Do you have independent contractors working at your organization?
Is your organization utilizing independent contractors? If the answer is yes, then you should pay close attention to the latest developments:
The Department of Labor's Wage and Hour Division has officially unveiled the final rule on worker classification today, titled "Employee or Independent Contractor Classification Under the Fair Labor Standards Act," set to become effective on March 11.
This rule has been introduced to bring clarity to the distinction between employees and independent contractors under the Fair Labor Standards Act (FLSA). It replaces the 2021 Independent Contractor Rule, which focused on "core factors" for assessing employment relationships. The updated rule takes into account various factors equally, including:
Opportunity for Profit or Loss Depending on Managerial Skill: Evaluates whether a worker can gain or lose income based on their ability to effectively manage their work, including judgment and business skills.
Investments by the Worker and the Employer: Considers whether the worker or employer has made financial or resource investments resembling business or traditional employment.
Degree of Permanence of the Work Relationship: Assesses the duration of the working relationship, determining if it is short-term or ongoing.
Nature and Degree of Control: Examines whether the potential employer dictates the worker's schedule, directly oversees task execution, or imposes restrictions on working for other employers.
Extent to Which the Work Performed Is an Integral Part of the Employer’s Business: Considers if the tasks performed are crucial to the overall functioning of the business.
Skill and Initiative: Examines whether the worker utilizes specialized skills resembling business management rather than just fulfilling a job.
Additional Factors: Takes into account other unlisted factors relevant to indicating whether the worker operates independently or is economically reliant on the potential employer.
When new things like this arise, as employers, you need to be aware there is heightened potential for audit. Want to talk this through with me? I'm here to help.
