DOL Issues Final Independent Contractor Rule
What this means for your organization
The Department of Labor (DOL) recently issued a long-awaited final rule clarifying the standard for determining employee versus independent contractor status under the Fair Labor Standards Act (FLSA). Because the FLSA only applies to employees and not independent contractors, the determination is extremely important for any organization utilizing independent contractors.
The final rule is largely aimed at simplifying the determination; first by reaffirming the long-held “economic reality test” and second by emphasizing two “core principles” needed for the determination. The effective date of the final rule is March 8, 2021, but may be delayed until later by the DOL.
For years, federal courts have applied a so-called economic reality test, as well as other analysis, to determine if an individual performing work on behalf of a business, or other entity, is an employee. The test generally has focused on the extent of control the organization holds over the worker and whether he or she is dependent upon the business for the opportunity to render services or can do so independently.
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