January 21, 2021

Volume XI, Number 21

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DOL Issues Final Rule on Independent Contractor Classification Test under the FLSA

In the last weeks of the Trump Administration, the Department of Labor (DOL) published its final rule for determining whether an individual is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The distinction between an employee and independent contractor is of critical importance because independent contractors are not entitled to the benefits of the FLSA, namely minimum wage and overtime.

In the Final Rule, the DOL determined that the appropriate test to be applied is the “economic realities” test. This test, as the DOL describes, “considers whether a worker is in business for himself or herself (independent contractor) or is instead economically dependent on an employer for work (employee).” In addition to the economic realities test, the DOL also outlined two “core factors” which it considers “are the most probative of whether workers are economically dependent on someone else’s business or in business for themselves.” These two core factors are “the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss based on initiative, investment, or both.”

The DOL also outlined three “less probative factors” that should also be considered. These are “the amount of skill required for the work, the degree of permanence of the working relationship between the individual and the potential employer, and whether the work is part of an integrated unit of production.”

While significant, the Final Rule may be short lived. The Final Rule is set to go in effect on March 8, 2021. The delay between the announcement of the Final Rule and its effective date will provide the Biden administration an opportunity to withdraw the Final Rule if it so chooses. Accordingly, employers should monitor whether the Final Rule becomes effective and, as always, ensure they are properly classifying their employees under the FLSA, as well as other federal and state laws.

 

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Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XI, Number 13
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About this Author

Gary Enis Associate Dallas Labor and Employment
Associate

As an associate in the firm’s labor and employment group, Gary assists clients with traditional labor issues and complex employment matters.

Gary focuses on complex labor and employment litigation involving employment discrimination lawsuits, collective actions, and trade secret and restrictive covenant matters. Gary also helps employers comply with federal, state and local labor and employment laws by advising on workplace policies and procedures. In addition, he participates in several of the firm’s pro bono projects. 

Relevant Experience

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214-979-2924
Alan Marcuis Employment Attorney Dallas Hunton AK
Partner

Alan represents management in complex labor and employment law matters, including contract, trade secret and post-employment restrictive covenants, EEO litigation, collective bargaining and labor relations.

At Hunton Andrews Kurth LLP, Alan serves as co-head of the Unfair Competition & Information Task Force and Hiring Partner for the firm’s Texas offices. He is a contributing author to the the firm’s Employment & Labor Perspectives blog.

Alan is admitted to practice in the...

214 979 3060 direct
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