Employers: New Rule for Worker Classification Under FLSA

On January 9, 2024, the Wage and Hour Division of the United States Department of Labor announced a new rule pertaining to classifying a worker as either an employee or independent contractor under the Fair Labor Standards Act. The rule goes into effect March 11, 2024.

The new rule rescinds the 2021 Independent Contractor Rule and focuses on six factors which must be analyzed, with no one factor allocated more weight than any others. The six factors are:

1. The opportunity for profit or loss;
2. The financial stake and nature of any resources a worker has invested in the work;
3. The degree of permanence of the work relationship;
4. The degree of control an employer has over the person’s work;
5. The extent to which the work the person does is essential to the employer’s business; and
6. The worker’s skill and initiative.

The rule also stated that additional outside factors may be considered if those factors indicate a worker is in business for themselves rather than being economically dependent on an employer.

Higher Standard in California

The rule does not adopt the much stricter “ABC” test in California. The rule only revises the DOL’s guidance on how to analyze who is an employee or independent contractor under the FLSA. Here is a link to the California Labor and Workforce Development Agency discussing California’s ABC test. 

As always, employers should contact defense counsel with any questions pertaining to federal or California rules regarding classification of employees. Or read our previous blog regarding the state’s ABC test are here. 

Sue M. Bendavid and Joshua S. Stein are employment defense attorneys.