DOL Issues Final Rule on Employee or Independent Contractor Classification Under the Fair Labor Standards Act

The U.S. Department of Labor (DOL) issued a final rule replacing its analysis for determining employee or independent contractor classification under the Fair Labor Standards Act (FLSA) with an analysis that is more consistent with judicial precedent, text and purpose. The final rule will help employers and workers better understand when a worker qualifies as an employee and when they may be considered an independent contractor under the FLSA.

The final rule:

• Provides guidance on how to determine whether a worker is properly classified as an employee or independent contractor under the FLSA to combat employee misclassification.
• Defines the term “independent contractor” as workers who, as a matter of economic reality, are not economically dependent on an employer for work and are in business for themselves. Determining whether an employment relationship exists under the FLSA begins with the definition.      
  

• Preserves essential worker rights and provide consistency for entities covered by the FLSA.
• Rescinds the 2021 Independent Contractor Rule.

In addition to the final rule, the DOL's Wage and Hour Division released Fact Sheet 13: Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FLSA) providing general information on how to determine if a worker is an employee or independent contractor under the FLSA.

The final rule is effective March 11, 2024.

News release