Department of Labor Finalizes Independent Contractor Classification Rule: “Economic Reality” Test Provides More Predictability as to When Workers Would Be Considered Employees or Independent Contractors, But the Biden Transition Team Has Announced Plans to “Potentially Freeze” the Rule Before it Takes Effect

Sullivan & Cromwell LLP - January 13, 2021

On January 7, 2021, the U.S. Department of Labor published a final rule (the “Final Rule”) establishing a new test for classifying a worker as an employee or an independent contractor under the Fair Labor Standards Act.  Two factors, “the nature and degree of control over the work” and “the individual’s opportunity for profit or loss,” carry the most weight under the rule.  Although the Final Rule is scheduled to take effect on March 8, 2021, the Biden transition team has announced plans to “potentially freeze” the rule prior to that date.

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