1638 Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 / Rules and Regulations 

1 29 U.S.C. 202. 2 29 U.S.C. 203(d), (e)(1), (g). 

3 86 FR 1168. The Office of the Federal Register 

did not amend the Code of Federal Regulations 

(CFR) to include the regulations from the 2021 IC 

Rule because, as explained elsewhere in this 

section, the Department first delayed and then 

withdrew the 2021 IC Rule before it became 

effective. A district court decision later vacated the 

Department’s rules to delay and withdraw the 2021 

IC Rule, and the Department has (since that 

decision) conducted enforcement in accordance 

with that decision while the 2021 IC Rule has been 

in effect. 

4 Id. at 1246–47 (§ 795.105(d)). 

5 Id. at 1246 (§ 795.105(c)). 

6 Id. at 1247 (§ 795.105(d)(2)). 

7 Id. at 1246 (§ 795.105(c)). 

DEPARTMENT OF LABOR 

Wage and Hour Division 

29 CFR Parts 780, 788, and 795 

RIN 1235–AA43 

Employee or Independent Contractor 

Classification Under the Fair Labor 

Standards Act 

AGENCY: Wage and Hour Division, 

Department of Labor. 

ACTION: Final rule. 

SUMMARY: The U.S. Department of Labor 

(the Department) is modifying Wage and 

Hour Division regulations to replace its 

analysis for determining employee or 

independent contractor classification 

under the Fair Labor Standards Act 

(FLSA or Act) with an analysis that is 

more consistent with judicial precedent 

and the Act’s text and purpose. 

DATES: This final rule is effective on 

March 11, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Amy DeBisschop, Division of 

Regulations, Legislation, and 

Interpretation, Wage and Hour Division 

(WHD), U.S. Department of Labor, Room 

S–3502, 200 Constitution Avenue NW, 

Washington, DC 20210; telephone: (202) 

693–0406 (this is not a toll-free 

number). Alternative formats are 

available upon request by calling 1– 

866–487–9243. If you are deaf, hard of 

hearing, or have a speech disability, 

please dial 7–1–1 to access 

telecommunications relay services. 

Questions of interpretation and/or 

enforcement of the agency’s regulations 

may be directed to the nearest WHD 

district office. Locate the nearest office 

by calling WHD’s toll-free help line at 

(866) 4US–WAGE ((866) 487–9243) 

between 8 a.m. and 5 p.m. in your local 

time zone, or logging onto WHD’s 

website for a nationwide listing of WHD 

district and area offices at https://

www.dol.gov/whd/america2.htm. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

This final rule addresses how to 

determine whether a worker is properly 

classified as an employee or 

independent contractor under the Fair 

Labor Standards Act (FLSA or Act). 

Congress enacted the FLSA in 1938 to 

eliminate ‘‘labor conditions detrimental 

to the maintenance of the minimum 

standard of living necessary for health, 

efficiency, and general well-being of 

workers.’’ 1 To this end, the FLSA 

generally requires covered employers to 

pay nonexempt employees at least the 

Federal minimum wage for all hours 

worked and at least one and one-half 

times the employee’s regular rate of pay 

for every hour worked over 40 in a 

workweek. The Act also requires 

covered employers to maintain certain 

records regarding employees and 

prohibits retaliation against employees 

who are discharged or discriminated 

against after, for example, filing a 

complaint regarding their pay. However, 

the FLSA’s protections do not apply to 

independent contractors. 

As used in this rule, the term 

‘‘independent contractor’’ refers to 

workers who, as a matter of economic 

reality, are not economically dependent 

on an employer for work and are in 

business for themselves. Such workers 

play an important role in the economy 

and are commonly referred to by 

different names, including independent 

contractor, self-employed, and 

freelancer. This rule is not intended to 

disrupt the businesses of independent 

contractors who are, as a matter of 

economic reality, in business for 

themselves. 

Determining whether an employment 

relationship exists under the FLSA 

begins with the Act’s definitions. 

Although the FLSA does not define the 

term ‘‘independent contractor,’’ it 

contains expansive definitions of 

‘‘employer,’’ ‘‘employee,’’ and 

‘‘employ.’’ ‘‘Employer’’ is defined to 

‘‘include[ ] any person acting directly or 

indirectly in the interest of an employer 

in relation to an employee,’’ 

‘‘employee’’ is defined as ‘‘any 

individual employed by an employer,’’ 

and ‘‘employ’’ is defined to ‘‘include[ ] 

to suffer or permit to work.’’ 2 As 

detailed below, courts have developed 

an analysis that recognizes that 

independent contractors are not 

encompassed within these definitions. 

Since the 1940s, the Department and 

courts have applied an economic reality 

test to determine whether a worker is an 

employee or an independent contractor 

under the FLSA, grounded in the Act’s 

broad understanding of employment. 

The ultimate inquiry is whether, as a 

matter of economic reality, the worker is 

economically dependent on the 

employer for work (and is thus an 

employee) or is in business for themself 

(and is thus an independent contractor). 

In assessing economic dependence, 

courts and the Department have 

historically conducted a totality-of-thecircumstances analysis, considering 

multiple factors to determine whether a 

worker is an employee or an 

independent contractor, with no factor 

or factors having predetermined weight. 

There is significant and widespread 

uniformity among federal courts of 

appeals in the adoption and application 

of the economic reality test, although 

there is slight variation as to the number 

of factors considered or how the factors 

are framed. These factors generally 

include the opportunity for profit or 

loss, investment, permanency, control, 

whether the work is an integral part of 

the employer’s business, and skill and 

initiative. 

In January 2021, the Department 

published a rule titled ‘‘Independent 

Contractor Status Under the Fair Labor 

Standards Act’’ (2021 IC Rule), 

providing guidance on the classification 

of independent contractors under the 

FLSA applicable to workers and 

businesses in any industry.3 The 2021 

IC Rule marked a departure from the 

consistent, longstanding adoption and 

application of the economic reality test 

by courts and the Department of how to 

determine whether a worker is an 

employee or an independent contractor 

under the FLSA. It identified five 

economic reality factors to guide the 

inquiry into a worker’s status as an 

employee or independent contractor.4

Two of the five identified factors—the 

nature and degree of control over the 

work and the worker’s opportunity for 

profit or loss—were designated as ‘‘core 

factors’’ that were the most probative 

and carried greater weight in the 

analysis. The 2021 IC Rule stated that if 

these two core factors pointed towards 

the same classification, there was a 

substantial likelihood that it was the 

worker’s accurate classification.5 The 

2021 IC Rule also identified three less 

probative non-core factors: the amount 

of skill required for the work, the degree 

of permanence of the working 

relationship between the worker and the 

potential employer, and whether the 

work is part of an integrated unit of 

production.6 The 2021 IC Rule stated 

that it was ‘‘highly unlikely’’ that these 

three non-core factors could outweigh 

the combined probative value of the two 

core factors.7 The 2021 IC Rule also 


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8 Id. at 1246–47 (§ 795.105(d)(1) and (d)(2)(iii)). 9 Id. at 1247–48 (§ 795.110). 10See Coal. for Workforce Innovation v. Walsh, 

No. 1:21–CV–130, 2022 WL 1073346 (E.D. Tex. Mar. 

14, 2022), appeal filed, No. 22–40316 (5th Cir. May 

13, 2022) (‘‘CWI v. Walsh’’). 

11 87 FR 62218. 12 87 FR 64749. 

limited consideration of investment and 

initiative to the opportunity for profit or 

loss factor in a way that narrowed, in at 

least some circumstances, the extent to 

which investment and initiative are 

considered. The facts to be considered 

under other factors (such as control) 

were also narrowed, and the factor that 

considers whether the work is integral 

to the employer’s business was limited 

to whether the work was part of an 

integrated unit of production.8 Finally, 

the 2021 IC Rule provided that the 

actual practice of the parties involved 

was more relevant than what may be 

contractually or theoretically possible.9

The effective date of the 2021 IC Rule 

was March 8, 2021. On March 4, 2021, 

the Department published a rule 

delaying the effective date of the 2021 

IC Rule (Delay Rule) and on May 6, 

2021, it published a rule withdrawing 

the 2021 IC Rule (Withdrawal Rule). On 

March 14, 2022, in a lawsuit challenging 

the Department’s delay and withdrawal 

of the 2021 IC Rule, a Federal district 

court in the Eastern District of Texas 

issued a decision vacating the Delay and 

Withdrawal Rules.10 The district court 

concluded that the 2021 IC Rule became 

effective on the original effective date of 

March 8, 2021. 

On October 13, 2022, the Department 

published a Notice of Proposed 

Rulemaking (NPRM) regarding 

employee or independent contractor 

classification under the FLSA, 

proposing to rescind and replace the 

2021 IC Rule.11 The Department 

explained in its proposal that upon 

further consideration, the Department 

believed that the 2021 IC Rule did not 

fully comport with the FLSA’s text and 

purpose as interpreted by courts and 

departed from decades of case law 

applying the economic reality test. The 

NPRM identified provisions of the 2021 

IC Rule that were in tension with this 

case law—such as designating two ‘‘core 

factors’’ as most probative and 

predetermining that they carry greater 

weight in the analysis, considering 

investment and initiative only in the 

opportunity for profit or loss factor, and 

excluding consideration of whether the 

work performed is central or important 

to the employer’s business. The NPRM 

stated that these provisions narrowed 

the economic reality test by limiting the 

facts that may be considered as part of 

the test, facts which the Department 

believes are relevant in determining 

whether a worker is economically 

dependent on the employer for work or 

in business for themself. 

After careful consideration, the 

Department decided it was appropriate 

to move forward with a proposed 

rescission of the 2021 IC Rule and a 

replacement regulation. As explained in 

the NPRM, the Department believed that 

retaining the 2021 IC Rule would have 

a confusing and disruptive effect on 

workers and businesses alike due to its 

departure from case law describing and 

applying the multifactor economic 

reality test as a totality-of-thecircumstances test. Further, because the 

2021 IC Rule departed from legal 

precedent, it was not clear whether 

courts would adopt its analysis—a 

question that could take years of 

appellate litigation in different federal 

courts of appeals to sort out, resulting in 

more uncertainty as to the applicable 

test. The Department also explained in 

the NPRM that it believed the 2021 IC 

Rule’s departure from the longstanding 

test applied by the courts could result 

in greater confusion among employers 

in applying the new analysis, which 

could place workers at greater risk of 

misclassification as independent 

contractors due to the new analysis 

being applied improperly, and thus 

could negatively affect both the workers 

and competing businesses that correctly 

classify their employees. 

The initial deadline for interested 

parties to submit comments on the 

NPRM was November 28, 2022. In 

response to requests for an extension of 

the time period for filing written 

comments, the Department lengthened 

the comment period an additional 15 

days to December 13, 2022, resulting in 

a total comment period of 61 days.12

The Department received approximately 

55,400 comments on the proposed rule. 

As described below, after considering 

the views expressed by commenters, the 

Department is finalizing its proposal 

with some modifications. For the 

reasons explained in the NPRM and 

detailed in section III, the Department 

concludes that it is appropriate to 

rescind the 2021 IC Rule and set forth 

an analysis for determining employee or 

independent contractor status under the 

Act that is more consistent with existing 

judicial precedent and the Department’s 

longstanding guidance prior to the 2021 

IC Rule. 

Summary of the Major Provisions of the 

Final Rule 

In addition to rescinding the 2021 IC 

Rule, the Department is adding part 795. 

Specifically, this final rule modifies the 

regulatory text published on January 7, 

2021, at 86 FR 1246 through 1248, 

addressing whether workers are 

employees or independent contractors 

under the FLSA. Instead of using the 

‘‘core factors’’ set forth in the 2021 IC 

Rule, this final rule returns to a totalityof-the-circumstances analysis of the 

economic reality test in which the 

factors do not have a predetermined 

weight and are considered in view of 

the economic reality of the whole 

activity. In addition to this critical 

reversion to the longstanding analysis 

that preceded the 2021 IC Rule, this 

final rule returns to the longstanding 

framing of investment as its own 

separate factor, and the integral factor as 

one that looks to whether the work 

performed is an integral part of a 

potential employer’s business rather 

than part of an integrated unit of 

production. The final rule also provides 

broader discussion of how scheduling, 

remote supervision, price setting, and 

the ability to work for others should be 

considered under the control factor, and 

it allows for consideration of reserved 

rights while removing the provision in 

the 2021 IC Rule that minimized the 

relevance of retained rights. Further, the 

final rule discusses exclusivity in the 

context of the permanency factor, and 

initiative in the context of the skill 

factor. 

While the above modifications from 

the 2021 IC Rule were all proposed in 

the NPRM, the Department also made 

several adjustments to the proposed 

regulations after consideration of the 

comments received. Notably, as 

discussed further below, the portion of 

the Department’s proposal for the 

control factor stating that control 

implemented for purposes of complying 

with legal obligations may be indicative 

of control generated many comments. 

The Department is modifying the 

proposed language to address confusion 

and concern regarding potential 

unintended consequences. 

Additionally, the Department 

received many comments regarding the 

investment factor. In response to a 

number of comments concerning the 

Department’s proposal to consider the 

relative investments of the worker and 

the potential employer, the Department 

is clarifying in the final rule that 

consideration of the relative 

investments of the worker and the 

potential employer should be compared 

not only in terms of dollar value or size 

of the investments, but should focus on 

whether the worker is making similar 

types of investments as the employer 

(albeit on a smaller scale) that would 

suggest that the worker is operating 

independently. Further, in response to 


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13 29 U.S.C. 206(a), 207(a). 

14 29 U.S.C. 212. 

15 29 U.S.C. 203(m)(2)(B). 

16See 29 U.S.C. 218d (added by the PUMP for 

Nursing Mothers Act, Public Law 117–328, 136 

Stat. 4459 (Dec. 29, 2022)). 

17 29 U.S.C. 211(c), 215(a)(3). 

18 29 U.S.C. 203(e)(1). 

19 29 U.S.C. 203(d). 

20 29 U.S.C. 203(g). 

21United States v. Rosenwasser, 323 U.S. 360, 

362, 363 n.3 (1945) (quoting 81 Cong. Rec. 7657 

(statement of Senator Hugo Black)). 

22Nationwide Mut. Ins. v. Darden, 503 U.S. 318, 

326 (1992). 

23 Id.; see also, e.g., Walling v. Portland Terminal 

Co., 330 U.S. 148, 150–51 (1947) (‘‘[I]n determining 

who are ‘employees’ under the Act, common law 

employee categories or employer-employee 

classifications under other statutes are not of 

controlling significance. This Act contains its own 

definitions, comprehensive enough to require its 

application to many persons and working 

relationships, which prior to this Act, were not 

deemed to fall within an employer-employee 

category.’’) (citation omitted). 

24Portland Terminal, 330 U.S. at 152. 

25See, e.g., Rutherford Food Corp. v. McComb, 

331 U.S. 722, 729 (1947) (noting that ‘‘[t]here may 

be independent contractors who take part in 

production or distribution who would alone be 

responsible for the wages and hours of their own 

employees’’). 

26 Id. 

comments regarding the unilateral 

nature of some costs imposed by 

potential employers on workers, which 

could appear to be capital or 

entrepreneurial in nature, the 

Department is including language 

recognizing that costs that are 

unilaterally imposed are not indicative 

of a worker’s capital or entrepreneurial 

investment. 

Further clarifications and adjustments 

to the regulatory text that reflect a range 

of comments made by employers; 

workers; those who view themselves as 

independent contractors, self-employed, 

or freelancers; labor unions; legal 

services providers; policy and research 

organizations; and counsel for both 

businesses and employees have been 

made as well and are discussed under 

the section-by-section analysis that 

follows. 

The final rule reiterates that part 795 

contains the Department’s general 

interpretations for determining whether 

workers are employees or independent 

contractors under the FLSA. Further, it 

reiterates that economic dependence is 

the ultimate inquiry, meaning that a 

worker is an independent contractor as 

opposed to an employee under the Act 

if the worker is, as a matter of economic 

reality, in business for themself. The 

final rule explains that the economic 

reality test is comprised of multiple 

factors that are tools or guides to 

conduct the totality-of-thecircumstances analysis to determine 

economic dependence. The six factors 

described in the regulatory text should 

guide an assessment of the economic 

realities of the working relationship, but 

no one factor or subset of factors is 

necessarily dispositive. The final rule 

provides guidance on how six economic 

reality factors should be considered— 

opportunity for profit or loss depending 

on managerial skill, investments by the 

worker and the potential employer, the 

degree of permanence of the work 

relationship, the nature and degree of 

control, the extent to which the work 

performed is an integral part of the 

potential employer’s business, and skill 

and initiative. Just as under the 2021 IC 

Rule, and in accordance with 

longstanding precedent and guidance, 

additional factors may also be 

considered if they are relevant to the 

overall question of economic 

dependence. 

