© 2024 American Payroll Institute, Inc.
February 2, 2024 Volume 32 Issue 2
DOL Issues Final FLSA Worker Classification Rule
The U.S. Department of Labor (DOL) issued a final rule
that modifies how to determine whether a worker is
an employee or an independent contractor under the Fair
Labor Standards Act (FLSA) [89 F.R. 1638, 1-10-24]. The DOL
states that “economic dependence is the ultimate inquiry,
meaning that a worker is an independent contractor as
opposed to an employee under the [FLSA] if the worker is, as
a matter of economic reality, in business for themself.”
The final rule, which adopts the proposed rule with a few
modifications, will be effective March 11. The final rule also
formally rescinds the 2021 rule (86 F.R. 1168, 1-7-21).
The final rule
The final rule sets forth an analysis for determining
employee or independent contractor status under the FLSA
“that is more consistent with existing judicial precedent and
the [DOL]’s longstanding guidance” prior to the 2021 rule.
The final rule:
• Adopts a totality-of-the-circumstances analysis of the
economic reality test rather than using “core factors.” The
analysis focuses on whether each factor shows the worker is
economically dependent upon the employer for work versus
being in business for themselves. The final rule states the
factors should guide the assessment of the economic realities
of the working relationship, and not one factor or subset of
factors should be conclusive.
• Declines to adopt “an ABC test.” Although many states
use a form of the ABC test for classification, the DOL said it
“continues to believe that an ABC test would be inconsistent
with Supreme Court and federal appellate precedent
interpreting and applying the FLSA.”
• Includes examples for each of the six economic reality
factors (see “DOL Creates Examples for New FLSA Worker
Classification Rule” in this issue).
• Returns the consideration of investment to a
standalone factor by focusing on whether the worker’s
investment is capital or entrepreneurial in nature. It also
considers the worker’s investments on a relative basis with the
employer’s investment. The worker’s investments need not
be equal to the potential employer’s investments and should
not be compared only in terms of the investments’ dollar
values or the sizes of the worker and the potential employer.
Instead, the DOL said the focus should be on comparing the
investments to determine whether the worker is making
DOL Issues Final FLSA Worker Classification Rule.......................... 1
DOL, IRS Issue Guidance on New Emergency Savings
Accounts................................................................................................. 3
Three States, Virgin Islands May Face Credit Reduction
for 2024................................................................................................... 4
Student Loan Garnishments Remain Canceled Through
September. ............................................................................................5
Proposed Bill Would Change 1099 Threshold, End ERC Early. ...5
IRS Commissioner Briefs Senate Finance Committee on ERC
Program................................................................................................. 6
IRS Posts Reminder on SECURE 2.0 Changes Affecting 2023
Forms W-2.............................................................................................. 6
IRS Releases Updated 2024 Form W-2 With Minor Change. ......7
USCIS Announces E-Verify+ Will Be Available Soon. .....................7
DOL Creates Examples for New FLSA Worker Classification
Rule. .........................................................................................................7
IRS Releases Revised Application for EIN and Instructions.......... 8
IRS Updates Form for Employers to Request an Agent................. 9
DOL Announces Annual Adjustments for FLSA, FMLA
Violations............................................................................................... 9
DOJ Releases Fact Sheet to Help Employers Avoid Form I-9
Violations............................................................................................... 9
Learn More About Compliance at PAYO’s Capital Summit in
March....................................................................................................10
USCIS Reminds Staffing Agencies When to Create E-Verify
Cases......................................................................................................11
IRS Reminds Employers Not to Fall for Phishing Scams. ............11
National Taxpayer Advocate Releases Annual Report to
Congress...............................................................................................11
IRS Issues Letter on Worker Classification Basics. .........................13
Wage and Hour Roundup..................................................................... 14
State and Local Highlights............................................................. 15
PAYO Supports Wisconsin Garnishment Legislation............ 17
PayrollOrg Testifies in Washington on Earned Wage Access
Bills. .............................................................................................17
PayrollOrg Contacts D.C. Council on Artificial
Intelligence. ................................................................................18
February 2, 2024 Volume 32 Issue 2
DOL Issues Final FLSA Worker Classification Rule
The U.S. Department of Labor (DOL) issued a final rule
that modifies how to determine whether a worker is
an employee or an independent contractor under the Fair
Labor Standards Act (FLSA) [89 F.R. 1638, 1-10-24]. The DOL
states that “economic dependence is the ultimate inquiry,
meaning that a worker is an independent contractor as
opposed to an employee under the [FLSA] if the worker is, as
a matter of economic reality, in business for themself.”
