Wages of Independent Workers Could Be Impacted by New Law — 6 Changes Coming in March 2024
Written by
Yaël Bizouati-Kennedy
Edited by
Ashleigh Ray
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The gig economy has been amplified since the pandemic, as independent workers represent 45% of the U.S. workforce, according to an MBO Partners report.
And now, a new Department of Labor (DOL) rule, coming into effect on March 11, 2024, will affect wages of these workers, as it is “revising the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA),” according to the Department.
The DOL also added that the misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections.
“Misclassification is a problem that affects many low-paid industries like construction, transportation, home health care,” Sally Dworak-Fisher, senior staff attorney at NELP, told CNBC. But “people in every occupation at all types of pay levels” can be vulnerable to it, Samantha Sanders, director of government affairs and advocacy at the Economic Policy Institute, told CNBC.
The DOL’s new rule applies the following six factors to analyze employee or independent contractor status under the FLSA:
1. Opportunity for profit or loss depending on managerial skill.
As a legal alert by the Law Offices Snell & Wilmer explained, this factor assesses whether a worker can increase profits through their efforts and negotiations with the potential employer.
2. Investments by the worker and the potential employer.
According to the DOL, this factor considers whether any investments by a worker are capital or entrepreneurial in nature.
“Costs to a worker of tools and equipment to perform a specific job, costs of workers’ labor, and costs that the potential employer imposes unilaterally on the worker, for example, are not evidence of capital or entrepreneurial investment and indicate employee status,” it said.
3. Degree of permanence of the work relationship.
This factor weighs in favor of the worker being an employee when the work relationship is “indefinite in duration, continuous, or exclusive of work for other employers.”
On the other hand, this factor weighs in favor of the worker being an independent contractor when the work relationship is “definite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple entities,” according to the DOL.
4. Nature and degree of control.
As CNBC explained, this factor looks at the employer’s ability to supervise the work, their ability to set the worker’s schedule, their ability to limit the worker’s freedom to work for others, etc.
“If the employer has a high degree of control, the worker might be considered an employee,” CNBC noted.
5. The extent to which the work performed is an integral part of the potential employer’s business.
For this factor, NELP gave CNBC the examples of “a janitor working for a janitorial business, a tomato picker working for a farm, and a food delivery worker working for an app-based delivery company” as workers doing the “central work of the employer’s business.”
6. Skill and initiative.
Under this factor, the more specialized the worker’s skills, the more likely they are to be an independent contractor, according to the Snell & Wilmer legal alert.
According to CNBC, the updated rule will mostly affect workers paid less than the federal minimum wage of $7.25 per hour, or $10.88 per hour in overtime pay when they work more than 40 hours per week.
In order to benefit from the rule change, “you must be both a covered employee (and not an independent contractor running your own business, which is what the guidance speaks to) and be denied the wages guaranteed by the law,” says Dworak-Fisher.
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