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What the Department of Labor’s Proposed Change to FLSA Means for Classifying Independent Contractors

Posted on January 25th, 2021 Read time: 2 minutes

FLSA Document

For decades, employers have struggled to determine which workers they may qualify as independent contractors versus which must be hired as employees. With the burgeoning gig economy further blurring the line between these categories, this struggle has only grown more acute over the past few years.

And until recently, the Department of Labor has lacked clear worker classification guidelines. As a result, many state legislatures have taken it upon themselves to create their own independent contractor status tests to decide when workers may be classified as independent contractors. This has created a patchwork of competing legislation that companies now have to navigate if they want to avoid worker classification issues and stay on the right side of the law.

However, some of this friction and uncertainty could soon cease — if the DOL’s recently proposed rule change to the Fair Labor Standards Act goes into effect. This new DOL rule is the first true attempt to offer federal guidelines for determining independent contractor status in the U.S. It could potentially provide guidance to a fractured regulatory environment and ease some of the headaches currently associated with engaging talent.

However, the new DOL rule also has the potential to create a lot of confusion for companies that aren’t paying attention. If your organization relies on independent contractors to get work done, you must start looking at this proposed rule change now. Although it provides more clarity at the federal level, you’ll need to consider state laws as well in order to steer clear of worker classification issues.


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This guest-contributed article was written by: Tania Fiero, Vice President of Human Resources

Tania Fiero is the vice president of human resources at Innovative Employee Solutions (IES), a leading global Employer of Record in more than 150 countries that specializes in contingent workforce solutions such as outsourced payrolling, independent contractor compliance, and contractor management services. Founded in 1974, IES has grown into one of San Diego’s largest women-owned businesses and has been named one of the city’s “Best Places to Work” for 10 years in a row.

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