DOL Releases Final Rule for Determining Contractor Status

Earlier this week, the DOL finalized its ruling on determining employee or independent contractor status under the Fair Labor Standards Act (FLSA). The DOL put out the proposed ruling back in October, and the final ruling mainly follows the proposed regulations. The new regulations will mainly analyze independent contractor status on a “totality-of-the-circumstances” basis, which is a return to how the DOL analyzed these cased pre-2021.

Under the new regulations, the DOL will now consider six factors to help determine employee or independent contractor status. No single factor is weighed more than another, and thus the totality-of-the-circumstances approach mentioned above. The six factors are:

1. Opportunities for profit or loss based on managerial skill
2. Investments by the worker and potential employer
3. Degree of permanence of the relationship
4. Nature and degree of control
5. Extent to which the work performed is an integral part of the potential employer’s business
6. Skill and initiative

Over the last 3-4 years, this has been an issue that’s garnered a lot of attention with the past two Presidential Administrations changing interpretations as to what an independent contractor is. For transportation companies that utilize independent contractors, it’s recommended that they analyze the new ruling, current contracts and operations, and discuss with their attorney. It is widely anticipated that business groups will challenge the DOL’s authority to issue this regulation as the new ruling is perceived to be more strict than the pre-2021 ruling.

The final ruling takes effect March 11, 2024. You can find the press release here and the Federal Register notice here.