The Department recognizes that this 

return to a totality-of-the-circumstances 

analysis in which the economic reality 

factors are not assigned a predetermined 

weight and each factor is given full 

consideration represents a change from 

the 2021 IC Rule. However, the 

Department believes that this approach 

is the most beneficial because it is 

aligned with the Department’s decadeslong approach (prior to the 2021 IC 

Rule) as well as with federal appellate 

case law, and is more consistent with 

the Act’s text and purpose as interpreted 

by the courts. The Department believes 

that this final rule will provide more 

consistent guidance to employers as 

they determine whether workers are 

economically dependent on the 

employer for work or are in business for 

themselves, as well as useful guidance 

to workers on whether they are correctly 

classified as employees or independent 

contractors. Accordingly, the 

Department believes that the guidance 

provided in this final rule will help 

protect employees from 

misclassification. Moreover, this final 

rule recognizes that independent 

contractors serve an important role in 

our economy and provides a consistent 

approach for those businesses that 

engage (or wish to engage) independent 

contractors as well as for those who 

wish to work as independent 

contractors. 

II. Background 

A. Relevant FLSA Definitions 

Enacted in 1938, the FLSA generally 

requires that covered employers pay 

nonexempt employees at least the 

Federal minimum wage (presently $7.25 

per hour) for every hour worked, and at 

least one and one-half times the 

employee’s regular rate of pay for all 

hours worked beyond 40 in a 

workweek.13 Among other protections, 

the FLSA also regulates the employment 

of children,14 prohibits employers from 

keeping employee tips,15 and requires 

employers to provide reasonable break 

time and a place for covered nursing 

employees to express breast milk at 

work.16 Finally, the FLSA requires 

covered employers to ‘‘make, keep, and 

preserve’’ certain records regarding 

employees, and prohibits retaliation 

against employees who engaged in 

protected activity, such as filing a 

complaint regarding their pay.17

The FLSA’s wage-and-hour 

protections apply to employees. In 

relevant part, section 3(e) of the Act 

defines the term ‘‘employee’’ as ‘‘any 

individual employed by an 

employer.’’ 18 Section 3(d) defines the 

term ‘‘employer’’ to ‘‘includ[e] any 

person acting directly or indirectly in 

the interest of an employer in relation 

to an employee.’’ 19 Finally, section 3(g) 

provides that the term ‘‘ ‘[e]mploy’ 

includes to suffer or permit to work.’’ 20

Interpreting these provisions, the U.S. 

Supreme Court has stated that ‘‘[a] 

broader or more comprehensive 

coverage of employees within the stated 

categories would be difficult to frame,’’ 

and that ‘‘the term ‘employee’ under the 

FLSA had been given ‘the broadest 

definition that has ever been included 

in any one act.’ ’’ 21 In particular, the 

Court has noted the ‘‘striking breadth’’ 

of section 3(g)’s ‘‘suffer or permit’’ 

language, observing that it ‘‘stretches the 

meaning of ‘employee’ to cover some 

parties who might not qualify as such 

under a strict application of traditional 

agency law principles.’’ 22 Thus, the 

Court has repeatedly observed that the 

FLSA’s scope of employment is broader 

than the common law standard often 

applied to determine employment status 

under other Federal laws.23

At the same time, the Supreme Court 

has recognized that the Act was ‘‘not 

intended to stamp all persons as 

employees.’’ 24 Among other categories 

of workers excluded from FLSA 

coverage, the Court has recognized that 

‘‘independent contractors’’ fall outside 

the Act’s broad understanding of 

employment.25 Accordingly, the FLSA 

does not require covered employers to 

pay an independent contractor the 

minimum wage or overtime pay under 

sections 6(a) and 7(a) of the Act, or to 

keep records regarding an independent 

contractor’s work under section 11(c). 

However, merely ‘‘putting on an 

‘independent contractor’ label does not 

take [a] worker from the protection of 

the [FLSA].’’ 26 Courts have thus 

recognized a need to delineate between 


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27 Id. at 728. 28Courts invoke the concept of ‘‘economic 

reality’’ in FLSA employment contexts beyond 

independent contractor status. However, as in prior 

rulemakings, this final rule refers to the ‘‘economic 

reality’’ analysis or test for independent contractors 

as a shorthand reference to the independent 

contractor analysis used by courts for FLSA 

purposes. 

29 In distinguishing between employees and 

independent contractors under the common law, 

courts evaluate ‘‘the hiring party’s right to control 

the manner and means by which the product is 

accomplished.’’ Community for Creative NonViolence v. Reid, 490 U.S. 730, 751 (1989). ‘‘Among 

the other factors relevant to this inquiry are the skill 

required; the source of the instrumentalities and 

tools; the location of the work; the duration of the 

relationship between the parties; whether the hiring 

party has the right to assign additional projects to 

the hired party; the extent of the hired party’s 

discretion over when and how long to work; the 

method of payment; the hired party’s role in hiring 

and paying assistants; whether the work is part of 

the regular business of the hiring party; whether the 

hiring party is in business; the provision of 

employee benefits; and the tax treatment of the 

hired party.’’ Id. (footnotes omitted). 

30 322 U.S. at 118–20; 29 U.S.C. 152(3). 

31 Id. at 123–25, 129. 

32 331 U.S. at 712–14. 

33 Id. at 716. 

34 Id. 

35 Id. 

36 331 U.S. at 727. 

37 Id. at 723–24. 

38 Id. at 730. 

39See id. 

40 Id. at 729–30. 

41 332 U.S. at 130. 

42 Id. 

43 Id. 

44 Id. 

45Labor Management Relations (Taft-Hartley) 

Act, 1947, Public Law 80–101, sec. 101, 61 Stat. 

Continued 

employees, who fall under the 

protections of the FLSA, and 

independent contractors, who do not. 

The FLSA does not define the term 

‘‘independent contractor.’’ While it is 

clear that section 3(g)’s ‘‘suffer or 

permit’’ language contemplates a 

broader coverage of workers compared 

to what exists under the common law, 

‘‘there is in the [FLSA] no definition 

that solves problems as to the limits of 

the employer-employee relationship 

under the Act.’’ 27 Therefore, in 

articulating the distinction between 

FLSA-covered employees and 

independent contractors, courts rely on 

a broad, multifactor ‘‘economic reality’’ 

analysis derived from judicial 

precedent.28 Unlike the control-focused 

analysis for independent contractors 

applied under the common law,29 the 

economic reality test focuses more 

broadly on a worker’s economic 

dependence on an employer, 

considering the totality of the 

circumstances. 

B. Development of the Economic Reality 

Test 

1. Supreme Court Development of the 

Economic Reality Test 

In a series of cases from 1944 to 1947, 

the U.S. Supreme Court considered 

employee or independent contractor 

status under three different Federal 

statutes that were enacted during the 

1930s New Deal Era—the FLSA, the 

National Labor Relations Act (NLRA), 

and the Social Security Act (SSA)—and 

applied an economic reality test under 

all three laws. 

In the first of these cases, NLRB v. 

Hearst Publications, Inc., 322 U.S. 111 

(1944), the Court considered the 

meaning of ‘‘employee’’ under the 

NLRA, which defined the term to 

‘‘include any employee.’’ 30 In relevant 

part, the Hearst Court rejected 

application of the common law 

standard, noting that ‘‘the broad 

language of the [NLRA’s] definitions 

. . . leaves no doubt that its 

applicability is to be determined 

broadly, in doubtful situations, by 

underlying economic facts rather than 

technically and exclusively by 

previously established legal 

classifications.’’ 31

On June 16, 1947, the Supreme Court 

decided United States v. Silk, 331 U.S. 

704 (1947), addressing the distinction 

between employees and independent 

contractors under the SSA. The Court 

favorably summarized Hearst as setting 

forth ‘‘economic reality,’’ as opposed to 

‘‘technical concepts’’ of the common 

law standard alone, as the framework 

for determining workers’ classification, 

but acknowledged that not ‘‘all who 

render service to an industry are 

employees.’’ 32 Although the Court 

found it to be ‘‘quite impossible to 

extract from the [SSA] a rule of thumb 

to define the limits of the employeremploye[e] relationship,’’ the Court 

identified five factors as ‘‘important for 

decision’’: ‘‘degrees of control, 

opportunities for profit or loss, 

investment in facilities, permanency of 

relation[,] and skill required in the 

claimed independent operation.’’ 33 The 

Court added that ‘‘[n]o one [factor] is 

controlling nor is the list complete.’’ 34

The Court went on to note that the 

workers in that case were ‘‘from one 

standpoint an integral part of the 

businesses’’ of the employer, supporting 

a conclusion that some of the workers 

in that case were employees.35

The same day that the Supreme Court 

issued its decision in Silk, it also issued 

Rutherford Food Corp. v. McComb, 331 

U.S. 722 (1947), in which it affirmed a 

federal court of appeals decision that 

analyzed an FLSA employment 

relationship based on its economic 

realities.36 Describing the FLSA as ‘‘a 

part of the social legislation of the 1930s 

of the same general character as the 

[NLRA] and the [SSA],’’ the Court 

opined that ‘‘[d]ecisions that define the 

coverage of the employer-Employee 

relationship under the Labor and Social 

Security acts are persuasive in the 

consideration of a similar coverage 

under the [FLSA].’’ 37 Accordingly, the 

Court rejected an approach based on 

‘‘isolated factors’’ and again considered 

‘‘the circumstances of the whole 

activity.’’ 38 The Court considered 

several of the factors that it listed in Silk 

as they related to meat boners on a 

slaughterhouse’s production line, 

ultimately determining that the boners 

were employees.39 The Court noted, 

among other things, that the boners did 

a specialty job on the production line, 

had no business organization that could 

shift to a different slaughter-house, and 

were best characterized as ‘‘part of the 

integrated unit of production under 

such circumstances that the workers 

performing the task were employees of 

the establishment.’’ 40

On June 23, 1947, one week after the 

Silk and Rutherford decisions, the Court 

decided Bartels v. Birmingham, 332 U.S. 

126 (1947), another case involving 

employee or independent contractor 

status under the SSA. Here again, the 

Court rejected application of the 

common law control test, explaining 

that, under the SSA, employee status 

‘‘was not to be determined solely by the 

idea of control which an alleged 

employer may or could exercise over the 

details of the service rendered to his 

business by the worker.’’ 41 Rather, 

employees under ‘‘social legislation’’ 

such as the SSA are ‘‘those who as a 

matter of economic reality are 

dependent upon the business to which 

they render service.’’ 42 Thus, in 

addition to control, ‘‘permanency of the 

relation, the skill required, the 

investment [in] the facilities for work 

and opportunities for profit or loss from 

the activities were also factors’’ to 

consider.43 Although the Court 

identified these specific factors as 

relevant to the analysis, it explained 

that ‘‘[i]t is the total situation that 

controls’’ the worker’s classification 

under the SSA.44

Following these Supreme Court 

decisions, Congress responded with 

separate legislation to amend the NLRA 

and SSA’s employment definitions. 

First, in 1947, Congress amended the 

NLRA’s definition of ‘‘employee’’ to 

clarify that the term ‘‘shall not include 

any individual having the status of an 

independent contractor.’’ 45 The 


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136, 137–38 (1947) (codified as amended at 29 

U.S.C. 152(3)). 46SSA of 1948, Public Law 80–642, sec. 2(a), 62 

Stat. 438 (1948) (codified as amended at 26 U.S.C. 

3121(d)). 47See NLRB v. United Ins. Co. of Am., 390 U.S. 

254, 256 (1968) (noting that ‘‘[t]he obvious purpose 

of’’ the amendment to the definition of employee 

under the NLRA ‘‘was to have the Board and the 

courts apply general agency principles in 

distinguishing between employees and independent 

contractors under the Act’’). 

48 366 U.S. at 33 (quoting from Silk, 331 U.S. at 

713, and Rutherford, 331 U.S. at 729). 49 Id. at 32. 50 Darden, 503 U.S. at 325–26. 

51Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 

1311 (5th Cir. 1976) (quoting Bartels, 332 U.S. at 

130). 

52See Brock v. Superior Care, Inc., 840 F.2d 1054, 

1058–59 (2d Cir. 1988); Donovan v. DialAmerica 

Mktg., Inc., 757 F.2d 1376, 1382–83 (3d Cir. 1985); 

McFeeley v. Jackson Street Ent., LLC, 825 F.3d 235, 

241 (4th Cir. 2016); Pilgrim Equip., 527 F.2d at 

1311; Acosta v. Off Duty Police Servs., Inc., 915 

F.3d 1050, 1055 (6th Cir. 2019); Sec’y of Labor, U.S. 

Dep’t of Labor v. Lauritzen, 835 F.2d 1529, 1534– 

35 (7th Cir. 1987); Walsh v. Alpha & Omega USA, 

Inc., 39 F.4th 1078, 1082 (8th Cir. 2022); Real v. 

Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 754 

(9th Cir. 1979); Acosta v. Paragon Contractors 

Corp., 884 F.3d 1225, 1235 (10th Cir. 2018); 

Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 

1311–12 (11th Cir. 2013); Morrison v. Int’l Programs 

Consortium, Inc., 253 F.3d 5, 11 (D.C. Cir. 2001). 

53See, e.g., Parrish v. Premier Directional 

Drilling, L.P., 917 F.3d 369, 380 (5th Cir. 2019) 

(stating that it ‘‘is impossible to assign to each of 

these factors a specific and invariably applied 

weight’’) (quoting Hickey v. Arkla Indus., Inc., 699 

F.2d 748, 752 (5th Cir. 1983)); Scantland, 721 F.3d 

at 1312 n.2 (the relative weight of each factor 

‘‘depends on the facts of the case’’) (quoting 

Santelices v. Cable Wiring, 147 F. Supp. 2d 1313, 

1319 (S.D. Fla. 2001)); Martin v. Selker Bros., 949 

F.2d 1286, 1293 (3d Cir. 1991) (‘‘It is a wellestablished principle that the determination of the 

employment relationship does not depend on 

isolated factors . . . neither the presence nor the 

absence of any particular factor is dispositive.’’). 

54Scantland, 721 F.3d at 1311–12. 

55 Id. at 1312 n.2. 

56See Pilgrim Equip., 527 F.2d at 1311. 

57See Hobbs v. Petroplex Pipe & Constr., Inc., 946 

F.3d 824, 836 (5th Cir. 2020) (considering ‘‘the 

extent to which the pipe welders’ work was ‘an 

integral part’ of Petroplex’s business’’). Every other 

federal court of appeals that has decided an FLSA 

case involving alleged independent contractors 

includes the ‘‘integral part’’ factor among the list of 

enumerated economic reality factors. See the cases 

cited supra at n.52 other than Pilgrim Equipment. 

58See, e.g., Franze v. Bimbo Bakeries USA, Inc., 

826 F. App’x 74, 76 (2d Cir. 2020); Superior Care, 

840 F.2d at 1058–59. The D.C. Circuit has adopted 

the Second Circuit’s articulation of the factors, 

including treating opportunity for profit or loss and 

investment as one factor. See Morrison, 253 F.3d at 

11 (citing Superior Care, 840 F.2d at 1058–59). 

following year, Congress similarly 

amended the SSA to exclude from 

employment ‘‘any individual who, 

under the usual common-law rules 

applicable in determining the employeremployee relationship, has the status of 

an independent contractor.’’ 46 The 

Supreme Court interpreted the 

amendments to the NLRA as having the 

same effect as the explicit definition 

included in the SSA, which was to 

ensure that employment status would be 

determined by common law agency 

principles, rather than an economic 

reality test.47

Despite its amendments to the NLRA 

and SSA in response to Hearst and Silk, 

Congress did not similarly amend the 

FLSA following the Rutherford 

decision. Thus, when the Supreme 

Court revisited independent contractor 

status under the FLSA several years 

later in Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28 (1961), the Court 

affirmed that ‘‘ ‘economic reality’ rather 

than ‘technical concepts’ ’’ remained 

‘‘the test of employment’’ under the 

FLSA,48 quoting from its earlier 

decisions in Silk and Rutherford. The 

Court in Whitaker House found that 

certain homeworkers were ‘‘not selfemployed . . . [or] independent, selling 

their products on the market for 

whatever price they can command,’’ but 

instead were ‘‘regimented under one 

organization, manufacturing what the 

organization desires and receiving the 

compensation the organization 

dictates.’’ 49 Such facts, among others, 

established that the homeworkers at 

issue were FLSA-covered employees. 

Subsequently, in Nationwide Mutual 

Insurance Co. v. Darden, 503 U.S. 318 

(1992), the Court again endorsed 

application of the economic reality test 

to evaluate independent contractor 

status under the FLSA, citing to 

Rutherford and emphasizing the broad 

‘‘suffer or permit’’ language codified in 

section 3(g) of the Act.50

2. Application of the Economic Reality 

Test by Federal Courts of Appeals 

Since Rutherford, federal courts of 

appeals have applied the economic 

reality test to distinguish independent 

contractors from employees who are 

entitled to the FLSA’s protections. 

