Department of Labor Updates Employee Classifications

Today, March 11, 2024, a new Department of Labor rule regarding the classification of workers as “employees” or “independent contractors” becomes effective. The new rule eliminates the prior rule’s emphasis on a company’s control of the contractor’s work and the worker’s opportunity for profit or loss. Going forward, the DOL’s classification analysis will not emphasize any single factor, but will instead employ an amorphous, non-exhaustive, “totality of the circumstances” test in determining whether an “independent contractor” is actually an employee. While the current rule is currently being challenged in the United States District Court for the Eastern District of Texas, employers, small business owners, employees, and contractors alike should be aware of the rule change, and should understand its implications and risks.