DOL clarifies independent contractor status test with final rule Email
Written by Colorado Green NOW   
Tuesday, January 12, 2021 02:00 AM

Colorado Green Now

The US Department of Labor (DOL) has published to the federal register a final rule, to be effective March 8, 2021, which attempts to clarify the standard for determining independent contractor status vs. employee status. The rule was developed with gig economy workers in mind but could have an effect beyond those jobs.

From the DOL announcement: 

In the final rule, the Department: 

  • Reaffirms an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee). 
  • Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself: 
  • The nature and degree of control over the work. 
  • The worker’s opportunity for profit or loss based on initiative and/or investment. 
  • Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are: 
  • 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 actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible. 
  • Provides six fact-specific examples applying the factors. 

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