Recognizing that the ‘‘suffer or permit’’ 

language in section 3(g) of the FLSA 

provides a more expansive scope of 

employment than that which exists at 

common law, courts of appeals have 

followed the Supreme Court’s 

instruction that ‘‘ ‘employees are those 

who as a matter of economic realities 

are dependent upon the business to 

which they render service.’ ’’ 51

When determining whether a worker 

is an employee under the FLSA or an 

independent contractor, federal courts 

of appeals apply an economic reality 

test using the factors identified in Silk.52

No court of appeals considers any one 

factor or combination of factors to 

invariably predominate over the 

others.53 For example, the Eleventh 

Circuit has explained that some of the 

factors ‘‘which many courts have used 

as guides in applying the economic 

reality test’’ are: (1) the degree of the 

alleged employer’s right to control the 

manner in which the work is to be 

performed; (2) the worker’s opportunity 

for profit or loss depending upon their 

managerial skill; (3) the worker’s 

investment in equipment or materials 

required for their task, or their 

employment of helpers; (4) whether the 

service rendered requires a special skill; 

(5) the degree of permanence of the 

working relationship; and (6) the extent 

to which the service rendered is an 

integral part of the alleged employer’s 

business.54 Like other federal courts of 

appeals, the Eleventh Circuit repeats the 

Supreme Court’s explanation from Silk 

that no one factor is controlling, nor is 

the list exhaustive.55

Some courts of appeals have applied 

the factors with some variations. For 

example, the Fifth Circuit typically does 

not list the ‘‘integral part’’ factor as one 

of the considerations that guides its 

analysis.56 However, recognizing that its 

list of enumerated factors is not 

exhaustive, the Fifth Circuit has 

considered the extent to which a 

worker’s function is integral to a 

business as part of its economic realities 

analysis.57 Similarly, the Second and 

D.C. Circuits vary in that they describe 

the employee’s opportunity for profit or 

loss and the employee’s investment as a 

single factor, but they still use the same 

considerations as the other circuits to 

inform their economic realities 

analysis.58

In sum, since the 1940s, federal courts 

have analyzed the question of employee 

or independent contractor status under 

the FLSA using a multifactor, totality-ofthe-circumstances economic reality test, 

with no factor or factors being 

dispositive. The courts have examined 

the economic realities of the 

employment relationship to determine 

whether the worker is economically 

dependent on the employer for work or 

is in business for themself, even if they 

have varied slightly in their 

articulations of the factors. Despite such 

variation, all courts have looked to the 

factors first articulated in Silk as useful 

guideposts while acknowledging that 

those factors are not exhaustive and 

should not be applied mechanically. 

3. The Department’s Application of the 

Economic Reality Test 

The Department has applied a 

multifactor economic reality test since 

the Supreme Court’s opinions in 

Rutherford and Silk. For example, on 

June 23, 1949, the Wage and Hour 

Division (WHD) issued an opinion letter 


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59WHD Op. Ltr. (June 23, 1949). 

60 Id. 

61See, e.g., WHD Op. Ltr. (Oct. 12, 1965) 

(discussing degree of independent business 

organization); WHD Op. Ltr. (Feb. 18, 1969) (same); 

WHD Op. Ltr. FLSA–314 (Dec. 21, 1982) (discussing 

three of the Silk factors); WHD Op. Ltr. FLSA–164 

(Jan. 18, 1990) (discussing four of the Silk factors). 

62See, e.g., WHD Op. Ltr. FLSA–106 (Feb. 8, 

1956); WHD Op. Ltr. (July 20, 1965); WHD Op. Ltr. 

(Sept. 1, 1967); WHD Op. Ltr. (Feb. 18, 1969); WHD 

Op. Ltr. FLSA–31 (Aug. 10, 1981); WHD Op. Ltr. 

(June 5, 1995). 

63See 27 FR 8032; 29 U.S.C. 213(b)(28) 

(previously codified at 29 U.S.C. 213(a)(15)). 

64 27 FR 8033 (29 CFR 788.16(a)). 

65 Id. 

66 27 FR 8033–34 (29 CFR 788.16(a)). 

67See 37 FR 12084, 12102 (introducing 29 CFR 

780.330(b)). 

68 Id. 

69See 62 FR 11734 (amending 29 CFR 

500.20(h)(4)); see also 29 U.S.C. 1802(5) (‘‘The term 

‘employ’ has the meaning given such term under 

section 3(g) of the [FLSA]’’). 

70 29 CFR 500.20(h)(4). 

71See WHD Fact Sheet #13 (1997) https:/web.

archive.org/web/19970112162517/http:/www.

dol.gov/dol/esa/public/regs/compliance/whd/ 

whdfs13.htm). WHD made minor revisions to Fact 

Sheet #13 in 2002 and 2008, before a more 

substantial revision in 2014. In 2018, WHD reverted 

back to the 2008 version of Fact Sheet #13, which— 

apart from the addition of an advisory note referring 

to the 2021 IC Rule—is identical to the current 

March 2022 version (available at https://

www.dol.gov/agencies/whd/fact-sheets/13-flsaemployment-relationship). 

72AI 2015–1 is available at 2015 WL 4449086 

(withdrawn June 7, 2017). 

distilling six ‘‘primary factors which the 

Court considered significant’’ in 

Rutherford and Silk: ‘‘(1) the extent to 

which the services in question are an 

integral part of the ‘employer[’]s’ 

business; (2) the amount of the so-called 

‘contractor’s’ investment in facilities 

and equipment; (3) the nature and 

degree of control by the principal; (4) 

opportunities for profit and loss; . . . (5) 

the amount of initiative judgment or 

foresight required for the success of the 

claimed independent enterprise[;] and 

[(6)] permanency of the relation.’’ 59 The 

guidance cautioned that no single factor 

is controlling, and ‘‘[o]rdinarily a 

definite decision as to whether one is an 

employee or an independent contractor 

under the [FLSA] cannot be made in the 

absence of evidence as to [the worker’s] 

actual day-to-day working relationship 

with [their] principal. Clearly a written 

contract does not always reflect the true 

situation.’’ 60

Subsequent WHD opinion letters 

addressing employee or independent 

contractor status under the FLSA have 

provided similar recitations of the Silk 

factors, sometimes omitting one or more 

of the six factors described in the 1949 

opinion letter, and sometimes adding 

(or substituting) a seventh factor: the 

worker’s ‘‘degree of independent 

business organization and operation.’’ 61

Numerous opinion letters have 

emphasized that employment status is 

‘‘not determined by the common law 

standards relating to master and 

servant,’’ and that ‘‘[t]he degree of 

control retained by the principal has 

been rejected as the sole criterion to be 

applied.’’ 62

In 1962, the Department revised the 

regulations in 29 CFR part 788, which 

generally provides interpretive guidance 

on the FLSA’s exemption for employees 

in small forestry or lumbering 

operations, and added a provision 

addressing the distinction between 

employees and independent 

contractors.63 Citing to Silk, Rutherford, 

and Bartels, the regulation advised that 

‘‘an employee, as distinguished from a 

person who is engaged in a business of 

his own, is one who ‘follows the usual 

path of an employee’ and is dependent 

on the business which he serves.’’ 64 To 

‘‘aid in assessing the total situation,’’ the 

regulation then identified a partial list 

of ‘‘characteristics of the two 

classifications which should be 

considered,’’ including ‘‘the extent to 

which the services rendered are an 

integral part of the principal’s business; 

the permanency of the relationship; the 

opportunities for profit or loss; the 

initiative, judgment or foresight 

exercised by the one who performs the 

services; the amount of investment; and 

the degree of control which the 

principal has in the situation.’’ 65

Implicitly referring to the Bartels 

decision, the regulation advised that 

‘‘[t]he Court specifically rejected the 

degree of control retained by the 

principal as the sole criterion to be 

applied.’’ 66

In 1972, the Department added 

similar guidance on independent 

contractor status at 29 CFR 780.330(b), 

in a provision addressing the 

employment status of sharecroppers and 

tenant farmers.67 This regulation was 

nearly identical to the independent 

contractor guidance for the logging and 

forestry industry previously codified at 

29 CFR 788.16(a), including an identical 

description of the same six economic 

reality factors.68 Both provisions—29 

CFR 780.330(b) and 788.16(a)— 

remained unchanged until 2021. 

In 1997, the Department promulgated 

a regulation applying a multifactor 

economic reality analysis for 

distinguishing between employees and 

independent contractors under the 

Migrant and Seasonal Agricultural 

Worker Protection Act (MSPA), which 

notably incorporates the FLSA’s ‘‘suffer 

or permit’’ definition of employment by 

reference.69 The regulation (which has 

not since been amended) advises that in 

determining if the farm labor contractor 

or worker is an employee or an 

independent contractor, the ultimate 

question is the economic reality of the 

relationship—whether there is 

economic dependence upon the 

agricultural employer/association or 

farm labor contractor, as appropriate. 

The regulation elaborates that ‘‘[t]his 

determination is based upon an 

evaluation of all of the circumstances, 

including the following: (i) The nature 

and degree of the putative employer’s 

control as to the manner in which the 

work is performed; (ii) The putative 

employee’s opportunity for profit or loss 

depending upon his/her managerial 

skill; (iii) The putative employee’s 

investment in equipment or materials 

required for the task, or the putative 

employee’s employment of other 

workers; (iv) Whether the services 

rendered by the putative employee 

require special skill; (v) The degree of 

permanency and duration of the 

working relationship; (vi) The extent to 

which the services rendered by the 

putative employee are an integral part of 

the putative employer’s business.’’ 70

This description of six economic reality 

factors was very similar to the earlier 

description of six economic reality 

factors provided in 29 CFR 780.330(b) 

and 788.16(a). 

Also in 1997, WHD issued Fact Sheet 

#13, ‘‘Employment Relationship Under 

the Fair Labor Standards Act (FLSA).’’ 71

Like WHD opinion letters, Fact Sheet 

#13 advises that an employee, as 

distinguished from a person who is 

engaged in a business of their own, is 

one who, as a matter of economic 

reality, follows the usual path of an 

employee and is dependent on the 

business which they serve. The fact 

sheet identifies the six familiar 

economic realities factors, as well as 

consideration of the worker’s degree of 

independent business organization and 

operation. 

On July 15, 2015, WHD issued 

additional subregulatory guidance, 

Administrator’s Interpretation No. 

2015–1, ‘‘The Application of the Fair 

Labor Standards Act’s ‘Suffer or Permit’ 

Standard in the Identification of 

Employees Who Are Misclassified as 

Independent Contractors’’ (AI 2015– 

1).72 AI 2015–1 reiterated that the 

economic realities of the relationship 

are determinative and that the ultimate 

inquiry is whether the worker is 

economically dependent on the 

employer or truly in business for 

themself. It identified six economic 

realities factors that followed the six 

factors used by most federal courts of 


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73See News Release 17–0807–NAT, ‘‘US 

Secretary of Labor Withdraws Joint Employment, 

Independent Contractor Informal Guidance’’ (June 

7, 2017), https://www.dol.gov/newsroom/releases/ 

opa/opa20170607 (last visited November 20, 2023). 

74See WHD Op. Ltr. FLSA2019–6, 2019 WL 

1977301 (Apr. 29, 2019) (withdrawn Feb. 19, 2021). 

75See id. at *4. Opinion Letter FLSA2019–6’s 

‘‘extent of the integration’’ factor was a notable 

recharacterization of the factor traditionally 

considered by courts and the Department regarding 

the extent to which work is ‘‘an integral part’’ of 

an employer’s business. 

76See note at https://www.dol.gov/agencies/whd/ 

opinion-letters/search?FLSA (last visited November 

20, 2023). 

77See 86 FR 1168. The Department initially 

published a NPRM soliciting public comment on 

September 25, 2020. See 85 FR 60600. The final 

rule adopted ‘‘the interpretive guidance set forth in 

the [NPRM] largely as proposed.’’ 86 FR 1168. 

78 86 FR 1246–48. 

79 Id. at 1246. 

80 Id. at 1172, 1240. 

81 Id. at 1172–75. 

82 Id. at 1246 (§ 795.105(a)–(b)). 

83 Id. at 1246–47 (§ 795.105(c) and (d)(2)(iv)). 

84 Id. at 1246 (§ 795.105(c)). 

85 Id. at 1246–47 (§ 795.105(d)(1)(i)). 

86 Id. 

87 Id. (§ 795.105(d)(1)(ii)). 

appeals: (1) the extent to which the 

work performed is an integral part of the 

employer’s business; (2) the worker’s 

opportunity for profit or loss depending 

on their managerial skill; (3) the extent 

of the relative investments of the 

employer and the worker; (4) whether 

the work performed requires special 

skills and initiative; (5) the permanency 

of the relationship; and (6) the degree of 

control exercised or retained by the 

employer. AI 2015–1 further 

emphasized that the factors should not 

be applied in a mechanical fashion and 

that no one factor was determinative. AI 

2015–1 was withdrawn on June 7, 

2017.73

In 2019, WHD issued an opinion 

letter, FLSA2019–6, regarding whether 

workers who worked for companies 

operating self-described ‘‘virtual 

marketplaces’’ were employees covered 

under the FLSA or independent 

contractors.74 Like the Department’s 

prior guidance, the letter stated that the 

determination depended on the 

economic realities of the relationship 

and that the ultimate inquiry was 

whether the workers depend on 

someone else’s business or are in 

business for themselves. The letter 

identified six economic realities factors 

that differed slightly from the factors 

typically articulated by the Department 

previously: (1) the nature and degree of 

the employer’s control; (2) the 

permanency of the worker’s relationship 

with the employer; (3) the amount of the 

worker’s investment in facilities, 

equipment, or helpers; (4) the amount of 

skill, initiative, judgment, and foresight 

required for the worker’s services; (5) 

the worker’s opportunities for profit or 

loss; and (6) the extent of the integration 

of the worker’s services into the 

employer’s business.75 The Department 

later withdrew Opinion Letter 

FLSA2019–6 on February 19, 2021.76

C. The Department’s 2021 Independent 

Contractor Rule 

1. Overview 

On January 7, 2021, the Department 

published the 2021 IC Rule, with an 

effective date of March 8, 2021.77 The 

2021 IC Rule set forth regulations to be 

added to a new part (part 795) in title 

29 of the Code of Federal Regulations 

titled ‘‘Employee or Independent 

Contractor Classification under the Fair 

Labor Standards Act,’’ providing 

guidance on the classification of 

independent contractors under the 

FLSA applicable to workers and 

businesses in any industry.78 The 2021 

IC Rule also addressed the Department’s 

prior interpretations of independent 

contractor status in 29 CFR 780.330(b) 

and 788.16(a)—both of which applied to 

specific industries—by cross-referencing 

part 795.79

The Department explained that the 

purpose of the 2021 IC Rule was to 

establish a ‘‘streamlined’’ economic 

reality test that improved on prior 

articulations described as ‘‘unclear and 

unwieldy.’’ 80 It stated that the existing 

economic reality test applied by the 

Department and courts suffered from 

confusion regarding the meaning of 

‘‘economic dependence,’’ a lack of focus 

in the multifactor balancing test, and 

confusion and inefficiency caused by 

overlap between the factors.81 The 2021 

IC Rule asserted that shortcomings and 

misconceptions associated with the 

economic reality test were more 

apparent in the modern economy and 

that additional clarity would promote 

innovation in work arrangements. 

The 2021 IC Rule explained that 

independent contractors are not 

employees under the FLSA and are 

therefore not subject to the Act’s 

minimum wage, overtime pay, or 

recordkeeping requirements. It adopted 

an economic reality test under which a 

worker is an employee of an employer 

if that worker is economically 

dependent on the employer for work 

and is an independent contractor if the 

worker is in business for themself.82

The 2021 IC Rule identified five 

economic realities factors to guide the 

inquiry into a worker’s status as an 

employee or independent contractor, 

while acknowledging that the factors 

were not exhaustive, no one factor was 

dispositive, and additional factors could 

be considered if they ‘‘in some way 

indicate whether the [worker] is in 

business for him- or herself, as opposed 

to being economically dependent on the 

potential employer for work.’’ 83 In 

contrast to prior guidance and contrary 

to case law, the 2021 IC Rule designated 

two of the five factors—the nature and 

degree of control over the work and the 

worker’s opportunity for profit or loss— 

as ‘‘core factors’’ that should carry 

greater weight in the analysis. Citing the 

goal of providing greater certainty and 

predictability in the economic reality 

test, the 2021 IC Rule determined that 

these two factors were more probative of 

economic dependence than other 

economic realities factors. If both of 

those core factors indicate the same 

classification, as either an employee or 

an independent contractor, the 2021 IC 

Rule stated that there was a ‘‘substantial 

likelihood’’ that the indicated 

classification was the worker’s correct 

classification.84

The 2021 IC Rule’s first core factor 

was the nature and degree of control 

over the work, which indicated 

independent contractor status to the 

extent that the worker exercised 

substantial control over key aspects of 

the performance of the work, such as by 

setting their own schedule, by selecting 

their projects, and/or through the ability 

to work for others, which might include 

the potential employer’s competitors.85

The 2021 IC Rule provided that 

requiring the worker to comply with 

specific legal obligations, satisfy health 

and safety standards, carry insurance, 

meet contractually agreed upon 

deadlines or quality control standards, 

or satisfy other similar terms that are 

typical of contractual relationships 

between businesses (as opposed to 

employment relationships) did not 

constitute control for purposes of 

determining employee or independent 

contractor classification.86

The 2021 IC Rule’s second core factor 

was the worker’s opportunity for profit 

or loss.87 The Rule stated that this factor 

indicates independent contractor status 

to the extent the worker has an 

opportunity to earn profits or incur 

losses based on either (1) their exercise 

of initiative (such as managerial skill or 

business acumen or judgment) or (2) 

their management of investment in or 

capital expenditure on, for example, 

helpers or equipment or material to 

further the work. While the effects of the 

worker’s exercise of initiative and 

management of investment were both 

considered under this factor, the worker 

did not need to have an opportunity for 

profit or loss based on both initiative 


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88 Id. (§ 795.105(d)(2)). 

