There has long been concern that workers have been improperly classified as independent contractors to avoid required pay minimums, insurance benefits, overtime pay, and other employment-based protections. Earlier this month, the Department of Labor (DOL) issued Employee or Independent Contractor Classification Under the Fair Labor Standards Act (FSLA). This new guidance relies on the economic reality test supported by various reality factors. These include worker opportunity for profit or loss, nature, and degree of control over the work, permanency of the work relationship, and more. Other factors may be considered when determining economic dependence on the employer. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
It is a test that examines multiple factors to determine if an employment relationship exists under the FLSA. The purpose is to determine whether a worker is economically dependent on an employer or is instead in business for themselves. The test does not consider a single factor but rather evaluates the relationship by a totality of factors. There are six primary areas of consideration including opportunity for loss or profit, investments made by both the worker and employer, permanence of the relationship, nature, and degree of control, whether the work performed is integral to the company, and skill and initiative.
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While the final rule is not effective until March 24, 2024, it is important to become familiar with the new framework and the various economic reality factors. It may be necessary to consult a qualified advisor who can guide you through the process. If you have questions about the information outlined above or need assistance with a tax or audit issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.
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