Skip to Main Content
Filter By +
Topic +

Department of Labor Redefines ‘Independent Contractor’ Under FLSA

2 Minutes to Read

Topics covered


    A new FLSA rule will rescind a 2021 rule that redefined the meaning of “independent contractor.” Effective March 11, the rule is expected to grant rights and protections to millions of gig workers and other individuals in the service industry.

    The information in this blog post refers to a final rule published by the U.S. Department of Labor’s Wage and Hour Division on Jan. 10. Visit the agency’s website for more information.

    How does the Department of Labor’s new rule affect independent contractors?

    Effective March 11, the Department of Labor will rescind the 2021 independent contractor rule under the Fair Labor Standards Act (FLSA).

    The 2021 rule clarifies when a worker qualifies as an employee, directly addressing a problem that potentially kept millions of gig workers and other individuals from:

    • minimum wage
    • overtime pay
    • protection against wage theft
    • other employee rights

    Instead, this “new” rule effectively restores a preexisting procedure in which courts analyzed six factors that determined a worker’s relationship with their employer. The Department of Labor identifies those factors as:

    1. the worker’s opportunity for profit or loss
    2. the worker’s own investment (e.g., a vehicle or personal funds)
    3. the expected duration of employment
    4. the control an employer has over the worker’s output
    5. if the work is essential to business operations
    6. the worker’s skills and qualifications

    The revised legislation is expected to fundamentally change how ride-sharing, food delivery and other businesses in the service industry manage and compensate their workforces.

    Where does the FLSA rule go from here?

    With the March 11 effective date on the horizon, MSN reports that the legislation likely will face a volley of legal challenges.

    While the rule disrupts preexisting models for businesses that relied on the 2021 definition of an independent contractor, it also aims to improve the quality of life for workers in the affected industries.

    We will provide more information as it becomes available. Explore Paycom’s resources for more insight on compliance and other HR topics.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.