U.S. Department of Labor Announces New Rule on Worker Classification

The rule, effective from March 11, 2024, aims to provide clarity on the classification of workers as either employees or independent contractors, rescinding the 2021 Independent Contractor Rule.

The U.S. Department of Labor has announced a final rule to help employers and workers better understand when a worker qualifies as an employee and when they may be considered an independent contractor under the Fair Labor Standards Act.
The new rule restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor.
The rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.
The rule separately rescinds the 2021 Independent Contractor Rule that the department believes is not consistent with the law and longstanding judicial precedent.
The final rule takes effect on March 11, 2024.