New Independent Contractor Rule in Effect

The U.S. Department of Labor's (DOL) new worker classification rule went into effect as of March 11, 2024.  This rule rescinds the 2021 independent contractor rule (ICR) put in place by the prior administration. 

This final rule differs from the 2021 ICR and is aligned with the approach taken by federal courts in a number of ways. The 2024 rule:

• Returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight;

• Considers six factors (instead of five), including the investments made by the worker and the potential employer;

• Provides additional analysis of the control factor, including a detailed discussion of how scheduling, supervision, price-setting, and the ability to work for others should be considered when analyzing the nature and degree of control over a worker;

• Returns to the Department’s longstanding consideration of whether the work is integral to the employer’s business (rather than whether it is exclusively part of an “integrated unit of production”);

• Provides additional context to some factors, including a discussion of exclusivity in the context of the permanency factor and initiative in the context of the skill factor; and

• Omits a provision from the 2021 Independent Contractor Rule which minimized the relevance of an employer’s reserved but unexercised rights to control a worker.

 Six Factors

Employers should carefully consider the six factors and related guidance in the final rule using a “totality of the circumstances” assessment to classify their workers. Since the 2021 rule has been rescinded, its two “core factors” (control and opportunity for profit or loss) are no longer conclusive.  Employers should analyze and apply final rule factors to current workers, since an independent contractor could now be reclassified as an employee.

Because the final rule essentially narrows the universe of independent contractors, this could impact music retailers’ use of teachers and instrument repair personnel.  In addition, depending on the circumstances, certain “gig workers” in the music industry could be affected. Businesses and individuals working as independent contractors should seek legal advice or assistance from a human resources professional to ensure compliance under the final rule. 

Efforts to Overturn the Rule

Members of Congress in both the House  and Senate  have introduced resolutions to stop the rule and return to the previous 2021 ICR, but it is important to note that the DOL final rule is in effect and must be followed.