This week, the House Labor Committee heard testimony on the new federal rule regarding the classification of independent contractors. The U.S. Department of Labor (DOL) published the final rule on January 10, 2024, and it will take effect nationwide on March 11, 2024.
Key Points:
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- The Fair Labor Standards Act (FLSA) was first enacted into law in 1938.
- Under the FLSA, if a person is classified as an employee they are covered under the protections within the Act, such as minimum wage and overtime pay.
- It’s up to an employer to decide if a person is an employee or an independent contractor. Neither the DOL nor the State of Michigan would step in to classify a person unless a complaint is filed.
- The forthcoming change modifies the DOL’s test for deciding if a person is an employee or an independent contractor.
- The rule lays out six factors that should guide the assessment of classification, which are:
- Opportunity for profit or loss depending on managerial skill.
- Investments by the worker and the employer.
- Permanence of the work relationship.
- Nature and degree of control.
- Whether the work performed is integral to the employer’s business.
- Skill and initiative.
- The Federal rules are meant to be a floor and states can determine if they want to go above and beyond.
- According to testimony by the Michigan Department of Labor and Economic Opportunity, agencies use different tests, and that needs to change so that employees are classified in the same manner across state government.
Next Steps:
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- Barring any stays from the courts, the rule will go into effect on March 11.
- There is currently more than one legal challenge to the rule.
- Chairman Jim Haadsma (D-Battle Creek) said the committee is continuing to take a package, which includes worker classification, under advisement.
- The State of Michigan is working with DOL to put together webinars on the new rule.
For more information on the Fair Labor Standard Act, please click here.
To view the DOL’s fact sheet on classification under FLSA, please click here.
