Understanding the US Department of Labor's latest classification rule

The US Department of Labor asserts that the aim of the new rule is to preserve workers' fundamental rights

On January 9, 2024, the US Department of Labor announced a new rule amending guidelines to determine employee or independent contractor classification under the Fair Labor Standards Act (FLSA). The new rule took effect today, March 11. However, efforts are underway to overturn it.

Last week, lawmakers in the House of Representatives and the Senate introduced resolutions aimed at halting the rule and reverting to previous regulations. However, the resolution must be approved to enact the change, so for now, the new rule stands.

The new Department of Labor rule considers six factors for worker classification:

Opportunity for profit or loss based on management.
Worker and employer investments.
Permanence of the work relationship.
Nature and degree of control.
Integration of the work into the employer’s activity.
Worker’s capacity and initiative.

Understanding the new rule

The Owner-Operator Independent Drivers Association (OOIDA) sent an update to its members to clarify the effects of the new rule. OOIDA emphasized that the new rule does not adopt the ABC Test or California’s AB5, simplifying contractor classification for truckers. The rule underscores that no single factor is decisive, and classifications are made on a case-by-case basis.

The US Department of Labor asserts that the aim of the new rule is to preserve workers’ fundamental rights and provide consistency to entities regulated by the Fair Labor Standards Act. It stresses that misclassifying employees as independent contractors can lead to denial of fundamental rights such as minimum wage, overtime pay, and other labor protections, supporting the implementation of the new rule. Therefore, it established a FAQ page to help explain the new rule, preventing further misunderstandings.