Independent contractor rule released

Posted January 8, 2021

The final rule published Thursday, Jan. 7, in the Federal Register by the U.S. Department of Labor with regard to "Employee or Independent Contractor Classification" uses an "economic reality" test to determine a worker's status.

It is currrently scheduled to become effective March 8, 2021.

Click here to read the ruling.

The final rule considers whether a worker is in business for himself or herself (independent contractor) or is instead economically dependent on an employer for work (employee).

It identifies two “core factors”:

• The nature and degree of the worker's control over the work.
• The worker's opportunity for profit or loss based on initiative, investment or both.

The Department of Labor says it is emphasizing these factors "because they are the most probative of whether workers are economically dependent on someone else's business or are in business for themselves."

Three additional factors also were identified, though they are less probative than the core factors:

• The amount of skill required for the work.
• The degree of permanence of the working relationship between the individual and the potential employer.
• Whether the work is part of an integrated unit of production.

A legal update published by Seyfarth Shaw says that it remains to be seen whether President-Elect Joe Biden’s administration will permit the final rule to take effect, whether it could be rejected under the Congressional Review Act and whether certain state attorneys general might seek an injunction against the rule.

In addition, Seyfarth notes that "the independent contractor standard under other federal laws and some state laws also need to be considered for compliance. Nonetheless, the DOL’s new rule provides clearer guidance for companies on independent contractor classification under the FLSA."

Comments filed by Seyfarth partners Camille Olson and Rich Lapp on behalf of business, human resource and other organizations (including the Coalition for Workforce Innovation and the U.S. Chamber of Commerce) are referenced 54 times throughout the final rule. CWI’s comments are cited 23 times. America's Newspapers is a member of CWI.

Olson, who serves on the America's Newspapers board of directors, noted that newspaper newsroom relationships with freelancers are cited as indicative of the independence of the worker on the last two pages. 

Olson explained: "The final rule is a balanced approach and a modern interpretation of the economic realities test for independent contractor status under the federal wage and hour law.  Recall that under 213(d) of the FLSA, newspapers also have a specific exemption from the FLSA’s obligations to pay minimum wage, overtime and recordkeeping for newspaper carriers who deliver newspapers or shoppers to the ultimate consumer. That exemption is also incorporated into some state wage and hour laws."