89 Id. at 1246 (§ 795.105(c)). 

90 Id. at 1247–48 (§§ 795.110–.115). 

91 Id. at 1246 (§ 795.100). 

92See https://www.dol.gov/agencies/whd/ 

opinion-letters/search?FLSA (last visited November 

20, 2023), noting the withdrawal of Opinion Letters 

FLSA2021–8 and FLSA2021–9. 

93 86 FR 8326. 

94 86 FR 12535. 

95 86 FR 14027. 

96 86 FR 24303. 

97 Id. at 24320. 

98CWI v. Walsh, 2022 WL 1073346. 

99 Id. at *9. The court specifically faulted the 

Department’s use of a shortened 19-day comment 

period in its proposal to delay of the 2021 IC Rule’s 

original effective date (instead of 30 days), and for 

failing to consider comments beyond its proposal to 

delay the 2021 IC Rule’s effective date. Id. at *7– 

10. 

100 Id. at *11. 

101 Id. at *13. 

102 Id. at *20. 

103See Fifth Circuit No. 22–40316 (appeal filed, 

May 13, 2022). 

104See 87 FR 62218. 

and management of investment for this 

factor to weigh towards the worker 

being an independent contractor. This 

factor indicated employee status to the 

extent that the worker was unable to 

affect their earnings or was only able to 

do so by working more hours or faster. 

The 2021 IC Rule also identified three 

other non-core factors: the amount of 

skill required for the work, the degree of 

permanence of the working relationship 

between the worker and the employer, 

and whether the work is part of an 

integrated unit of production (which it 

cautioned is ‘‘different from the concept 

of the importance or centrality of the 

individual’s work to the potential 

employer’s business’’).88 The 2021 IC 

Rule provided that these other factors 

were ‘‘less probative and, in some cases, 

may not be probative at all’’ of economic 

dependence and were ‘‘highly unlikely, 

either individually or collectively, to 

outweigh the combined probative value 

of the two core factors.’’ 89

The 2021 IC Rule also stated that the 

actual practice of the parties involved is 

more relevant than what may be 

contractually or theoretically possible, 

and provided five ‘‘illustrative 

examples’’ demonstrating how the 

analysis would apply in particular 

factual circumstances.90 Finally, the 

2021 IC Rule rescinded any ‘‘prior 

administrative rulings, interpretations, 

practices, or enforcement policies 

relating to classification as an employee 

or independent contractor under the 

FLSA’’ to the extent that such items ‘‘are 

inconsistent or in conflict with the 

interpretations stated in this part,’’ and 

explained that the 2021 IC Rule would 

guide WHD’s enforcement of the 

FLSA.91

On January 19, 2021, WHD issued 

Opinion Letters FLSA2021–8 and 

FLSA2021–9 applying the Rule’s 

analysis to specific factual scenarios. 

WHD subsequently withdrew those 

opinion letters on January 26, 2021, 

explaining that the letters were issued 

prematurely because they were based on 

a rule that had yet to take effect.92

2. Delay and Withdrawal 

On February 5, 2021, the Department 

published a proposal to delay the 2021 

IC Rule’s effective date until May 7, 

2021—60 days after the Rule’s original 

March 8, 2001, effective date.93 On 

March 4, 2021, after considering the 

approximately 1,500 comments received 

in response to that proposal, the 

Department published a final rule 

delaying the effective date of the 2021 

IC Rule as proposed.94

On March 12, 2021, the Department 

published a NPRM proposing to 

withdraw the 2021 IC Rule.95 On May 

5, 2021, after reviewing approximately 

1,000 comments submitted in response 

to the NPRM, the Department 

announced a final rule withdrawing the 

2021 IC Rule.96 In explaining its 

decision to withdraw the 2021 IC Rule, 

the Department stated that the Rule was 

inconsistent with the FLSA’s text and 

purpose and would have had a 

confusing and disruptive effect on 

workers and businesses alike due to its 

departure from longstanding judicial 

precedent. The Withdrawal Rule stated 

that it took effect immediately upon its 

publication in the Federal Register on 

May 6, 2021.97

3. Litigation 

On March 14, 2022, in a lawsuit 

challenging the Department’s Delay and 

Withdrawal Rules under the 

Administrative Procedure Act (APA), a 

district court in the Eastern District of 

Texas issued a decision vacating the 

Department’s Delay and Withdrawal 

Rules.98 While acknowledging that the 

Department engaged in separate noticeand-comment rulemakings in 

promulgating both of these rules, the 

district court concluded that the 

Department ‘‘failed to provide a 

meaningful opportunity for comment in 

promulgating the Delay Rule,’’ 99 failed 

to show ‘‘good cause for making the 

[Delay Rule] effective immediately upon 

publication,’’ 100 and acted in an 

arbitrary and capricious manner in its 

Withdrawal Rule by ‘‘fail[ing] to 

consider potential alternatives to 

rescinding the Independent Contractor 

Rule.’’ 101 Accordingly, the district court 

vacated the Delay and Withdrawal Rules 

and concluded that the 2021 IC Rule 

‘‘became effective as of March 8, 2021, 

the rule’s original effective date, and 

remains in effect.’’ 102 The district 

court’s ruling did not address the 

validity of the 2021 IC Rule; rather, the 

case was focused solely on the validity 

of the Delay and Withdrawal Rules. 

The Department filed a notice of 

appeal of the district court’s decision.103

In response to requests by the 

Department informing the court of this 

rulemaking, the Fifth Circuit Court of 

Appeals has entered successive orders 

staying the appeal. The Fifth Circuit’s 

most recent order was dated October 9, 

2023 and stayed the appeal for an 

additional 120 days. 

D. The Department’s Proposal 

Following a series of stakeholder 

forums on the classification of workers 

as employees or independent 

contractors under the FLSA, the 

Department published an NPRM on 

October 13, 2022 proposing to rescind 

the 2021 IC Rule and replace it with 

new part 795 regulations.104 In the 

NPRM, the Department proposed to add 

a new part 795 to Title 29 of the Code 

of Federal Regulations providing 

guidance regarding whether workers are 

employees or independent contractors, 

which would be different in notable 

respects from the regulatory text in the 

2021 IC Rule, published at 86 FR 1246 

through 1248. In contrast to the 2021 IC 

Rule’s creation of elevated ‘‘core 

factors,’’ the Department proposed 

returning to a totality-of-thecircumstances analysis of the economic 

reality test in which the factors do not 

have a predetermined weight and are 

considered in view of the economic 

reality of the whole activity. Additional 

proposed differences from the 2021 IC 

Rule included restoring consideration of 

investment as a separate factor, 

providing additional analysis of the 

control factor (including detailed 

discussions of how scheduling, 

supervision, price-setting, and the 

ability to work for others should be 

considered), and returning to the 

longstanding interpretation of the 

integral factor, which considers whether 

the work performed is integral to the 

employer’s business. 

E. Comments 

The initial deadline for interested 

parties to submit comments on the 

NPRM was November 28, 2022. In 

response to requests for an extension of 

the time period for filing written 

comments, the Department lengthened 

the comment period an additional 15 


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105 87 FR 64749. Although several commenters 

requested a longer extension or otherwise objected 

that the comment period was inadequately short, 

the resulting 61-day comment period was more than 

twice as long as the 30-day comment period for the 

NPRM for the 2021 IC Rule, when the Department 

initially proposed regulatory guidance on employee 

and independent contractor status under the FLSA. 

See 85 FR 60600. The Department declined several 

requests to extend the comment period for the 2020 

NPRM. See https://www.regulations.gov/document/ 

WHD-2020-0007-0193. 

106Campaign comments, both in favor and 

opposed to the proposal, were received from a 

variety of groups, including, for example, court 

reporters, construction industry employers, 

DoorDash workers, professional translators, 

truckers, financial advisors, and healthcare 

professionals. 

107See, e.g., WHD Fact Sheet #71: Internship 

Programs Under The Fair Labor Standards Act 

(describing the analysis applied by courts and the 

Department to evaluate the FLSA employment 

status of students and interns). 

days to December 13, 2022, resulting in 

a total comment period of 61 days.105

The Department received 

approximately 55,400 comments on the 

NPRM. Comments were submitted by a 

diverse array of stakeholders, including 

employees, self-identified independent 

contractors, businesses, trade 

associations, labor unions, advocacy 

groups, law firms, members of Congress, 

state and local government officials, and 

other interested members of the public. 

This section provides a high-level 

summary of commenter views. 

Significant issues raised in the 

comments received are discussed in 

subsequent sections of this preamble, 

along with the Department’s response to 

those comments and a discussion of 

resulting changes that have been made 

in the final rule’s regulatory text. All 

comments received may be viewed on 

the http://www.regulations.gov website, 

docket ID WHD–2022–0003. 

Many of the comments the 

Department received can be 

characterized in the following ways: (1) 

very general statements of support or 

opposition; (2) personal anecdotes that 

did not address a specific aspect of the 

proposal; or (3) identical or nearly 

identical ‘‘campaign’’ comments sent in 

response to comment initiatives 

sponsored by various groups.106 Other 

comments provided specific data, 

views, and arguments, which are 

described throughout this preamble. 

Commenters expressed a wide variety of 

views on the merits of the Department’s 

proposal. Acknowledging that there are 

strong views on the issues presented in 

this rulemaking, the Department has 

carefully considered the comments 

submitted. 

As a general matter, most employees, 

labor unions, worker advocacy groups, 

and other affiliated stakeholders 

generally expressed support for the 

NPRM, asserting that its proposed 

guidance was more consistent with 

judicial precedent and would better 

protect employees from 

misclassification than the 2021 IC Rule. 

By contrast, most commenters who 

identified as independent contractors, 

business entities, and commenters 

affiliated with those constituencies 

generally expressed opposition to the 

NPRM, criticizing the Department’s 

proposed economic reality test as 

ambiguous and biased against 

independent contracting. 

The Department received several 

comments addressing topics that are 

beyond the scope of this rulemaking. 

For example, numerous individuals 

submitted comments expressing support 

or opposition to the ‘‘Protecting the 

Right to Organize Act’’, H.R. 842, 117th 

Cong. (2021), proposed legislation that 

would amend the NLRA. Other 

commenters expressed views on 

possible legislative reforms to extend 

wage-and-hour protections and other 

employment benefits to workers 

classified as independent contractors. 

See, e.g., Center for Cultural Innovation 

(‘‘CCI’’) (discussing collective 

bargaining rights and sector wage 

standards as ‘‘two promising approaches 

to guaranteeing [wage-and-hour] 

protections to independent workers’’); 

DoorDash (‘‘[L]aws should be updated 

to preserve the independence workers 

like Dashers value, while clearing the 

way for new protections and benefits 

that independent contractors have 

historically lacked.’’); Uber (‘‘We look 

forward to working with the Department 

to address the shortcomings of existing 

laws, including unlocking access to 

benefits for independent contractors 

such as app-based workers.’’). Such 

legislative efforts are beyond the scope 

of this rulemaking as they would require 

congressional action; the scope of this 

regulation is limited to providing 

guidance regarding employee or 

independent contractor classification 

under the FLSA as currently enacted. 

Some commenters addressed the 

rulemaking’s potential effect on workers 

other than those classified as 

independent contractors. For example, 

the Labor Relations and Employment 

Law Society at St. John’s University 

School of Law requested the Department 

to apply the NPRM’s proposed 

economic reality test to evaluate the 

employment status of unpaid student 

interns. Similarly, Boulette Golden & 

Marin L.L.P. asserted that the NPRM’s 

proposed guidance creates a ‘‘false 

dichotomy’’ where ‘‘every worker in the 

United States is either an employee or 

an ‘independent business.’ ’’ To clarify, 

this rulemaking specifically addresses 

the legal distinction between FLSAcovered employees and independent 

contractors; it does not replace or 

supplant the analyses that courts and 

the Department apply when evaluating 

FLSA coverage of other kinds of 

workers, such as unpaid interns, 

students, trainees, or volunteers.107

Coverage for these types of workers is 

not addressed in this rule. 

Finally, some commenters opined on 

potential compliance or enforcement 

measures. For example, the Sheet Metal 

and Air Conditioning Contractors’ 

National Association (‘‘SMACNA’’) 

requested that the Department introduce 

a mandatory ‘‘Notice of Independent 

Contractor Status’’ form for businesses 

and independent contractors in the 

construction industry, to notify ‘‘true 

independent contractors’’ of their tax 

obligations and help enforcement 

against misclassification. This 

suggestion, however, is outside the 

scope of this rulemaking, which has not 

proposed any mandatory notice and 

focuses specifically on the legal 

distinction between FLSA-covered 

employees and independent contractors. 

Further, some commenters raised 

compliance with employment 

verification requirements under the 

Immigration Reform and Control Act 

(IRCA), both to note that some 

employers are incentivized to 

misclassify immigrant workers as 

independent contractors in part because 

they do not have to verify the work 

authorization of independent 

contractors, see, e.g., Equal Justice 

Center; SMACNA, and to note that being 

able to operate as an independent 

contractor or in business for oneself 

provides economic opportunity for 

people who lack work authorization, see 

TheDream.US. Because this rulemaking 

pertains only to the question of 

employee classification under the FLSA, 

it does not address employers’ 

compliance obligations with respect to 

employees as determined under other 

laws, such as IRCA. The FLSA’s various 

worker protections apply to FLSAcovered employees regardless of their 

citizenship or immigration or work 

authorization status. 

III. Need for Rulemaking 

The Department recognizes that 

independent contractors and small 

businesses play an important role in our 

economy. It is also fundamental to the 

Department’s obligation to administer 

and enforce the FLSA that workers who 

should be covered under the Act are 

able to receive its protections. In the 

FLSA context, employees misclassified 

as independent contractors are denied 


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108Workers who are employees under the FLSA 

but are misclassified as independent contractors 

remain legally entitled to the Act’s wage-and-hour 

protections and are protected from retaliation for 

attempting to assert their rights under the Act. See 

29 U.S.C. 215(a)(3). However, many misclassified 

employees may not be aware that such rights and 

protections apply to them or face obstacles when 

asserting those rights. 

109 29 U.S.C. 202; see also Tony & Susan Alamo 

Found. v. Sec’y of Labor, 471 U.S. 290, 302 (1985) 

(noting that allowing workers who are employees 

under the Act to work as non-employees ‘‘would 

affect many more people than those workers 

directly at issue . . . and would be likely to exert 

a general downward pressure on wages in 

competing businesses’’). 

110 86 FR 1225; see also id. at 1206–07. 

111See 86 FR 24307–18. 

112See 87 FR 62226 (citing FCC v. Fox Television 

Stations, Inc., 556 U.S. 502, 515 (2009)). 

113 Id. (citing 86 FR 1172–75). 

114 Id. (citing 86 FR 1175). 

basic workplace protections, including 

the rights to minimum wage and 

overtime pay.108 Meanwhile, employers 

that comply with the law are placed at 

a competitive disadvantage compared to 

other businesses that misclassify 

employees, contravening the FLSA’s 

goal of eliminating ‘‘unfair method[s] of 

competition in commerce.’’ 109

As explained in the NPRM, the 

Department believes that the 2021 IC 

Rule did not fully comport with the 

FLSA’s text and purpose as interpreted 

by the courts. The Department further 

believes that leaving the 2021 IC Rule in 

place would have a confusing and 

disruptive effect on workers and 

businesses alike due to its departure 

from decades of case law describing and 

applying the multifactor economic 

reality test as a totality-of-thecircumstances test. While the 

Department agrees that the 2021 IC Rule 

identified a need to further develop and 

center the concept of economic 

dependence, the 2021 IC Rule included 

provisions that are in tension with 

longstanding case law, such as 

designating two ‘‘core factors’’ as most 

probative and predetermining that they 

carry greater weight in the analysis; 

considering investment and initiative 

only as part of the opportunity for profit 

or loss factor; and excluding 

consideration of whether the work 

performed is central or important to the 

potential employer’s business. These 

and other provisions in the 2021 IC Rule 

narrowed the economic reality test by 

limiting the facts that may be 

considered as part of the test—facts 

which the Department believes are 

relevant in determining whether a 

worker is economically dependent on 

the employer for work or is in business 

for themself. As the NPRM explained, 

this novel narrowing of the test under 

which certain factors are always 

elevated and other facts are essentially 

precluded from consideration may 

result in misapplication of the economic 

reality test and an increased risk of 

FLSA-covered employees being 

misclassified as independent 

contractors. Moreover, the 2021 IC Rule 

did not address the potential risks to 

workers of such misclassification.110

The Department previously explained 

these concerns about the 2021 IC Rule 

at length in the Withdrawal Rule,111

which was vacated by a district court 

(the Department’s appeal of the district 

court’s order is pending). The 

Department now believes it is 

appropriate to rescind the 2021 IC Rule 

and replace it with an analysis for 

determining employee or independent 

contractor status under the Act that is 

more consistent with existing judicial 

precedent and the Department’s 

longstanding guidance prior to the 2021 

IC Rule. While prior to the 2021 IC Rule 

the Department primarily issued 

subregulatory guidance in this area, the 

NPRM explained that rescinding the 

2021 IC Rule and replacing it with 

detailed regulations addressing the 

multifactor economic reality test—in a 

way that both more fully reflects the 

case law and continues to be relevant to 

the evolving economy—would be 

helpful for workers and businesses 

alike. Specifically, the Department 

explained that its proposed guidance 

would protect workers from 

misclassification while at the same time 

provide a consistent approach for those 

businesses that engage (or wish to 

engage) with properly classified 

independent contractors. 

