Something else actually happened in Washington on Wednesday, January 6, 2021, besides the riots at the Capitol and electoral college vote acceptance. USDOL issued a final regulation on worker classification for FLSA minimum wage and overtime requirements. The rule describes an “economic realities” test for whether a service provider is an employee or an independent contractor of the purchaser of the work. Two major factors are key: the worker’s (1) freedom from control and (2) opportunity for profit or loss as a result of personal investment. Only if these two factors do not weigh in favor of independent contractor status does the analysis require reference to three other issues: (1) skill level, (2) permanence of the relationship, and (3) integration to the service consumer’s operations. The new regulation also permits providing some benefits without employee status. Lockstep plan participation with employees is not consistent with independent contractor status, but receiving contribution towards independently maintained medical or retirement plan can be.
The final rule was issued after an unusually short public comment period and will not be effective until March 8, giving the Biden Administration the opportunity to withdraw it.