Employer Alert: U.S. Department of Labor Finalizes Independent Contractor Regulations

On January 6, 2020, the U.S. Department of Labor (DOL) provided its final rule for determining whether a worker is an employee or independent contractor. The final rule is similar to the proposed rule the DOL published in September 2020.

The final rule includes an “economic reality” test to determine a worker’s economic independence or dependence upon an employer. While the new parameters are similar to the guidance currently being used by courts and the DOL, the final rule provides five distinctive factors, rather than the previous overlapping factors.

The five distinctive factors are as follows:
• The nature and degree of control over the work.
• The worker’s opportunity for profit or loss based on initiative and/or investment.
• The amount of skill required for the work.
• The degree of permanence of the working relationship between the worker and the potential employer.
• Whether the work is part of an integrated unit of production.

The first two factors above – nature and degree of control over work and opportunity for profit or loss – are considered to be the “core” factors and are more important than the other factors in the classification of a worker. The final rule also provides that the actual practice of a worker and an employer is more relevant to a worker’s classification than language included in a contract. For additional guidance, the DOL also provides specific examples for applying the factors.

The final rule can be found here.

If the incoming Biden administration agrees, the final rule is scheduled to take effect on March 8, 2021.

We will keep you notified if there are any changes to the rule or proposed effective date. In the meantime, if you have questions about the proposed rule, please contact Matthew R. Plain or Rita E. Nerney at 401.273.7171.

Barton Gilman’s employment law team provides comprehensive legal guidance to a wide variety of employers on all aspects of the employment cycle—from hiring through separation—including personnel policies and handbooks, non-compete agreements, and representation before state and federal courts and agencies. To learn more, please visit www.bglaw.com/services/labor-employment/.