The final rule, which adopts the proposed rule with a few
modifications, will be effective March 11. The final rule also
formally rescinds the 2021 rule (86 F.R. 1168, 1-7-21).
The final rule
The final rule sets forth an analysis for determining
employee or independent contractor status under the FLSA
“that is more consistent with existing judicial precedent and
the [DOL]’s longstanding guidance” prior to the 2021 rule.
The final rule:
• Adopts a totality-of-the-circumstances analysis of the
economic reality test rather than using “core factors.” The
analysis focuses on whether each factor shows the worker is
economically dependent upon the employer for work versus
being in business for themselves. The final rule states the
factors should guide the assessment of the economic realities
of the working relationship, and not one factor or subset of
factors should be conclusive.
• Declines to adopt “an ABC test.” Although many states
use a form of the ABC test for classification, the DOL said it
“continues to believe that an ABC test would be inconsistent
with Supreme Court and federal appellate precedent
interpreting and applying the FLSA.”
• Includes examples for each of the six economic reality
factors (see “DOL Creates Examples for New FLSA Worker
Classification Rule” in this issue).
• Returns the consideration of investment to a
standalone factor by focusing on whether the worker’s
investment is capital or entrepreneurial in nature. It also
considers the worker’s investments on a relative basis with the
employer’s investment. The worker’s investments need not
be equal to the potential employer’s investments and should
not be compared only in terms of the investments’ dollar
values or the sizes of the worker and the potential employer.
Instead, the DOL said the focus should be on comparing the
investments to determine whether the worker is making
DOL Issues Final FLSA Worker Classification Rule.......................... 1
DOL, IRS Issue Guidance on New Emergency Savings
Accounts................................................................................................. 3
Three States, Virgin Islands May Face Credit Reduction
for 2024................................................................................................... 4
Student Loan Garnishments Remain Canceled Through
September. ............................................................................................5
Proposed Bill Would Change 1099 Threshold, End ERC Early. ...5
IRS Commissioner Briefs Senate Finance Committee on ERC
Program................................................................................................. 6
IRS Posts Reminder on SECURE 2.0 Changes Affecting 2023
Forms W-2.............................................................................................. 6
IRS Releases Updated 2024 Form W-2 With Minor Change. ......7
USCIS Announces E-Verify+ Will Be Available Soon. .....................7
DOL Creates Examples for New FLSA Worker Classification
Rule. .........................................................................................................7
IRS Releases Revised Application for EIN and Instructions.......... 8
IRS Updates Form for Employers to Request an Agent................. 9
DOL Announces Annual Adjustments for FLSA, FMLA
Violations............................................................................................... 9
DOJ Releases Fact Sheet to Help Employers Avoid Form I-9
Violations............................................................................................... 9
Learn More About Compliance at PAYO’s Capital Summit in
March....................................................................................................10
USCIS Reminds Staffing Agencies When to Create E-Verify
Cases......................................................................................................11
IRS Reminds Employers Not to Fall for Phishing Scams. ............11
National Taxpayer Advocate Releases Annual Report to
Congress...............................................................................................11
IRS Issues Letter on Worker Classification Basics. .........................13
Wage and Hour Roundup..................................................................... 14
State and Local Highlights............................................................. 15
PAYO Supports Wisconsin Garnishment Legislation............ 17
PayrollOrg Testifies in Washington on Earned Wage Access
Bills. .............................................................................................17
PayrollOrg Contacts D.C. Council on Artificial
Intelligence. ................................................................................18
