The U.S. Department of Labor has published a final rule on how to classify who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). The new rule goes into effect on March 11, 2024 and considers six factors instead of the standard two that had been used in the past.
The six factors, which are all considered equally in looking at the economic reality of the whole activity are:
- Opportunity for profit or loss depending on managerial skill;
- Investment by the worker and the employer;
- Permanence of the work relationship;
- Nature and degree of control;
- Whether the performed is integral to the employer’s business, and;
- Skill and initiative.
Keep in mind that state labor departments may also have their own rules as well as the Federal rules for determining proper classification between independent contractor and employee.
New York State Department of Labor looks at several factors, which include the following:
- Supervision;
- Direction, and;
- Control on the performance of their duties.
Misclassification of workers as independent contractors can create significant liability risks at both the federal and state level.
For additional information on the U.S. DOL rule, including FAQs, visit: https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking.
For additional information on NYS DOL rules, visit: https://dol.ny.gov/independent-contractors.
Please feel free to reach out with any questions at info@bspcpa.com.