January 06, 2021

DOL Issues Final Rule on Independent Contractor Classification

On January 6th, the U.S. Department of Labor (DOL) announced the final rule clarifying what factors employers should consider when trying to determine if a worker is an employee or an independent contractor (IC).

The two primary or “core” factors are: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment.

Then, there are three secondary factors or “guideposts” to be considered: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the worker and the potential employer; and (3) whether the work is part of an integrated unit of production.

Further guidance may be needed to answer a variety of questions. The core factors will “typically” be given greater weight than the latter three, but what is an atypical scenario?  If the two core factors indicate the same status, may or must the guideposts also be considered? The regulations read that “additional factors” may be relevant in making this determination; what are they?

The final rule was published January 7th and will take effect March 8, 2021. In the interim, will the new Administration rescind the rule?  Will the DOL issue FAQ’s or other interpretive guidance for employers?  Stay tuned!

Want more information?  Check out FiveL Company’s January 27th webcast, “Don’t Play with My Pay...” where we will review this new rule in more detail plus lots more wage and hour updates!