United States of America: Adopted Employee or Independent Contractor Classification Under the Fair Labor Standards Act

On 9 January 2024, the Department of Labor (DOL) adopted its final Rule on Employee or Independent Contractor Classification Under the Fair Labor Standards Act, which would rescind the 2021 Rule. In its final version of the Rule, the DOL confirms the new framework that uses the "economic reality test", taking a "totality of circumstances" approach to assessing the worker's status and classifying a worker as an independent contractor or employee. The test is based on six factors: the workers' opportunity for profit or loss, investments by the two parties, the degree of permanence of the relationship, the nature and degree of the control exerted over the worker, and the worker's skill or initiative. The final rule clarifies that only potential employers' control of workers beyond specific legal requirements will be considered for the test. Additionally, it specifies the implementation of criteria such as relative investments and equipment acquisition, as well as workers' incentivisation to work more based on hourly compensation. Finally, in the final rule, it is clarified that specialised skill only indicates independent contractor status if it is connected with initiative. The Rule is set to be implemented on 11 March 2024, 60 days after its publication in the Federal Register, which is scheduled for 10 January 2024.