On Jan. 6, 2021, the U.S. Department of Labor (DOL) issued a final rule that clarifies how to determine whether a worker is an employee who is protected under the Fair Labor Standards Act (FLSA) or an independent contractor who is exempt from it. The final rule becomes effective March 8, 2021.
“Economic Reality” Test Reaffirmed
The final rule reaffirms an existing test under which an employer must consider whether, as a matter of economic reality, a particular worker is dependent on that employer, as opposed to being in business for him- or herself. Two “core factors” that are most significant in this analysis are:
Other relevant factors to consider, particularly when the two above do not point to the same classification, include:
For these analyses, the final rule emphasizes that actual practices are more relevant than what may be contractually or theoretically possible.
The FLSA requires employers to meet wage, workhour and recordkeeping requirements for each of their employees. If a worker meets the standards for independent contractor status, those requirements would not apply. Employers should become familiar with the new final rule.
Source – Zywave, Inc.