The U.S. Department of Labor issued a new rule in 2024 that significantly narrows the definition of who qualifies as an independent contractor under the Fair Labor Standards Act (FLSA).

What’s Changed:

• Emphasis is now placed on the “economic reality” test, looking at whether workers are economically dependent on the employer.
• Many gig workers and freelancers may now be reclassified as employees.

Implications for Employers:

• Increased exposure to wage, hour, and benefits liability.
• Risk of back pay, overtime claims, and employment tax audits.

Best Practices:

• Audit current contractor arrangements.
• Shift borderline roles into employee status where appropriate.
• Update contracts and clearly define work relationships.

Bottom Line:
Misclassification risks are higher than ever—don’t wait for an audit or lawsuit to take action.

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