Understanding the New Department of Labor Independent Contractor Rule

The US Department of Labor announced that a final rule clarifying standards for employees versus independent contractors under the Fair Labor Standards Act (FLSA) became effective on March 8, 2021.

If you have followed the news over the last few years, then you have undoubtedly noticed a continual battle between the classification of workers as independent contractors or as employees. California has perhaps received the most publicity concerning this type of classification, as the state passed a law that tightened requirements about who could actually be considered an independent contractor. However, last year, the people of California passed a ballot initiative effectively making it much easier for companies to use independent contractors instead of making workers employees. The issue of independent contractor classification is a target enforcement issue for the federal and state wage and hour agencies.

Here, we want to discuss new federal rules under 29 CFR Parts 780, 788, and 795, as well as what you can do if you are confused about how this can affect hiring employees in the Pittsburgh area or throughout Pennsylvania.

What does the new rule state?

According to the Department of Labor, the final rule changes accomplish the following:

• Reaffirm that the “economic reality” test will be used to determine whether an individual is in business for him, her, or themselves as an independent contractor or are economically dependent on a potential employer for work (making him, her, them an employee under FLSA guidelines).
• Identify and explain the two “core factors” related to the question of whether a worker is economically dependent on an employer or self-employed:
  • The nature and degree of worker control over assignments
  • The worker’s opportunity for profit and loss based on his, her, their initiative, and/or investment of time
• Identify three other factors that could serve as additional guidelines in an analysis over independent contracting versus employment, particularly if the first two factors mentioned above do not point to a clear classification:
  • The amount of skill required for the work
  • The degree of permanence in the relationship between the worker and potential employer
  • Whether or not the work is part of an integrated unit of production of the employer
• Explain that the actual work conducted between the “employee” and the potential employer is more relevant than what the contract defines.

These new and final rules were published in the Federal Register on January 7, 2021.

Call a Pennsylvania employment law attorney today

If you are a public or private employer in or around the Pittsburgh area, or anywhere in Pennsylvania, and you have questions regarding federal standards surrounding using an independent contractor versus an employee, you need to seek legal assistance. Employment lawyer Neva Stotler has extensive experience handling these issues and will be able to help you properly identify your employment needs. Attorney Stotler will examine your current employee or contractor situation and determine whether or not you are properly classifying your workers. N. Stotler Law is standing by to help you in these situations. You can contact us for a consultation of your case by clicking here or calling 724-841-5565.