In the NPRM, the Department 

acknowledged that its proposal departed 

from the approach taken in the 2021 IC 

Rule, and further discussed the rationale 

used in the 2021 IC Rule and why the 

Department had carefully reconsidered 

that reasoning and determined that 

modifications were necessary.112 As the 

NPRM noted, the Department had 

identified four reasons underlying the 

need to promulgate the 2021 IC Rule: (1) 

confusion regarding the meaning of 

‘‘economic dependence’’ because the 

concept is ‘‘underdeveloped’’; (2) lack of 

focus in the multifactor balancing test; 

(3) confusion and inefficiency due to 

overlapping factors; and (4) the 

shortcomings of the economic reality 

test that are more apparent in the 

modern economy.113 The 2021 IC Rule 

had also suggested as a fifth reason that 

the economic reality test hindered 

innovation in work arrangements.114 As 

discussed further below, the Department 

explained in the NPRM that it believed 

that the proposed rule’s approach offers 

a better framework for understanding 

and applying the concept of economic 

dependence by explaining how the 

touchstone of whether an individual is 

in business for themself is analyzed 

within each of the six economic realities 

factors. Further, the Department 

believed that the proposal’s discussion 

of how courts and the Department’s 

previous guidance apply the factors 

brings the multifactor test into focus, 

reduces confusion as to the overlapping 

factors, and provides a better basis for 

understanding how the test has the 

flexibility to be applied to changes in 

the modern economy, such that the 

Department no longer viewed the 

concerns articulated in the 2021 IC Rule 

as impediments to using the economic 

reality test formulated by the courts and 

the Department’s longstanding 

guidance. 

Thousands of commenters opined on 

this rulemaking. Most commenters that 

expressed support for the NPRM— 

including labor unions, worker 

advocacy organizations, and workers— 

were highly critical of the 2021 IC Rule, 

often referencing or attaching earlier 

comments filed in opposition to that 

rule when it was proposed. See, e.g., 

American Federation of Labor and 

Congress of Industrial Organizations 

(‘‘AFL–CIO’’); National Women’s Law 

Center (‘‘NWLC’’); Northwest Worker 

Justice Project; United Brotherhood of 

Carpenters and Joiners of America 

(‘‘UBC’’). Using common template 

language, several dozen advocacy 

organizations and local unions affiliated 

with the United Food and Commercial 

Workers (‘‘UFCW’’) characterized the 

2021 IC Rule as an ‘‘anti-worker rule’’ 

which ‘‘narrowed the scope of who is 

considered an employee under the 

FLSA.’’ Many of these commenters also 

asserted that the 2021 IC Rule 

‘‘contravenes the [FLSA’s] statutory 

definitions and Supreme Court 

precedent.’’ Additionally, numerous 

commenters supportive of the 

Department’s rulemaking asserted that 

replacing the 2021 IC Rule with the 

NPRM’s proposed economic reality test 

would reduce the misclassification of 

employees as independent contractors, 

given the proposed test’s fuller 

consideration of facts that were 

minimized or excluded under the 2021 

IC Rule. See, e.g., AARP; Joint Comment 

of the National Electrical Contractors 

Association and the International 

Brotherhood of Electrical Workers 

(‘‘NECA & IBEW’’); REAL Women in 

Trucking. 

A number of commenters supportive 

of the NPRM also stated that the 

economic reality test applied by courts 

is not only compatible with the modern 


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115See 86 FR 1246 (§ 795.105(b) (‘‘An employer 

suffers or permits an individual to work as an 

employee if, as a matter of economic reality, the 

individual is economically dependent on that 

employer for work.’’); see also infra section V.B.; 29 

CFR 795.105(b) (‘‘An ‘employee’ under the Act is 

an individual whom an employer suffers, permits, 

or otherwise employs to work. . . . [This is] meant 

economy, but preferable to the 2021 IC 

Rule’s elevation of certain factors as 

controlling. See, e.g., AARP (‘‘It is 

precisely because work arrangements 

are more varied and complex in today’s 

economy that no one factor should be 

controlling or exclusive to others.’’); 

Coalition of State Attorneys General and 

State Labor Departments (‘‘State AGs’’) 

(‘‘As State AGs who enforce and defend 

state wage and hour laws, we know that 

a flexible standard that considers the 

totality of the circumstances is required 

to address changing work 

arrangements.’’). Some business 

stakeholders expressed support for the 

NPRM, but for different reasons. For 

example, some employers—including 

Alto Experience, Inc., Gale Healthcare 

Solutions, IntelyCare, Inc., and various 

union-affiliated contractor 

associations—expressed support for the 

NPRM on the grounds that its guidance 

would better prevent rival businesses 

from obtaining an unfair competitive 

advantage through the misclassification 

of employees as independent 

contractors, consistent with the FLSA’s 

goal of eliminating unfair methods of 

competition in commerce. Additionally, 

some business stakeholders stated that 

they preferred the economic reality test 

applied by courts to the 2021 IC Rule. 

See, e.g., Ho-Chunk Inc. (supporting the 

proposed analysis because the 2021 IC 

Rule ‘‘deviat[ed] from established case 

law’’); Small Business Legislative 

Council (‘‘SBLC’’) (‘‘While the SBLC has 

not taken a position on whether the 

economic realities test strikes the right 

balance, applying a test like the 

economic realities test that has been 

fleshed out over years through case law 

and administrative guidance certainly 

makes this complex issue easier to 

navigate.’’); see also Opera America 

(‘‘The ‘totality-of-the-circumstances’ 

approach allows for the nuance 

necessary to truly evaluate the nature of 

an employment or contractor 

relationship’’); Texas Association for 

Home Care and Hospice (‘‘We support 

the reiteration in the [NPRM] that the 

enumerated factors should each be 

equally relevant, including any 

additional relevant factors that indicate 

economic dependence or 

independence.’’). 

Other commenters, including most 

business-affiliated stakeholders and 

many self-identified independent 

contractors, disagreed with the 

Department’s proposal to rescind and 

replace the 2021 IC Rule. Many of these 

commenters argued that the 2021 IC 

Rule was based on judicial precedent. 

See e.g., Coalition for Workforce 

Innovation (‘‘CWI’’); Independent 

Bakers Association (‘‘IBA’’); Pacific 

Legal Foundation. Commenters opposed 

to this rulemaking further stated that the 

2021 IC Rule’s analysis is clearer than 

the NPRM’s proposed economic reality 

test, asserting that returning to a totalityof-the-circumstances analysis would 

increase litigation and deter businesses 

from engaging with independent 

contractors. See, e.g., American Society 

of Travel Advisors (‘‘ASTA’’); Financial 

Services Institute (‘‘FSI’’); U.S. Chamber 

of Commerce (‘‘U.S. Chamber’’). While 

many commenters opposed to the 

NPRM acknowledged that the 

misclassification of employees as 

independent contractors might be a 

problem in some industries, several 

commenters disputed the need for 

generally applicable guidance that (in 

their view) could be disruptive to 

businesses and legitimate independent 

contractors in their particular 

industries. See, e.g., American 

Translators Association; IMC 

Companies, LLC; see also HR Policy 

Association. Finally, many selfidentified independent contractors and 

advocacy groups asserted that the 

Department’s proposal would 

‘‘misclassify’’ independent contractors 

as employees. See, e.g., American 

Society of Journalists and Authors; 

Cambridge Investment Research, Inc.; 

Fight for Freelancers; Transportation 

Intermediaries Association (‘‘TIA’’). 

Commenters opposed to this 

rulemaking agreed with the 2021 IC 

Rule’s assessment that the economic 

reality test traditionally applied by 

courts is incompatible with the modern 

economy. See, e.g., Institute for the 

American Worker (‘‘I4AW’’); Society for 

Human Resources Management 

(‘‘SHRM’’); TIA. Several commenters 

pointed to differences in the economy 

today compared to the 1930s and 1940s, 

when the FLSA was enacted and the 

Supreme Court first endorsed the 

economic reality test. See, e.g., Flex 

Association (‘‘Flex’’) (‘‘It is no longer 

1938, when Congress enacted the FLSA. 

Today, independent contractors can 

leverage app-based technology to build 

their own businesses in ways we could 

not have conceived even 20, let alone 

84, years ago.’’); National Association of 

Professional Insurance Agents (‘‘[I]n 

many ways, the 1938 Congress could 

not have conceived of the present-day 

global economy or the variations among 

worker statuses that have emerged and 

continue to evolve therefrom.’’). 

Several commenters stated that the 

Department’s proposal would deter 

businesses from engaging with 

independent contractors, which in turn 

would have disruptive economic 

consequences. In a joint comment, 33 

business advocacy organizations and 

over 100 local Chambers of Commerce 

(‘‘Coalition of Business Stakeholders’’) 

asserted that, under the NPRM, ‘‘the 

only scenario in which a hiring entity 

can be sure it is safe from an 

enforcement action by the DOL is when 

it classifies, or misclassifies, its workers 

as employees’’ and concluded that the 

NPRM would ‘‘upend millions of 

legitimate, productive independent 

contractor relationships.’’ See also, e.g., 

California Association of Realtors 

(C.A.R.) (‘‘This proposal as is would 

seriously disrupt the current and 

historical choices of the real estate 

industry that have been in place for at 

least fifty years.’’); FSI (‘‘Changes in 

laws or regulations that substantially 

limited or prohibited the use of 

independent contracting in financial 

services would harm those who 

currently work as independent 

contractors, harm consumers by 

reducing their financial literacy and 

thus their ability to accumulate wealth 

and save for retirement, and harm the 

economy overall.’’). 

Upon consideration of the comments 

and as described throughout this 

preamble, the Department continues to 

believe that this final rule’s approach 

offers a better framework for 

understanding and applying the concept 

of economic dependence by explaining 

how the touchstone of whether an 

individual is in business for themself is 

analyzed within each of the six 

economic reality factors. This rule’s 

discussion of how courts and the 

Department’s previous guidance apply 

the factors brings the multifactor test 

into focus, reduces confusion as to the 

overlapping factors, and provides a 

more consistent basis for understanding 

how the test has the flexibility to be 

applied to changes in the modern 

economy. Accordingly, the Department 

no longer views the concerns articulated 

in the 2021 IC Rule as impediments to 

using the economic reality test 

formulated by the courts and the 

Department’s longstanding guidance. 

The Department is, however, retaining 

its longstanding interpretation, as it did 

in the 2021 IC Rule, that economic 

dependence is the ultimate inquiry, and 

that an employee is someone who, as a 

matter of economic reality, is 

economically dependent on an 

employer for work—not for income.115


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to encompass as employees all workers who, as a 

matter of economic reality, are economically 

dependent on an employer for work. . . . 

Economic dependence does not focus on the 

amount of income earned, or whether the worker 

has other sources of income.’’). 

116See 86 FR 1172–73. 117 86 FR 1175. 

118See 87 FR 62227–29. The Department had 

previously identified and discussed these three 

concerns in its 2021 Withdrawal Rule. See 86 FR 

24307–15. 

Consistent with the 2021 IC Rule and as 

explained in the NPRM, the Department 

continues to believe that, as compared 

to the economic realities analysis 

generally, the particular concept of 

economic dependence is 

underdeveloped in the case law. As 

noted in the 2021 IC Rule, the 

Department and most courts have 

historically applied a ‘‘dependence-forwork’’ approach which considers 

whether the worker is dependent on the 

employer for work or depends on the 

worker’s own business for work. 

However, a minority of courts have 

applied a ‘‘dependence-for-income’’ 

approach that considers whether the 

worker has other sources of income or 

wealth or is financially dependent on 

the employer.116 Further, rather than 

giving primacy to only two factors as 

indicators of economic dependence, the 

Department believes that developing the 

concept of economic dependence is 

better accomplished by, in addition to 

elaborating on the general meaning of 

economic dependence, explaining how 

each of the six factors can illuminate the 

distinction between economic 

dependence on the employer for work 

and being in business for oneself. By 

focusing on that distinction in its 

discussion of each factor, the 

Department expects that this rule will 

provide clarity on the concept of 

economic dependence that the 2021 IC 

Rule indicated would be welcomed by 

workers and businesses, but will do so 

in a way that is consistent with case law 

and the Department’s prior guidance. 

Regarding commenters that stated that 

the 2021 IC Rule provided more clarity 

in distinguishing between factors, the 

Department believes, upon further 

consideration, that any purported 

confusion and inefficiency due to 

overlapping factors was overstated in 

the 2021 IC Rule. Moreover, when each 

factor is viewed under the framework of 

whether the worker is economically 

dependent or in business for themself, 

the rationale for considering facts under 

more than one factor is clearer. The 

Department explains in more detail in 

section V why considering certain facts 

under more than one factor is consistent 

with the totality-of-the-circumstances 

approach of the economic realities 

analysis used by courts. And the 

Department provides guidance 

regarding how to consider certain facts, 

such as the ability to work for others 

and whether the working relationship is 

exclusive, under more than one factor. 

The Department believes that this 

flexible approach is supported by the 

case law and preferable to rigidly and 

artificially limiting facts to only one 

factor, as the 2021 IC Rule did. 

Concerning comments that the 2021 

IC Rule was better suited to the modern 

economy, the Department believes that 

this final rule is well-equipped to 

address a wide array of traditional and 

emerging work relationships, as 

discussed throughout section V of this 

preamble. In the 2021 IC Rule, the 

Department stated that ‘‘technological 

and social changes have made 

shortcomings of the economic realities 

test more apparent in the modern 

economy,’’ thus justifying the 2021 IC 

Rule’s characterization of the integral, 

investment, and permanence factors as 

less important in determining a worker’s 

classification.117 Upon further 

consideration, however, the Department 

believes that the multifactor economic 

reality test relied on by courts where no 

one factor or set of factors is presumed 

to carry more weight is the most helpful 

tool for evaluating modern work 

arrangements. The test’s vitality is 

confirmed by its application over seven 

decades that have seen monumental 

shifts in the economy. Modern work 

arrangements utilizing applications or 

other technology are best addressed 

using the underlying economic reality 

test, which considers the totality of the 

circumstances in each working 

arrangement and offers a flexible, 

comprehensive, and appropriately 

nuanced approach which can be 

adapted to disparate industries and 

occupations. It can also encompass 

continued social changes because it 

does not presume which aspects of the 

work relationship are most probative or 

relevant and leaves open the possibility 

that changed circumstances may make 

certain factors more important in certain 

cases or future scenarios. 

The Department’s response to 

commenter feedback on the potential 

economic consequences of this 

rulemaking is discussed in the 

regulatory impact analysis provided in 

section VII. However, the Department 

continues to believe that proper 

application of the FLSA in the modern 

economy requires the flexibility of an 

economic reality test that does not 

predetermine the probative value of 

particular factors and which is 

adaptable to different industries and 

workers. As further explained in 

sections III.C and VII, commenter 

assertions of economic disruption 

related to this rulemaking are belied by 

the fact that this rulemaking merely 

aligns the Department’s interpretive 

guidance with the same legal standard 

courts have been applying for decades— 

and are continuing to apply today. 

The discussion that follows sets forth 

the Department’s explanation of the 

need for this rulemaking and responds 

to relevant commenter feedback. 

A. The 2021 IC Rule’s Test Is Not 

Supported by Judicial Precedent or the 

Department’s Historical Position and Is 

Not Fully Aligned With the Act’s Text as 

Interpreted by the Courts 

In the NPRM, the Department 

explained that it was proposing to 

rescind and replace the 2021 IC Rule in 

part because that rule was not fully 

aligned with the FLSA’s text as 

interpreted by the courts or the 

Department’s longstanding analysis, as 

well as decades of case law describing 

and applying the multifactor economic 

reality test. In relevant part, the NPRM 

explained that the Department had three 

primary and overlapping legal concerns 

with the 2021 IC Rule: (1) its creation of 

two ‘‘core factors’’ as the ‘‘most 

probative’’ in the economic reality 

analysis; (2) the oversized role of the 

control factor in its analysis; and (3) its 

altering of several economic reality 

factors to minimize or exclude key facts 

commonly analyzed by courts.118

After considering the comments, the 

Department continues to believe that the 

2021 IC Rule marked a departure from 

the way in which courts and the 

Department adopted and applied the 

multifactor, totality-of-thecircumstances economic reality test in 

which the factors do not have a 

predetermined weight and are 

considered in view of the economic 

reality of the whole activity. The 

Department also continues to believe 

that the 2021 IC Rule’s departure from 

longstanding precedent unduly 

narrowed the economic reality test by 

limiting facts that may be considered as 

part of the test that are relevant in 

determining whether a worker is 

economically dependent on the 

employer for work or is in business for 

themself. By doing so, the 2021 IC Rule 

artificially restricted the Act’s expansive 

definitions of ‘‘employer,’’ ‘‘employee,’’ 

and ‘‘employ,’’ undermining the Act’s 

text and purposes, as interpreted by 

courts and the Department’s 

longstanding interpretation of the 

economic reality test. 


