ATTENTION HEALTH CARE PROVIDERS: U.S. Department of Labor Revises the Independent Contractor Classification Rule

On January 9, 2024, the Wage and Hour Division of the U.S. Department of Labor (“USDOL”) issued a Final Rule modifying the applicable regulations to replace its previous analysis for determining employee and independent contractor classification under the Fair Labor Standards Act (FLSA). The regulation, 89 FR 1638, better known as “Employee or Independent Contractor Classification Under the Fair Labor Standards Act” addresses how to determine a worker’s appropriate classification considering the entirety of the employment relationship. The new Final Rule overturns the USDOL’s previous 2021 iteration of the Independent Contractor Rule.

The USDOL’s final rule contains a six-factor test to determine proper classification under the FLSA:

(1) an employee’s opportunity for profit or loss;

(2) the investments made by the employee and the potential employee;

(3) the degree of permanence of the working relationship;

(4) the degree of control the employer has over the employee’s work;

(5) the extent to which work performed is integral to the employer’s business; and

(6) the use of the employee’s skill and initiative.

No single factor is assigned a predetermined weight, rather, each factor is analyzed independently. This analysis signals the USDOL’s return to the totality-of-the-circumstances test of economic reality in light of the entire employment relationship. According to the USDOL, the ultimate inquiry is governed by the economic dependence, or lack thereof, in the employment relationship.

The architects of the rule believe it will provide greater clarity and consistency for employers in determining a worker’s proper classification under the FLSA. The rule is scheduled to take effect on March 11, 2024; however, be advised that the regulation has been challenged in federal court.

If you have any questions regarding the newly issued regulations, please contact David R. Ross, Esq., Shareholder, at (518) 312-0167 or via e-mail at dross@oalaw.com. Colin D. Green, Law Clerk, assisted in the writing of this article.

The regulation can be found at https://www.federalregister.gov/documents/2024/01/10/2024-00067/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act.