Labor Department Issues Independent Contractor Final Rule

The Biden Administration has finalized regulations governing independent contractor classification.

The Biden Administration’s Department of Labor (DOL) has finalized a rulemaking that revises the criteria for how workers are classified as independent contractors. The final rule, which was issued on January 9, largely mirrors the proposed rule and requires companies to weigh a variety of economic factors to determine whether a worker is an employee or an independent contractor.

The rulemaking rescinds and replaces a previous, more straightforward standard instituted by the Trump Administration, which NATSO supported. 

Under the new rule, employers are required to use a “totality-of-the-circumstances” analysis, in which all of the six new “factors” are weighed equally. 

The new standard includes the following factors that employers must consider: 

  • The degree to which the employer controls how the work is done;
  • The worker’s opportunity for profit or loss;
  • The amount of skill and initiative required for the work;
  • The degree of permanence of the working relationship;
  • The worker’s investment in equipment or materials required for the task; and
  • The extent to which the service rendered is an integral part of the employer’s business.

Under the federal Fair Labor Standards Act (FLSA), employees must receive minimum wage, overtime pay, and other benefits. Independent contractors, however, forgo some benefits in exchange for the ability to work for multiple companies and have more control over their schedules.

The rulemaking, which is already facing multiple lawsuits, will take effect on March 11.

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