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New Independent Contractor Rule Rolling Out Jan. 10, 2024; FLSA Overtime Rule Expected to be Published in April 2024.

Final Rule on Classifying Workers as Independent Contractors to be Published Tomorrow

 

A stiffer test from the United States Department of Labor (DOL) to determine whether an individual who provides services to an organization is an independent contractor or employee will take effect on March 11, 2024.  

 

The U.S. DOL announced today its final rule on independent contractors will be officially published tomorrow in the Federal Register.  The rule stems from the controversy over the status of Uber and Lyft drivers who were considered independent contractors by those companies.

 

The final rule rescinds a 2021 Trump-era simplified test which looked at two "core factors” in determining the status of independent contractors - control over the work and opportunity for profit or loss. The new rule revives the Obama era six-factor test that predated the Trump administration, in which no one factor carries greater weight.  The test analyzes:

 

1. The degree to which the employer controls how the work is done.

2. The worker’s opportunity for profit or loss.

3. The amount of skill and initiative required for the work.

4. The degree of permanence of the working relationship.

5. The worker’s investment in equipment or materials required for the task.

6. The extent to which the service rendered is an integral part of the employer’s business.

 

“Our clients should keep in mind that Connecticut has its own test, the ‘ABC test’ to determine whether an individual is an independent contractor. Employers should be cognizant of the fact that the law favors the employee classification,” states Attorney Padric F.S. Noonan.  He adds, “For companies that engage people as independent contractors, this would be the opportune time to re-examine whether the independent contractor test will be met.”

 

U.S. DOL’s Final Overtime Salary Test Coming in April 2024 - Minimum Salary May Increase by Nearly 41%

 

Over 3.6 million currently exempt salary employees will qualify for time and a half under the new final rules the United States Department of Labor is expected to issue in April. Under the new rules, the minimum salary required for a position to be exempt from overtime would increase by over 40% from the current $584 per week ($35,568 annually) to $1,059 per week ($55,068 annually).  The rule is set to take effect 60 days after being published in the Federal Register.  If the DOL meets its April deadline for finalizing the rule, this would mean an effective date in June 2024.

 

While the DOL often misses the deadlines it sets for itself in its regulatory agendas, employers should prepare for the possibility of the rule arriving on time this year. With the presidential and congressional elections less than a year away, the Biden administration is expected to push to finalize the rule as soon as possible. The rule, however, is expected to face legal challenges.

 

The following are steps that employers will need to consider for compliance if these new overtime regulations are approved:

 

·     Identify Impacted Employees.  Identify which employees are currently exempt from federal overtime regulations and have salaries under the proposed new threshold of $55,068 per year.

 

·     Consider a Base Pay Adjustment.  Of the affected employees identified above, organizations should decide whether to allow these workers to become non-exempt if the new rules go into effect or to preserve their exempt status through a pay raise. For example, if an employee makes just under the new threshold and works a significant amount of overtime hours, it may be most cost-effective to raise that employee’s salary to just above the minimum threshold to keep the person in an exempt status.

 

·     Implement Time Tracking and Training Soon.  For employees who are currently exempt but would become non-exempt if the new rules are adopted, organizations should begin to keep track of work hours to predict how much overtime may need to be paid. Organizations should prepare to enact changes in payroll and time tracking systems to ensure accurate overtime counting and payment.

 

·     Review Telework and Flex-time Policies.  For exempt salary employees who work remotely, employees will need to convert them to non-exempt employees and track their hours worked.

 

·     Calculate Potential Costs and Budget Impact.  If the new regulations are adopted, organizations should examine the impact of changing salary levels and overtime payments on yearly budgets and update these budgets accordingly.

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