On January 9, 2024, the U.S. Department of Labor (“DOL”) announced the issuance of the final rule, Employee or Independent Contractor Classification under the Fair Labor Standards Act (“FLSA”). According to the DOL, the 339-page final rule and guidance will reduce the risk that employees are misclassified as independent contractors, applies to workers in any industry, and provides greater consistency for businesses to engage with individuals who are in business for themselves.

Under the final rule, the DOL will rely on the “economic reality” test, consistent with the long-standing multi-factor analysis used by courts, to determine whether, as a matter of economic reality, workers are in business for themselves, or economically dependent on the hiring party for work. The final rule applies six factors to analyze employee or independent contractor status under the FLSA:

• opportunity for profit or loss depending on managerial skill;
• investments by the worker and the potential employer;
• degree of permanence of the work relationship;
• nature and degree of control;
• extent to which the work performed is an integral part of the potential employer’s business; and
• skill and initiative.

The final rule provides extensive guidance and examples as to each factor. It is important to note that no single factor or set of factors has a predetermined weight or conclusively determines whether a worker is an employee or an independent contractor. Moreover, additional factors may be relevant if...

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