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119 87 FR 62227 (citing 86 FR 1246 (§ 795.105(c) 

and (d))). 

120 86 FR 1246 (§ 795.105(c)); see also id. at 1201 

(advising that other factors would only outweigh 

the two core factors ‘‘in rare cases’’). 

121 Id. at 1246 (§ 795.105(c)). 

122See 86 FR 1196–98. 

123 Id. at 1196. 

124For example, although some commenters cited 

Walsh v. Medical Staffing of America, that case 

explicitly stated that ‘‘[n]o single factor in the sixfactor test is dispositive as ‘the test is designed to 

capture the economic realities of the relationship 

between the worker and the putative employer.’ ’’ 

580 F. Supp. 3d 216, 229 (E.D. Va. 2022) (quoting 

McFeeley, 825 F.3d at 241). The Medical Staffing 

court’s reference to Smith v. CSRA, 12 F.4th 396, 

413 (4th Cir. 2021), is unpersuasive since that case 

addressed employment status under the Americans 

with Disabilities Act, not the FLSA. See CSRA, 12 

F.4th at 412–13. Other cases cited by commenters 

in support of core factors are inapposite. See Brown 

v. BCG Attorney Search, No. 12 C 9596, 2013 WL 

6096932, at *1 (N.D. Ill. Nov. 20, 2013) (citing 

Knight v. United Farm Bureau Mut. Ins. Co., 950 

F.2d 377, 378 (7th Cir. 1991), which concerned 

Title VII not the FLSA); Meyer v. U.S. Tennis Ass’n, 

No. 1:11–cv–06268 (ALC)(MHD), 2014 WL 4495185, 

at *6 (S.D.N.Y. Sept. 11, 2014) (citing Wadler v. 

Eastern Coll. Athletic Conference, No. 00–civ–5671, 

1. The 2021 IC Rule’s Elevation of 

Control and Opportunity for Profit or 

Loss as the ‘‘Most Probative’’ Factors in 

Determining Employee Status Under the 

FLSA 

As the NPRM explained, the 2021 IC 

Rule set forth a new articulation of the 

economic reality test, elevating two 

factors (control and opportunity for 

profit or loss) as ‘‘core’’ factors above 

other factors, asserting that the two core 

factors have ‘‘greater probative value’’ in 

determining a worker’s economic 

dependence.119 Notably, the 2021 IC 

Rule further provided that if both core 

factors point toward the same 

classification—either employee or 

independent contractor—then there is a 

‘‘substantial likelihood’’ that this is the 

worker’s correct classification.120

Although it identified three other factors 

as additional guideposts and 

acknowledged that additional factors 

may be considered, it made clear that 

non-core factors ‘‘are less probative and, 

in some cases, may not be probative at 

all, and thus are highly unlikely, either 

individually or collectively, to outweigh 

the combined probative value of the two 

core factors.’’ 121 The NPRM explained 

that the Department believes that the 

2021 IC Rule’s elevation of the control 

and opportunity for profit or loss factors 

was in tension with the language of the 

Act as well as the longstanding judicial 

precedent, expressed by the Supreme 

Court and in appellate cases from across 

the circuits, that no single factor is 

determinative in the analysis of whether 

a worker is an employee or an 

independent contractor, nor is any 

factor or set of factors necessarily more 

probative of whether the worker is in 

fact economically dependent on the 

employer for work as opposed to being 

in business for themself. 

Many commenters expressed 

concerns about the 2021 IC Rule’s 

elevation of two ‘‘core factors’’ and 

supported the Department’s proposal to 

restore a totality-of-the-circumstances 

analysis where no factor (or set of 

factors) is given a predetermined 

weight. Several commenters asserted 

that the use of core factors was contrary 

to Supreme Court precedent. See, e.g., 

International Association of Machinists 

and Aerospace Workers, AFL–CIO; 

Laborers’ International Union of North 

America (‘‘LIUNA’’); National 

Employment Law Project (‘‘NELP’). The 

AFL–CIO and the North America’s 

Building Trades Unions (‘‘NABTU’’) 

further commented that the 2021 IC 

Rule’s elevation of control and 

opportunity for profit or loss effectively 

(and impermissibly) adopted a common 

law test for independent contractor 

status. The Signatory Wall and Ceiling 

Contractors Alliance (‘‘SWACCA’’) 

stated that ‘‘[b]y giving greater emphasis 

to these two factors . . . the [2021 IC 

Rule] improperly narrows the analysis 

of the facts and circumstances 

surrounding the business-worker 

relationship, thereby reducing the scope 

of the FLSA’s protections.’’ See also 

State AGs (commenting that the 2021 IC 

Rule’s ‘‘emphasis on two ‘core’ factors 

. . . negated the need to fully consider 

the remaining factors’’). Farmworker 

Justice commented that the 2021 IC 

Rule’s use of core factors could facilitate 

the misclassification of farmworkers, 

whose employment status is particularly 

dependent on the economic reality 

factors examining the skill and 

integrality of the work being performed. 

See also Joint Comment from the Center 

for Law and Social Policy & Governing 

for Impact (‘‘CLASP & GFI’’) (same). 

Other commenters supported the 2021 

IC Rule’s use of core factors and did not 

agree with the Department’s proposal to 

change the 2021 IC Rule’s analysis. 

Pointing to the Department’s review of 

appellate case law described in the 2021 

IC Rule preamble,122 several 

commenters stated that the elevation of 

the control and opportunity for profit or 

loss factors was fully consistent with the 

outcome of FLSA court decisions, if not 

their explicit reasoning. See, e.g., 

Associated Builders and Contractors 

(‘‘ABC’’); Coalition to Promote 

Independent Entrepreneurs (‘‘CPIE’’); 

Flex; FSI. Several commenters, like the 

Club for Growth, Flex, and Modern 

Economy Project (‘‘MEP’’) agreed with 

the 2021 IC Rule’s determination that 

the control and the opportunity for 

profit or loss factors ‘‘drive at the heart’’ 

of economic dependence.123 CWI 

asserted that ‘‘it is simply inaccurate 

that no court has determined, as a 

general rule, that any core factor should 

be afforded greater weight in 

determining whether an individual is an 

[employee].’’ See also CPIE. 

Having considered the comments, the 

Department continues to believe that the 

2021 IC Rule was in tension with the 

Act, judicial precedent, and 

congressional intent. As the Department 

explained in the NPRM, there is no 

statutory basis for such a predetermined 

weighting of the factors and the 

Department is concerned that 

prioritizing two core factors over other 

factors may not fully account for the 

Act’s broad definition of ‘‘employ,’’ as 

interpreted by the courts. The 

Department agrees with those 

commenters that noted that the 

elevation of two core factors improperly 

narrowed the analysis of the relevant 

facts, thereby reducing the scope of the 

FLSA’s protections. For example, if facts 

relevant to the control and opportunity 

for profit or loss factors both point to 

independent contractor status for a 

particular worker but weakly so, those 

factors should not be presumed to carry 

more weight than stronger factual 

findings under other factors (e.g., the 

existence of a lengthy working 

relationship under the ‘‘permanence’’ 

factor and the performance of work that 

does not require specialized skills and 

is an integral part of the business), 

which would indicate that the worker is 

an employee. 

Moreover, the Department is not 

aware of any court that has, as a general 

rule, elevated any one economic reality 

factor or subset of factors above others, 

despite receiving several comments 

suggesting that there was such case law. 

The 2021 IC Rule did not cite or rely on 

any particular decision where a court 

announced such a general rule 

predetermining the weight of some of 

the economic reality factors. Further, 

the Department has examined cases 

raised by commenters in support of the 

core factor analysis and none stand for 

the proposition that a predetermined 

elevation of any factor or set of factors 

is appropriate under the economic 

reality analysis for worker classification 

under the FLSA. Rather, the cases cited 

by commenters are either relevant to a 

different statute such as the Americans 

with Disabilities Act (‘‘ADA’’) or Title 

VII, reference a joint employment 

analysis rather than an employee 

classification analysis, or have had 

excerpts taken out of context.124 While 


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2003 WL 21961119, at *2 (S.D.N.Y. Aug. 14, 2003), 

a Title VII case not an FLSA case); see also Herman 

v. RSR Sec. Servs. Ltd., 172 F.3d 132, 135 (2d Cir. 

1999) (joint employment not worker classification); 

Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61 (2d 

Cir. 2003) (joint employment not worker 

classification); Razak v. Uber Technologies, Inc., 

951 F.3d 137, 145 (3d Cir. 2020) (making the 

uncontroversial statement that the control factor ‘‘is 

highly relevant to the FLSA analysis’’ while also 

reaffirming the Third Circuit’s statement that 

‘‘neither the presence nor absence of any particular 

factor is dispositive’’ and that ‘‘courts should 

examine the circumstances of the whole activity’’ 

(quoting DialAmerica, 757 F.2d at 1382)). 

125Rutherford, 331 U.S. at 730; see also Silk, 331 

U.S. at 716, 719 (denying the existence of ‘‘a rule 

of thumb to define the limits of the employeremployee relationship’’ and determining 

employment status based on ‘‘the total situation’’). 

126See, e.g., Parrish, 917 F.3d at 380 (‘‘And, 

obviously, the factors should not ‘be applied 

mechanically.’ ’’) (quoting Brock v. Mr. W 

Fireworks, Inc., 814 F.2d 1042, 1043–44 (5th Cir. 

1987)); Superior Care, 840 F.2d at 1059 (‘‘Since the 

test concerns the totality of the circumstances, any 

relevant evidence may be considered, and 

mechanical application of the test is to be 

avoided.’’). 

127Parrish, 917 F.3d at 380 (quoting Hickey, 699 

F.2d at 752); see also Scantland, 721 F.3d at 1312 

n.2 (‘‘The weight of each factor depends on the light 

it sheds on the putative employee’s dependence on 

the alleged employer, which in turn depends on the 

facts of the case.’’) (quoting Santelices, 147 F. Supp. 

2d at 1319)). 

128See, e.g., Silk, 331 U.S. at 716 (explaining that 

‘‘[n]o one [factor] is controlling’’ in the economic 

realities test); Morrison, 253 F.3d at 11 (‘‘No one 

factor standing alone is dispositive and courts are 

directed to look at the totality of the circumstances 

and consider any relevant evidence.’’); Dole v. 

Snell, 875 F.2d 802, 805 (10th Cir. 1989) (‘‘It is well 

established that no one of these factors in isolation 

is dispositive; rather, the test is based upon a 

totality of the circumstances.’’); Lauritzen, 835 F.2d 

at 1534 (‘‘Certain criteria have been developed to 

assist in determining the true nature of the 

relationship, but no criterion is by itself, or by its 

absence, dispositive or controlling.’’); Selker Bros., 

949 F.2d at 1293 (‘‘It is a well-established principle 

that the determination of the employment 

relationship does not depend on isolated factors 

. . . neither the presence nor the absence of any 

particular factor is dispositive.’’). 

129See McFeeley, 825 F.3d at 241 (‘‘While a sixfactor test may lack the virtue of providing 

definitive guidance to those affected, it allows for 

flexible application to the myriad different working 

relationships that exist in the national economy. In 

other words, the court must adapt its analysis to the 

particular working relationship, the particular 

workplace, and the particular industry in each 

FLSA case.’’). 

130The 2021 IC Rule referenced on several 

occasions a review of appellate case law since 1975 

to justify its elevation of two ‘‘core’’ factors. See 86 

FR at 1194, 1196–97, 1198, 1202, 1240. 

131 85 FR 60619. 

132Federal courts of appeals have repeatedly 

cautioned against the ‘‘mechanical application’’ of 

the economic reality factors, including in the cases 

cited in support of the predetermined elevation of 

core factions. See, e.g., Saleem v. Corp. Transp. 

Grp., Ltd., 854 F.3d 131, 139 (2d Cir. 2017) 

(‘‘Relevant FLSA precedent, despite endorsing the 

Silk factors, cautions against their ‘mechanical 

application.’ ’’) (quoting Superior Care, 840 F.2d at 

1059). And as explained herein, courts of appeals 

make clear that the analysis should draw from the 

totality of circumstances, with no single factor 

being determinative by itself. 

133See, e.g., Hobbs, 946 F.3d at 829 (‘‘No single 

factor is determinative. Rather, each factor is a tool 

used to gauge the economic dependence of the 

alleged employee, and each must be applied with 

this ultimate concept in mind.’’) (quotation marks 

omitted) (citing Hopkins v. Cornerstone Am., 545 

F.3d 338, 343 (5th Cir. 2008)); Parrish, 917 F.3d at 

380 (noting that no one factor is determinative and 

‘‘obviously, the factors should not ‘be applied 

mechanically’ ’’) (quoting Mr. W Fireworks, 814 F.2d 

at 1043); Saleem, 854 F.3d at 139–40 (explaining 

that employment relationships are determined by 

the circumstances of the whole activity); McFeeley, 

825 F.3d at 241 (‘‘No single factor is dispositive,— 

all six are part of the totality of circumstances 

presented.’’) (citing Baystate Alternative Staffing, 

Inc. v. Herman, 163 F.3d 668, 675 (1st Cir. 1998)) 

(internal citation and quotation marks omitted); 

Barlow v. C.R. England, Inc., 703 F.3d 497, 506 

(10th Cir. 2012) (‘‘ ‘None of the factors alone is 

dispositive; instead, the court must employ a 

totality-of-the-circumstances approach.’ ’’) (citing 

Baker v. Flint Eng’g & Const. Co., 137 F.3d 1436, 

1440 (10th Cir. 1998)); Schultz v. Capital Int’l Sec., 

Inc., 466 F.3d 298, 305 (4th Cir. 2006) (‘‘No single 

factor is dispositive; again, the test is designed to 

capture the economic realities of the relationship 

between the worker and the putative employer.’’). 

134See 86 FR 1196–97. 

courts and the Department may focus on 

some relevant factors more than others 

when analyzing a particular set of facts 

and circumstances, this does not mean 

that it is possible or permissible to 

derive from these fact-driven decisions 

universal rules regarding which factors 

deserve more weight than the others 

when the courts themselves have not set 

forth any such universal rules despite 

decades of opportunity. 

The Supreme Court has emphasized 

that employment status under the 

economic reality test turns upon ‘‘the 

circumstances of the whole activity,’’ 

rather than ‘‘isolated factors.’’ 125

Federal appellate courts have repeatedly 

cautioned against a mechanical or 

formulaic application of the economic 

reality test,126 and specifically warn that 

it ‘‘ ‘is impossible to assign to each of 

these factors a specific and invariably 

applied weight.’ ’’ 127 The 2021 IC Rule’s 

elevation of two ‘‘core factors’’ was also 

in tension with judicial precedent, 

expressed by the Supreme Court and 

federal courts of appeals, that no single 

factor in the analysis is dispositive.128

Thus, the 2021 IC Rule’s predetermined 

and mechanical weighting of factors was 

not consistent with how courts have, for 

decades, applied the economic reality 

analysis.129

Regarding comments relying on the 

2021 IC Rule’s reference to an appellate 

case law analysis to support the 

elevation of core factors, the Department 

has carefully reconsidered the cases 

cited in the 2020 NPRM and 2021 IC 

Rule in support.130 The appellate cases 

relied on in the 2020 NPRM 131 and 

2021 IC Rule to support the 2021 IC 

Rule’s creation of ‘‘core factors’’ do not, 

themselves, elevate these two factors— 

rather, the 2021 IC Rule made 

assumptions about the reasoning behind 

the courts’ decisions that are not clear 

from the decisions themselves and in 

some cases are contrary to the decisions’ 

instructions that the test should not be 

applied in a mechanical fashion.132 In 

fact, most of the decisions cited as 

supporting a ‘‘core factor’’ analysis 

based on the case law review explicitly 

deny assigning any predetermined 

weight to these factors, and instead state 

that they considered the factors as part 

of an analysis of the whole activity, with 

no determinative single factor.133

Particularly when viewed in the context 

of repeated statements from the courts 

that no one factor in the economic 

reality test is dispositive, divining from 

the cases a conclusion that is the exact 

opposite from what the courts say that 

they are doing is not persuasive. The 

Department now believes that the 2020 

NPRM and 2021 IC Rule’s discussion of 

the case law in support of the core 

factors improperly simplified the courts’ 

analysis in an attempt to quantify the 

probative value of certain factors in a 

manner that is facially inconsistent with 

the decisions themselves. 

