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Department of Labor Announces Final Independent Contractor Rule

On Tuesday, January 9, 2024, the Labor Department announced a final rule making it more difficult for businesses to classify workers as independent contractors. The change officially eliminates a 2021 policy by the Trump administration and is intended to ensure that millions of workers, including those in the service sector, construction and health care, receive labor guarantees like a minimum wage, mandatory overtime and payroll tax contributions.  Under federal law such protections apply to employees, but are not automatically extended to those who work for themselves and contract with employers, a distinction that has taken on heightened salience with the rise of the gig economy.   The Biden administration has taken to imposing an “economic realities” test similar to the one under former President Obama that relies on a multi-factor, “totality-of-the-circumstances” approach in which each component is weighted equally when determining whether a worker is properly classified.  By contrast the Trump framework emphasized an individual’s “opportunity for profit” and degree of control over their work above other considerations, a position that the Biden administration believes fostered worker misclassification and business confusion while running counter to court precedent.

The final rule is due to be published in the federal Register shortly, before taking effect on March 11th, coming more than a year after its initial proposal in October 2022.