for minimum wage and overtime pay, can create an unfair competitive advantage, and generates broader adverse effects on the economy. Acting Secretary of Labor Julie Su emphasizes the rule’s role in protecting workers and ensuring proper classification.

The Final rule seeks consistency for entities covered by the FLSA. The guidance aligns with established judicial precedent and reinstates a multifactor analysis, considering factors such as profit opportunity, financial investment, work permanence, employer control, essentiality of the work, and worker skill.

The new rule rescinds the 2021 Independent Contractor Rule, which was deemed inconsistent with the law. Stakeholder feedback from the 2022 forums and the October 2022 comment period informed the development of the rule. It becomes effective on March 11, 2024.