Additionally, while there are certainly 

many cases in which the classification 

decision made by the court aligns with 

the classification indicated by the 

control and opportunity for profit or 

loss factors, the 2021 IC Rule did not 

identify any cases stating that those two 

factors are ‘‘more probative’’ of a 

worker’s classification than other 

factors. Rather, the 2021 IC Rule 

acknowledged that there are cases in 

which the classification suggested by 

the control factor did not align with the 

worker’s classification as determined by 

the courts.134 The Department has also 

identified appellate cases in which the 

classification suggested by the profit or 

loss factor, for example, did not align 

with the worker’s classification as 

determined by the courts or in which 

that factor was simply not addressed 

due to the fact-specific nature of the 

analysis. See, e.g., Nieman v. Nat’l 

Claims Adjusters, Inc., 775 F. App’x 

622, 625 (11th Cir. 2019) (concluding 

that worker was an independent 

contractor without considering profit or 

loss or integral factors because facts 

were not presented on those issues); 

Simpkins v. DuPage Hous. Auth., 893 

F.3d 962, 967 (7th Cir. 2018) (reversing 

the district court’s summary judgment 

decision and remanding case for 

determination of employee status 

without addressing opportunity for 

profit or loss); Thomas v. TXX Servs., 

Inc., 663 F. App’x 86, 90 (2d Cir. 2016) 

(reversing summary judgment on the 

issue of plaintiffs’ status as employees 


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135Unsurprisingly, most of the cases cited in 

support of the core factor analysis had multiple 

factors pointing in the same direction, not only 

control and opportunity for profit or loss. See, e.g., 

Hobbs, 946 F.3d at 830–36 (all factors pointing in 

same direction); Verma v. 3001 Castor, Inc., 937 

F.3d 221, 230–32 (3d Cir. 2019) (control, profit or 

loss, integral, skill, and investment all pointing in 

same direction); Gayle v. Harry’s Nurses Registry, 

Inc., 594 F. App’x 714, 717–18 (2d Cir. 2014) 

(control, profit or loss, and integral all pointing in 

same direction); Schultz, 466 F.3d at 307–09 

(control, profit or loss, investment, permanence, 

integral all pointing in same direction); Parrish, 917 

F.3d at 379–388 (control, profit or loss, skill, 

permanence all pointing same direction); Saleem, 

854 F.3d at 140–48 (control, profit or loss, 

investment, permanence all pointing same 

direction); Mid-Atl. Installation Servs., 16 F. App’x 

at 106–08 (control, profit or loss, investment, skill 

all pointing same direction); Off Duty Police, 915 

F.3d at 1059–1062 (profit or loss, investment, 

permanence, skill, and integral all pointing in same 

direction); McFeeley, 825 F.3d at 243–44 (control, 

profit or loss, investment, skill, and integral all 

pointing in same direction); Eberline v. Media Net, 

L.L.C., 636 F. App’x 225, 228–29 (5th Cir. 2016) 

(control, profit or loss, investment, and skill all 

pointing in same direction). 

136 Id. at 1246–47 (§ 795.105(c), (d)). 

under the FLSA but not discussing 

opportunity for profit or loss); Meyer v. 

U.S. Tennis Ass’n, 607 F. App’x 121, 

123 (2d Cir. 2015) (affirming summary 

judgment decision and concluding that 

district court did not err in determining 

that plaintiffs were independent 

contractors where district court found 

that the profit or loss factor ‘‘cuts both 

ways’’) (quoting Meyer, 2014 WL 

4495185, at *7); Johnson v. Unified 

Gov’t of Wyandotte Cnty./Kansas City, 

Kansas, 371 F.3d 723, 730 (10th Cir. 

2004) (affirming jury verdict that 

workers were independent contractors 

despite concluding that ‘‘[t]he jury 

could have viewed [the profit or loss] 

factor as not favoring either side’’); 

Donovan v. Tehco, Inc., 642 F.2d 141, 

143 (5th Cir. 1981) (noting that the 

worker ‘‘could elect to be paid by the 

hour or by the job and thus profit from 

foresight’’ but that this and other facts 

were not sufficient ‘‘to counterbalance 

the strong indicia of employee status’’). 

As such, it is clear that mechanically 

deconstructing certain court decisions 

and considering what those courts have 

said about only two factors—even when 

the courts did not present their analyses 

in this manner—ignores the broader 

approach that most courts have taken in 

determining worker classification. 

Moreover, it is necessarily the case 

when applying a multifactor balancing 

test that when any two factors of that 

test both point toward the same 

outcome, the probability of that 

indicated outcome aligning with the 

ultimate outcome increases. The 2021 IC 

Rule did not address whether a different 

combination of two factors would yield 

similar results. Yet, an in-depth review 

of the case law indicates that it would 

yield similar results, as most of the 

cases cited in the 2020 NPRM and 2021 

IC Rule in support of its core factor 

analysis had multiple factors pointing in 

the same direction.135 This further 

underscores the unduly narrow focus on 

two ‘‘core factors’’ in the 2021 IC Rule. 

In any event, the 2021 IC Rule 

significantly altered the ‘‘control’’ and 

‘‘opportunity for profit or loss’’ factors, 

changing what facts may be considered 

for each, as discussed more fully in 

section V. For example, contrary to the 

approach taken by most courts, the 2021 

IC Rule placed a significant focus on the 

worker’s control rather than the 

potential employer’s control and recast 

the opportunity for profit or loss factor 

as indicating independent contractor 

status based on the worker’s initiative or 

investment. Thus, irrespective of 

whether control and opportunity for 

profit or loss were more frequently 

aligned with the ultimate result in prior 

appellate cases, the new framing of 

these factors, as redefined in the 2021 IC 

Rule, set forth a new standard for 

analysis that is unsupported by 

precedent. 

2. The Role of Control in the 2021 IC 

Rule’s Analysis 

The 2021 IC Rule identified ‘‘the 

nature and degree of control over the 

work’’ as one of two core factors given 

‘‘greater weight’’ in the independent 

contractor analysis.136 In the NPRM, the 

Department expressed concern that 

elevating the importance of control in 

every FLSA employee or independent 

contractor analysis brings the 2021 IC 

Rule closer to the common law control 

test that courts have rejected when 

interpreting the Act. Accordingly, the 

NPRM proposed restoring control to one 

of six factors to be considered, with no 

single factor being determinative. 

Commenter views on the 2021 IC 

Rule’s emphasis on control overlapped 

with those responding to its creation of 

‘‘core factors.’’ For example, several 

commenters in support of the NPRM 

asserted that elevating the role of 

control makes the 2021 IC Rule’s 

analysis too similar to a common law 

control test. See, e.g., AFL–CIO; LIUNA; 

NABTU; State AGs. Lawyers’ Committee 

for Civil Rights Under Law & the 

Washington Lawyers’ Committee for 

Civil Rights and Urban Affairs 

(‘‘LCCRUL & WLC’’) discussed court 

decisions where workers were found to 

be misclassified employees under the 

economic reality test despite a lack of 

‘‘actual control’’ exercised by the 

employer, implying that the outcomes 

might have been different if courts had 

applied the 2021 IC Rule. NELP 

requested that the Department further 

deemphasize the relevance of control, 

asserting that ‘‘the ‘control’ factor is 

furthest removed from the statutory 

‘suffer or permit’ language, and that an 

absence of control is not particularly 

telling given that language.’’ Finally, 

several commenters asserted that the 

2021 IC Rule’s elevation of control is 

doubly problematic in view of 

alterations to the control factor which, 

in commenters’ views, make the factor 

less likely to indicate employee status. 

See NWLC (‘‘[T]he 2021 Rule not only 

gave the ‘control’ factor outsized 

importance, but impermissibly 

narrowed the concept of control itself by 

focusing on control over work exercised 

by the individual worker, as opposed to 

the right to control by an employer, and 

defining control primarily with 

reference to considerations that are 

often disregarded as irrelevant by 

courts.’’); see also AFL–CIO; 

International Brotherhood of Teamsters 

(‘‘IBT’’). 

As discussed earlier, commenters 

opposed to the NPRM stated that the 

control factor should be given added 

weight in the economic reality test 

(along with the opportunity for profit or 

loss factor), due to its purported strong 

correlation with the ultimate outcomes 

of prior FLSA court decisions. See, e.g., 

ABC; CPIE; Flex; FSI. CWI commented 

that the 2021 IC Rule’s elevation of 

control served a ‘‘definitional purpose,’’ 

identifying control as a foundational 

aspect of the ‘‘dependence’’ in 

‘‘economic dependence.’’ See also Club 

for Growth (‘‘[Because control is] 

virtually synonymous with what it 

means to be an independent 

businessperson . . . it makes sense that 

[it] typically matter[s] more than, for 

instance, the duration of a business 

relationship or a worker’s level of 

skill.’’). The U.S. Chamber commented 

that the 2021 IC Rule ‘‘rightly elevated 

the importance of control’’ because 

‘‘courts and scholars have found . . . no 

functional difference between’’ the 

economic reality and common law 

control tests. See also Club for Growth 

(‘‘It would be odd to say that control, 

which underpins the concept of 

employment and agency law generally, 

should have no more weight than, say, 

whether the worker bought his own 

boots.’’). 

As noted in the NPRM, although the 

2021 IC Rule’s analysis regarding who is 

an employee and who is an independent 

contractor was not the same as the 

common law control analysis, elevating 

the importance of control in every FLSA 

employee or independent contractor 

analysis brought the 2021 Rule closer to 


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137The Department previously identified this 

concern as one of the primary reasons for the 

Withdrawal Rule. See 86 FR 24311. 

138See Darden, 503 U.S. at 324–26; Portland 

Terminal, 330 U.S. at 150–51; and Rutherford, 331 

U.S. at 728. 

139 86 FR 1246–47 (§ 795.105(d)(1)(i)). 

140 Id. at 1247 (§ 795.105(d)(1)(ii)) (‘‘While the 

effects of the individual’s exercise of initiative and 

management of investment are both considered 

under this factor, the individual does not need to 

have an opportunity for profit or loss based on both 

for this factor to weigh towards the individual being 

an independent contractor.’’). 

141 Id.; see also id. at 1188 (‘‘[T]he Department 

reaffirms its position that comparing the individual 

worker’s investment to the potential employer’s 

investment should not be part of the analysis of 

investment.’’). 

142 Id. at 1247 (§ 795.105(d)(2)(iii)); see also id. at 

1248 (noting through an example in 

§ 795.115(b)(6)(ii) that ‘‘[i]t is not relevant . . . that 

the writing of articles is an important part of 

producing newspapers’’); accord id. at 1195 

(responding to commenters regarding the 

Department’s decision to shift to an ‘‘integrated unit 

of production’’ analysis). 

143See id. at 1246–47 (advising, in 

§ 795.105(d)(1)(i), that the control factor indicates 

employment status if a potential employer 

‘‘exercises substantial control over key aspects of 

the performance of the work’’) (emphasis added); 

id. at 1247 (advising, in § 795.110, that ‘‘a business’ 

contractual authority to supervise or discipline an 

individual may be of little relevance if in practice 

the business never exercises such authority’’); see 

also id. at 1203–04 (same in response to 

commenters). 

144See 86 FR 1247 (§ 795.105(d)(2)(iii)). 

145 Id. at 1168. 

146See supra section III.A. 

the common law control test that courts 

have rejected when interpreting the 

Act.137 The Supreme Court has 

repeatedly stated that the Act 

establishes a broader scope of 

employment for FLSA purposes than 

under a common law analysis focused 

on control.138 The Department remains 

concerned that the outsized role of 

control under the 2021 IC Rule’s 

analysis was contrary to the Act’s text 

and case law interpreting the Act’s 

definitions of employment and as such 

disagrees with commenters who 

suggested that control is essentially 

synonymous with economic 

dependence and should be given more 

weight. The Department, however, also 

disagrees with NELP that the FLSA’s 

‘‘suffer or permit’’ standard suggests that 

control should be afforded less weight 

than other economic reality factors, as 

courts have similarly not adopted such 

an approach. 

3. The 2021 IC Rule Improperly Altered 

Several Factors by Precluding the 

Consideration of Relevant Facts 

The NPRM stated that the Department 

remained concerned that the 2021 IC 

Rule’s preclusion of certain facts from 

being considered under the factors 

improperly narrowed the economic 

reality test and did not allow for a full 

consideration of all facts which might 

be relevant to determining whether a 

worker is economically dependent upon 

an employer for work or in business for 

themself. Examples of such narrowing 

from the 2021 IC Rule include: (1) 

stating that ‘‘control’’ indicative of an 

employment relationship must involve 

an employer’s ‘‘substantial control over 

key aspects of the performance of the 

work,’’ excluding requirements ‘‘to 

comply with specific legal obligations, 

satisfy health and safety standards, carry 

insurance, meet contractually agreedupon deadlines or quality control 

standards, or satisfy other similar 

terms;’’ 139 (2) making the ‘‘opportunity 

for profit or loss’’ factor indicate 

independent contractor status based on 

either the worker’s initiative or 

investment (even if either a lack of 

initiative or lack of investment suggests 

that the worker is an employee); 140 (3) 

disregarding the employer’s 

investments; 141 (4) disregarding the 

importance or centrality of a worker’s 

work to the employer’s business; 142 and 

(5) downplaying the employer’s 

reserved right or authority to control the 

worker.143 In each of these ways, the 

2021 IC Rule limited the scope of facts 

and considerations comprising the 

analysis of whether the worker is an 

employee or independent contractor. 

Numerous commenters opined on the 

2021 IC Rule’s general narrowing of the 

economic reality test and the extent to 

which it justifies this rulemaking. For 

example, IBT stated that ‘‘[t]he current 

rule conflicts with the intended broad 

definition and coverage of the [FLSA] 

and adopts an impermissibly narrow 

test for determining employee status.’’ 

See also, e.g., AFL–CIO (‘‘Overall, the 

2021 IC Rule contracted the coverage of 

the FLSA, strongly contrary to 

congressional intent and Supreme Court 

precedent.’’); Outten & Golden LLP 

(‘‘The January 2021 rule restricts FLSA 

coverage to a smaller subset of workers 

than those whose work is ‘suffer[ed] or 

permit[ted]’ under the statute’s 

expansive coverage.’’). While some 

commenters focused on the 2021 IC 

Rule’s elevation of ‘‘control’’ as a core 

factor, other commenters additionally 

addressed the rule’s alteration of 

individual economic factors. See, e.g., 

LCCRUL & WLC (describing the 2021 IC 

Rule as ‘‘elevating facts tending to show 

independent contractor status, while 

reducing the probative weight of other 

factors and downplaying facts tending 

to show employee status’’); NECA & 

IBEW (‘‘The 2021 IC Rule also narrowed 

the facts to be considered under the 

‘non-core’ factors.’’). The AFL–CIO and 

LCCRUL & WLC both identified two 

changes to the factors from the 2021 IC 

Rule as particularly problematic: the 

diminution of an employer’s reserved 

right to control, and the alteration of the 

‘‘integral part’’ factor (excluding any 

consideration of the importance or 

centrality of the work to the employer). 

Other commenters defended the merit 

of the 2021 IC Rule’s five economic 

reality factors, as discussed in greater 

detail in section V. As a general matter, 

these commenters praised the 2021 IC 

Rule’s description of the economic 

reality factors for reducing overlap and 

redundancy compared to the approach 

taken by courts, stating that such 

changes brought greater clarity to the 

regulated community. See, e.g., 

American Hotel & Lodging Association; 

Center for Workplace Compliance 

(‘‘CWC’’); FSI; MEP; National Retail 

Federation and the National Council of 

Chain Restaurants (‘‘NRF & NCCR’’). 

Discussing examples such as the 

‘‘integrated unit’’ factor’s exclusion of 

the importance or centrality of the 

individual’s work to the potential 

employer’s business,144 CWI asserted 

that the 2021 IC Rule ‘‘ensures that each 

factor is properly tailored to address the 

ultimate determinant of employee or 

independent contractor status— 

economic dependence.’’ 

Having considered the comments on 

this issue, the Department believes that 

the 2021 IC Rule altered various 

economic reality factors in ways that 

improperly narrowed the economic 

reality test, because such alterations 

minimized or excluded facts which in 

many cases are relevant for determining 

whether a worker is economically 

dependent upon an employer for work 

or in business for themself. The 

Department remains of the view that the 

2021 IC Rule’s alteration of several 

economic reality factors provides 

another important justification for this 

rulemaking. Commenter feedback on the 

proper articulation of each factor in the 

economic reality test is described in 

greater detail in section V. 

B. Confusion and Uncertainty 

Introduced by the 2021 IC Rule 

The 2021 IC Rule stated that it sought 

to ‘‘significantly clarify to stakeholders 

how to distinguish between employees 

and independent contractors under the 

Act.’’ 145 However, as previously 

discussed,146 the 2021 IC Rule 

introduced a new analysis regarding 

employee or independent contractor 

classification that was materially 

different from the longstanding analysis 

applied by courts and that included 


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147See generally 87 FR 62229. 148See generally id. 

149A far larger number of commenters—including 

those both supportive and critical of the NPRM— 

asserted that any regulatory guidance issued by the 

Department addressing employee or independent 

contractor status under the FLSA would be a nonbinding ‘‘interpretive rule,’’ given the Department’s 

lack of explicit rulemaking authority on the topic. 

See, e.g., Club for Growth; CWC; NELP; Winebrake 

& Santillo, LLC; WPI. 

several new concepts that neither courts 

nor the Department had previously 

applied. This final rule (and particularly 

rescission of the 2021 IC Rule) is needed 

in part because of the concern that the 

2021 IC Rule’s new analysis and 

concepts did not provide the intended 

clarity. 

First, as the Department explained in 

the NPRM, because the 2021 IC Rule 

departed from courts’ longstanding 

precedent, it is not clear whether courts 

would have at some point adopted the 

Rule’s analysis were it not being 

rescinded as part of this rulemaking. 

