Independent Contractor vs. Employee: The final rule clarifying the standards for each takes effect on March 8, 2021. Here’s what you need to know.

In the final rule, the Department reaffirms an “economic reality” test to determine whether an individual is in business for themself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee).

Two “core factors” considered are:

 
• The nature and degree of control over the work.
 
• The worker’s opportunity for profit or loss based on initiative and/or investment.

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Three additional factors that serve as additional guideposts in determining the appropriate classification 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.

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Important note: The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.

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Click here for six fact-specific examples provided in the ruling.

For the full ruling, click here.