Scholars evaluate the consequences of worker misclassification.
Minimum wage and overtime. These rights are afforded to every employee in the United States, but not to every worker.
Under the Fair Labor Standards Act (FLSA), whether a worker is classified as an employee or an independent contractor determines access to the statute’s core protections. The FLSA entitles employees to federal minimum wage and overtime pay, along with recordkeeping and anti-retaliation safeguards.
Independent contractors, by contrast, fall outside the FLSA’s coverage. As a result, the classification dictates whether a worker can bring a claim for unpaid minimum wage or overtime. The distinction also carries other consequences: Workers treated as contractors typically do not receive employer-provided benefits and are excluded from federal collective bargaining protections.
Given the importance of the classification, how does a worker know if they are an employee or an independent contractor? A 2024 rule by the Department of Labor (DOL) seeks to answer this question.
The rule—issued through the DOL’s Wage and Hour Division—replaced a 2021 rule with an approach that assesses the “economic reality” of the worker’s situation. The rule considers the totality of the circumstances, flagging six factors in particular.
These factors include: a worker’s opportunity for profit or loss; investment by the worker and employer; the work relationship’s degree of permanence; the extent of control the employer...
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