The issue of misclassifying employees as independent contractors has been widely debated in the U.S. and has been subject to different regulations.

In 2020, the Department published the so-called Joint Employer Rule, mainly based on the 'economic reality' test to determine whether a worker is in business for himself (an independent contractor) or economically dependent on the employer for work (an employee) for purposes of the FLSA. 

Subsequently, as we previously reported, in 2021, it announced a final rule to rescind the previous one, withdrawing rules on the classification of workers based on “economic reality”.

It was based on a multi-factor test to determine whether a worker was economically dependent on an employer, especially the nature and degree of control over the work, and the individual’s opportunity for profit and loss.

Now, the last new final rule rescinds it and introduces a six-factor test for the classification of workers, which also takes into account the parameters used in the decision of judicial precedents: 

1. opportunity for gain or loss depending on managerial skill
2. investment by the worker and the prospective employer 
3. degree of permanence of the employment relationship
4. nature and degree of control
5. the extent to which the work performed is integral to the prospective employer's business and 
6. skill and initiative

An analysis of the totality of circumstances and 'economic realities' is thus reinstated to determine worker status.

In applying this, workers are more likely to be classified as employees under the FLSA.

It is, therefore, crucial to keep these criteria in mind when conducting the relationship to avoid disputes over determining employee status.

However, it is essential to clarify that the rule is not binding for courts and does not directly affect the classification of independent contractors for purposes of state employment laws, but only for classification under the FLSA.