DOL Publishes Final Rule on Classifying Independent Contractors

The U.S. Department of Labor on Jan. 7, 2021, issued its final version of a lengthy Fair Labor Standards Act (FLSA) rule on distinguishing independent contractors from employees. The rule was published for comment last September, and it takes effect this coming March.

An introductory section of the rule explains that it should be read as guidance on how to apply and weight the five main factors of the economic realities test for classifying someone as an independent contractor. Those factors are the

  1. Nature and degree of the individual’s control over the work,
  2. Opportunity for profit or loss,
  3. Skill required,
  4. Permanence of the working relationship, and
  5. Integrated unit.

No one factor should be considered dispositive, the rule states, but the first two should receive the greatest consideration. For instance, evidence of self-employment will remain the primary justification for classifying someone as an independent contractor.

DOL drafted the new rule to apply across all industries. One thing this means for government agencies is that they will no longer need to use separate guidance for classifying forestry specialists.

As a final consideration, HR Dive quoted a DOL spokesperson saying that this federal guidance only applies where the FLSA is the primary law regarding worker classification. “Certain state and local laws that touch on the issue still apply,” the online magazine writes. “One such law is California’s Assembly Bill No. 5, or AB-5, which implemented a test analysts said would expand the number of workers that could be classified as employees.”

In other compensation news, a Dec. 31, 2020, opinion letter from DOL’s Wage & Hour Division states that an employer does not need pay an employee for commuting time when “an employee who chooses to telework for part of the day and work at the office for part of the day, [has] sufficient time to perform certain personal tasks in between.”

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