DOL Issues New Guidance on Employee or Independent Contractor Classification

On January 10, 2024, the U.S. Department of Labor announced a final rule that offers guidance for employers to classify a worker as an employee or independent contractor under the Fair Labor Standards Act (FLSA). The final rule will take effect on March 11, 2024.

The Six Factors of the Economic Reality Test

To determine whether a worker is an employee or independent contractor under the FLSA, the final rule considers the following six factors:

1. Opportunity for profit or loss depending on managerial skill;

2. Investments by the worker and the potential employer;

3. Degree of permanence of the work relationship;

4. Nature and degree of control;

5. Extent to which the work performed is an integral part of the potential employer’s business; and

6. Skill and initiative.

According to the DOL, "No one factor or subset of factors determines if a worker is an employee or independent contractor. Rather, all the circumstances of the relationship should be examined."

More Information

To learn more about the final rule and the six factors of the Economic Reality Test, view the DOL Small Entity Compliance Guide.

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