Well, it took a while, but the U.S. Department of Labor has finally modified the “Final Rule” from January 2021, and returned to a “totality-of-the-circumstances” test.  While this is simply a rule and not a regulation passed by Congress, it is important for employers to be aware of the proposed change, as it guides enforcement of independent contractor rules under the Fair Labor Standards Act (“FLSA”).

For those who are not familiar with the “totality-of-the-circumstances” test, the test involves several factors to determine whether an individual performing work for a company is either an independent contractor or employee.  The final rule applies the following six factors to analyze employee or independent contractor status under the FLSA:

1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the potential employer;
3. Degree of permanence of the work relationship;
4. Nature and degree of control;
5. Extent to which the work performed is an integral part of the potential employer’s business; and
6. Skill and initiative.

An important change in DOL analysis, following the implementation of this rule, there will be additional emphasis on the “control” factor.  Control includes issues such as scheduling, supervision, price-setting, and the ability to work for others.  However, it is critical to understand that “control” is just one factor of six that the agency will consider, and that different factors might be more or less important in different cases depending on the facts of each case.  All factors need not be satisfied for a finding that an individual is an employee of an employer, and not an independent contractor.

In addition, under the final rule, additional factors may be considered by the investigating agency, if the factors indicate whether the person is in business for themselves instead of being dependent on the potential employer for work.

This change is taking place soon.  While we are all somewhat familiar with the rules involving independent contractor status, it is important to keep up with the ever-changing emphases of the DOL.  If you, or your organization need assistance with properly classifying your employees, contact Wiley Reber Law, for legal advice that works.