US Department of Labor introduces new labor classification regulation

Controversies surrounding the determination of employee or independent contractor status.

On January 9, 2024, the U.S. Department of Labor announced a new regulation modifying guidelines for determining the classification of employees or independent contractors under the Fair Labor Standards Act (FLSA). This regulation, effective from March 11, 2024, aims to establish a more consistent analysis with the FLSA based on the interpretation of long-standing judicial precedents.

The Department of Labor emphasizes that misclassifying employees as independent contractors can lead to the denial of fundamental rights such as minimum wage, overtime pay, and other labor protections. These reasons support the implementation of the new regulation.

However, the new regulation has faced strong criticism from the American Trucking Association. In a statement, Chris Spear, the association’s CEO, expressed disagreement, considering this government restriction contrary to American principles. He contends that the flexibility and economic opportunities provided by the choice to work as a contractor have been crucial for empowering minorities and immigrants, enabling them to manage their own business and choose their schedules and routes.

Spear concludes the statement by emphasizing that the American Trucking Association will seek support and solidarity from Congress members and other stakeholders to eliminate the Department of Labor’s established regulation.

Acting Secretary of Labor Julie Su addresses the regulation from a different perspective. She points out that misclassifying employees as independent contractors is a serious problem, depriving workers of essential rights and protections. Su states that the new regulation aims to protect workers, especially those at greater risk of exploitation, by ensuring proper classification and fair payment of wages.

The regulation considers six key factors in analyzing the relationship between a worker and an employer: the opportunity for the worker’s profit or loss, financial involvement and resources invested in the work, the duration of the employment relationship, the employer’s control over the work, the essentiality of the work to the employer’s business, and aspects related to the worker’s skill and initiative.

According to a statement from the Department of Labor, the new regulation’s goal is to preserve fundamental rights for workers and provide coherence to entities regulated by the Fair Labor Standards Act. It ensures that all relevant factors will be considered to determine whether a worker should be classified as an employee or an independent contractor.