The U.S. Department of Labor (DOL) has released a final rule that will revise the federal framework for determining whether a worker is an employee or an independent contractor. The new standard is important because the FLSA’s minimum wage and overtime pay protections do not apply to independent contractors, and many observers expect the new rule to result in significantly more workers being classified as employees rather than independent contractors. The new rule becomes effective on March 11, 2024.

The rule, which was proposed in October 2022, rescinds the 2021 Independent Contractor Status implemented by the Trump Administration in which two core factors – control over the work and opportunity for profit or loss – carried greater weight in classifying workers as independent contractors versus employees under the Fair Labor Standards Act (FLSA).

The new rule restores a “totality-of-the-circumstances” analysis using six factors that do not have a predetermined weight. Those factors now include the amount of skill required in the work, the degree of permanence of the working relationship, the worker's investment in equipment or materials required for the task, and the extent to which the service rendered is an integral part of the employer's business.

NLBMDA submitted extensive comments to the DOL on the Independent Contractor rule and is working with federal lawmakers to advance legislation that would reign in the DOL’s authority under the FLSA. Members with questions should contact NLBMDA at MemberSupport@Dealer.org.