The U.S. Department of Labor announced a final rule to clarify independent contractor status under the fair labor standards act. In this January 2021 ruling, the department is setting the standard to determine whether a person is an employee or an independent contractor. Attention has been given the employee vs independent contractor issue over the years as some would argue individuals (independent contractors) are seeking entrepreneurial freedom. Others might say employers are trying to avoid paying benefits and taxes to individuals calling an employee an independent contractor.
The Trump administration had been putting finishing touches on the rule in the final days of its tenure. However, will it remain intact during the Biden administration? The ruling is contentious because it’s likely to have an impact on labor relations, pay scales and benefits for workers.
The Final Rule includes clarifications in several areas:
Under the Final Rule, these two factors are the main pillars of thought. If two of the factors are met, then the individual will be classified as either an employee or independent contractor. There are three other factors that may serve as guideposts in trying to determine a classification, especially when the two core factors are not met:
It is no secret the Biden administration had earmarked the Final Rule as one it would likely freeze when he took office. The rule may also face legal challenges from labor unions, so will the law take effect March 8, 2021? That remains to be seen, however, it does provide some guidance in a complex area.
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