The Department further explained that 

this question could have taken years of 

appellate litigation in different federal 

courts of appeals to sort out, resulting in 

more uncertainty as to the applicable 

economic reality test. Businesses 

operating nationwide would have had to 

familiarize themselves with multiple 

standards for determining who is an 

employee under the FLSA. This 

litigation and these multiple standards 

would have likely caused confusion and 

uncertainty.147

Second, as the Department noted in 

the NPRM, the 2021 IC Rule would have 

introduced several ambiguous terms and 

concepts into the analysis for 

determining whether a worker is an 

employee under the FLSA or an 

independent contractor. For example, 

those following the guidance provided 

in the 2021 IC Rule had to grapple with 

what it means in practice for two factors 

to be ‘‘core’’ factors and entitled to 

greater weight. In addition, they had to 

determine, in cases where the two core 

factors point to the same classification, 

how ‘‘substantial’’ the likelihood is that 

they point toward the correct 

classification if the additional factors 

point toward the other classification. 

Additionally, as explained in the 

NPRM, the 2021 IC Rule did not specify 

whether the ‘‘additional factors’’ that 

could be considered under that rule had 

less probative value (or weight) than the 

three non-‘‘core’’ factors. Assuming that 

they did, the 2021 IC Rule would have 

essentially resulted in a three-tiered 

multifactor balancing test, with the 

‘‘core’’ factors given more weight than 

enumerated non-‘‘core’’ factors, and the 

enumerated non-‘‘core’’ factors given 

more weight than the ‘‘additional’’ 

factors. The 2021 IC Rule would have 

also improperly collapsed some factors 

into each other, so that, for example, 

investment and initiative would have 

been considered only as a part of the 

opportunity for profit or loss factor, 

requiring courts and the regulated 

community to reconsider how they have 

long applied those factors. These new 

concepts, this new weighing of the 

factors, and this new treatment of the 

factors would have likely caused 

confusion and uncertainty.148

In sum, the NPRM explained that the 

2021 IC Rule would have complicated 

rather than simplified the analysis for 

determining whether a worker is an 

employee or independent contractor 

under the FLSA, which is further 

justification for this final rule to rescind 

and replace the 2021 IC Rule. 

As a threshold matter, commenters 

disagreed over whether courts would 

adopt and apply the 2021 IC Rule’s 

analysis if it were left in place. Multiple 

commenters agreed with the 

Department’s concern, as described in 

the NPRM, that courts might not adopt 

or apply the 2021 IC Rule, which they 

criticized as an unlawfully narrow 

interpretation of the FLSA. See, e.g., 

LIUNA (discussing ‘‘the clear illegality 

of the 2021 Rule’’); NELP (describing the 

2021 IC Rule as ‘‘a legally incorrect 

standard’’ that ‘‘merits neither 

adherence, agency deference, nor 

smallest persuasive effect’’); UBC (‘‘The 

2021 Rule is so abundantly flawed that 

it is ripe for challenge under the 

Administrative Procedure Act.’’). The 

State AGs commented that ‘‘it could 

take years of litigation to determine if 

and how courts will adopt’’ the 2021 IC 

Rule’s analysis. See also SWACCA 

(‘‘Judicial disregard of the January 2021 

Rule’s interpretation of the FLSA would 

create considerable confusion.’’). UBC 

elaborated that uncertainty over judicial 

adoption of the 2021 IC Rule poses a 

significant legal risk to businesses, as 

‘‘any employer relying on the 2021 Rule 

faces the very real possibility that their 

presumed compliance with the FLSA 

would in fact be the opposite.’’ See also 

NECA & IBEW (asserting that the 2021 

IC Rule does not provide ‘‘certainty and 

clarity’’ for businesses because courts 

will continue applying a broader 

economic reality test). Notwithstanding 

their concerns with some aspects of the 

NPRM’s proposed guidance, some 

independent contractors and business 

stakeholders shared the Department’s 

concerns over whether courts would 

actually apply the 2021 IC Rule and the 

attendant risks that they would not. See, 

e.g., Ho-Chunk, Inc. (‘‘Ho-Chunk 

supports the Department’s revision of 

the 2021 IC Rule as we agree that [it] 

would have a confusing and disruptive 

effect due to its deviation from 

established case law.’’). 

Commenters opposed to the NPRM, 

however, expressed confidence that, if 

left in place, the 2021 IC Rule would be 

adopted by courts over time and 

promote greater uniformity in the law. 

See, e.g., IMC Companies (‘‘After 

decades of uncertainty and imprecise 

applications of the law, the [2021 IC 

Rule] was on the cusp of ushering in a 

new era of streamlined analysis and 

consistent court decisions across all 

jurisdictions.’’); NRF & NCCR (‘‘If left in 

place, [the 2021 IC Rule] would 

undoubtedly increase consistency.’’). 

Several of these commenters asserted 

that the Department’s concerns about 

the 2021 IC Rule’s reception by courts 

were speculative, unsupported by 

evidence, and premature. See, e.g., 

American Bakers Association; CPIE; 

Freedom Foundation. A comment from 

two fellows at the Heritage Foundation 

asserted that courts would adopt the 

2021 IC Rule given the deferential 

standard of review afforded to agency 

rules that fill statutory gaps under 

Chevron U.S.A., Inc. v. Natural 

Resources Defense Council, Inc., 468 

U.S. 837 (1984).149 Other commenters 

disputed the relevance of the 

Department’s concern over the 2021 IC 

Rule’s adoption by courts, asserting that 

courts were already applying different 

versions of the economic reality test and 

arriving at different outcomes prior to 

the 2021 IC Rule. See, e.g., ASTA; 

Independent Women’s Forum (‘‘IWF’’); 

see also Club for Growth (‘‘Without 

supporting experience, the critique is no 

more than the same argument that could 

be leveled against virtually any 

regulation.’’). Finally, many commenters 

questioned the likelihood that courts 

would adopt the NPRM’s proposed 

guidance, which they viewed as less 

consistent with the FLSA and judicial 

precedent than the 2021 IC Rule. See, 

e.g., CPIE; FSI; National Association of 

Manufacturers (‘‘NAM’’); Workplace 

Policy Institute of Littler Mendelson, 

P.C. (‘‘WPI’’). 

Having considered the comments, the 

Department continues to have serious 

concerns about the extent to which 

federal courts would have adopted the 

2021 IC Rule, were it not being 

rescinded by this rulemaking. The 

Department is unaware of a single 

federal court that has applied the 2021 

IC Rule’s analysis. To the contrary, to 

the Department’s knowledge, only a few 

court decisions have even considered 

the 2021 IC Rule and all expressly 


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150See Wallen v. TendoNova Corp., No. 20-cv790–SE, 2022 WL 17128983, at *4 (D.N.H. Nov. 22, 

2022) (noting that the 2021 IC Rule ‘‘is not 

controlling . . . and may not be valid’’); Harris v. 

Diamond Dolls of Nevada, LLC, No. 3:19-cv-00598– 

RCJ–CBC, 2022 WL 4125474, at *2 (D. Nev. July 26, 

2022) (denying defendants’ motion to reconsider 

the court’s earlier ruling that plaintiffs were FLSAcovered employees in part because the 2021 IC Rule 

is ‘‘not binding’’); Badillo-Rubio v. RF Constr., LLC, 

No. 18–CV–1092, 2022 WL 821421, at *13 (M.D. La. 

Mar. 17, 2022) (rejecting plaintiff’s argument that 

the court should apply the 2021 IC Rule’s 

‘‘integrated production’’ factor as ‘‘unnecessary’’ in 

determining that plaintiff was an employee). The 

Wallen decision is notable because, as the court 

explained, the First Circuit has neither adopted nor 

rejected a particular test, and thus the court was not 

bound by any prior circuit-level precedent. Still, the 

Wallen court declined to apply the 2021 IC Rule 

and applied ‘‘the standard six-factor test.’’ 2022 WL 

17128983, at *3–4. 

151See, e.g., Acevedo v. McCalla, No. MJM–22– 

1157, 2023 WL 1070436, at *3–5 (D. Md. Jan. 27, 

2023) (relying on the Fourth Circuit’s economic 

reality test to find that the worker failed to state a 

claim for relief under the FLSA without reference 

to 2021 IC Rule); Brunet v. GB Premium OCTG 

Servs. LLC, No. 4:21–CV–1600, 2022 WL 17730576, 

at *5–10 (S.D. Tex. Dec. 1, 2022) (applying the Fifth 

Circuit’s economic reality test without reference to 

2021 IC Rule), report and recommendation 

adopted, 2023 WL 2186441 (Feb. 23, 2023); 

Ajquiixtos v. Rice & Noodles, Inc., No. 4:21–CV– 

01546, 2022 WL 7055396, at *2–4 (S.D. Tex. Oct. 

12, 2022) (relying on the Fifth Circuit’s economic 

reality test and not referencing the 2021 IC Rule to 

conclude that a worker was an employee and not 

an independent contractor); Black v. 7714 Ent., 

Corp., No. 21–CV–4829, 2022 WL 4229260, at *6– 

8 (E.D.N.Y. July 29, 2022), report and 

recommendation adopted, 2022 WL 3643969 

(E.D.N.Y. Aug. 24, 2022) (relying on the Second 

Circuit’s economic reality test to conclude that a 

worker is an employee and not an independent 

contractor without reference to the 2021 IC Rule); 

Hill v. Pepperidge Farm, Inc., No. 3:22–CV–97– 

HEH, 2022 WL 3371321, at *2–5 (E.D. Va. Aug. 16, 

2022) (relying on the Fourth Circuit’s economic 

reality test to find that the worker has stated a claim 

for relief under the FLSA without reference to 2021 

IC Rule). 

152See supra section III.A.1. 

153See supra n.52. 

154See infra, section V.C.5. 

155 331 U.S. at 716. As discussed earlier, the 

Second and D.C. Circuit Courts of Appeals describe 

‘‘investment’’ and ‘‘opportunity for profit or loss’’ 

as a single factor in the economic reality test. See 

supra n.58. 

156 87 FR 62275 (proposed § 795.110(b)(4)). 

157 87 FR 62275 (proposed § 795.110(b)(2)). 

158See infra, section V.C. 

declined to apply its analysis.150 Other 

courts that have considered employee or 

independent contractor classification 

under the FLSA have continued 

applying a broader economic reality test 

consistent with their own longstanding 

precedent.151

The Department disagrees with 

commenter assertions that the 2021 IC 

Rule’s analysis was more likely to be 

adopted by courts than the analysis 

proposed in the NPRM. The 

Department’s analysis in this 

rulemaking is grounded in longstanding 

case law, while the new standard and 

new concepts introduced by the 2021 IC 

Rule were a very significant departure 

from that longstanding case law. For 

example, as previously discussed, the 

2021 IC Rule created ‘‘core’’ factors that 

were automatically given greater weight 

in the analysis, contrary to how every 

appellate court has described the 

economic reality test.152 In line with the 

case law, this final rule has no ‘‘core’’ 

factors. Similarly, while every federal 

court of appeals that has applied the 

integral factor in an FLSA independent 

contractor case has examined whether 

the worker’s work is an ‘‘integral part’’ 

of the potential employer’s business,153

no circuit applies the 2021 IC Rule’s 

narrower inquiry into ‘‘whether the 

work is part of an integrated unit of 

production’’ as the standard under this 

factor.154 And unlike the 2021 IC Rule, 

all but two circuits share the approach 

of listing ‘‘investment’’ and 

‘‘opportunity for profit and loss’’ as 

separate economic reality factors, 

consistent with the Supreme Court’s 

original listing of these factors in 

Silk.155

Some commenters alleged that certain 

aspects of the NPRM’s proposed 

guidance were departures from judicial 

precedent, such as its proposal that 

‘‘control implemented by the employer 

for purposes of complying with legal 

obligations, safety standards, or 

contractual or customer service 

standards may be indicative of 

control,’’ 156 and its proposed 

consideration of investments made by 

the potential employer as well as the 

worker.157 However, as the discussions 

of the control and investments factors in 

section V explain, this final rule’s 

guidance on both issues is wellsupported by the case law. Moreover, 

the Department has made meaningful 

changes in this final rule to aspects of 

its proposed guidance in response to 

comments, including the treatment of 

control exercised to comply with legal 

obligations and the consideration of 

investments made by the potential 

employer.158 The Department believes 

that such changes further align this final 

rule’s guidance with the analysis 

presently applied by courts, providing 

greater certainty for interested parties. 

Apart from the 2021 IC Rule’s 

reception by courts, commenters also 

disagreed over whether the 2021 IC 

Rule’s guidance brought clarity or 

confusion as a standalone matter. Some 

commenters asserted that the novelty of 

the 2021 IC Rule’s analysis, for example, 

would have created confusion as 

compared to the longstanding analysis 

applied by courts. See, e.g., NELP (‘‘By 

departing from decades of federal case 

law on the scope of the Act’s 

protections, and by downplaying 

relevant facts of an employment 

relationship in the analysis, the 2021 IC 

Rule . . . creates more confusion for 

employers and workers alike.’’); 

SWACCA (asserting that the ability to 

‘‘draw[] on 70 years of existing 

interpretations from the courts and 

Department of Labor guidance’’ under 

the NPRM’s guidance will ‘‘save time 

and resources for all stakeholders 

compared to the January 2021 Rule’s 

novel, untested weighted framework.’’). 

In contrast, other commenters 

asserted that rescission and replacement 

of the 2021 IC Rule would reduce 

certainty and clarity. See, e.g., 

Americans for Prosperity Foundation 

(‘‘AFPF’’); Coalition of Business 

Stakeholders; NAM; Republican 

Members of Congress; SHRM; U.S. 

Chamber. Numerous commenters that 

preferred the 2021 IC Rule identified its 

establishment of core factors as that 

rule’s most clarifying feature. See, e.g., 

Competitive Enterprise Institute (‘‘CEI’’); 

CWC; IWF; Landmark Legal Foundation; 

National Association of Women 

Business Owners (‘‘NAWBO’’); 

Raymond James Financial, Inc. 

(‘‘Raymond James’’). Some commenters 

additionally supported the 2021 IC 

Rule’s elimination of purported 

redundant or overlapping 

considerations in various economic 

reality factors. See, e.g., FSI (criticizing 

the NPRM’s proposed separation of the 

‘‘investment’’ and ‘‘opportunity for 

profit or loss’’ factors as ‘‘yet another 

way in which the [NPRM] . . . undo[es] 

the 2021 Rule’s clarifying efforts to 

articulate an appropriately weighted test 

with less overlapping redundancy’’); 

MEP. 

Having reviewed the comments, the 

Department continues to believe that the 

2021 IC Rule introduced uncertainty 

regarding the applicable legal standard 

for determining whether a worker is an 

employee or an independent contractor 

under the FLSA, contrary to its stated 

intent. Prior to the 2021 IC Rule, there 

was certainty as to the applicable legal 

standard for determining whether a 

worker was an employee or 

independent contractor under the FLSA 

because federal courts of appeals 

applied a totality-of-the-circumstances, 

economic reality test that did not 

elevate any factors above the others. 

Despite slight variation in the exact 

number and phrasing of specific 

economic reality factors, courts and the 

Department generally examined the 

same economic reality factors. The 2021 

IC Rule, however, injected uncertainty 

into this area of the law by putting forth 

new guidance that was at odds (for all 

of the reasons discussed herein) with 


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159To the extent that there was any uncertainty 

around outcomes when applying federal appellate 

case law beyond what would be expected from any 

fact-specific test, the standard that courts and the 

Department would apply prior to the 2021 IC Rule 

was known. And with this rulemaking, the 

Department hopes to decrease any uncertainty 

around outcomes by providing detailed guidance 

about the application of each factor that is 

consistent with the case law, as opposed to the new 

concepts that the 2021 IC Rule introduced. 

160The Department acknowledges that the 2021 

IC Rule includes several important principles from 

the case law, such as: economic dependence is the 

ultimate inquiry, the list of economic reality factors 

is not exhaustive, and no single factor is 

determinative. However, as explained herein, the 

2021 IC Rule was, on balance, a departure from the 

case law to an extent that it introduced uncertainty. 

161The 2021 IC Rule explained that it rejected 

commenter requests to ‘‘state that if the two core 

factors point towards the same classification, there 

is no need to consider any other factors’’ because 

‘‘in some circumstances, the core factors could be 

outweighed by particularly probative facts related 

to other factors.’’ 86 FR 1202. 

162The 2021 IC Rule explained that ‘‘there may 

be circumstances where one or more of the non-core 

factors, upon consideration, has little or no 

probative value.’’ 86 FR 1202 (emphasis added). 

163Cf. 86 FR 1201 (‘‘[T]he rule’s standard for 

employment remains broader than the common 

law.’’); see also id. at 1239 (rejecting the adoption 

of a common law control test in the analysis of 

regulatory alternatives). 

164See 87 FR 62230 (describing commenter 

feedback from the Withdrawal Rule asserting that 

‘‘misclassification is rampant in low-wage, laborintensive industries where women and people of 

color, including Black, Latinx, and AAPI workers, 

as overrepresented’’). 

165 Id. 

166See 87 FR 62266 (citing a 2020 study from 

NELP estimating that ‘‘10 to 30 percent of 

employers (or more) misclassify their employees as 

independent contractors). 

the substantive standard applied by 

courts. As a result of the 2021 IC Rule, 

the regulated community was 

confronted with inconsistent standards 

for interested parties to apply to 

determine a worker’s status—the test 

from the 2021 IC Rule and the totalityof-the-circumstances test in federal 

appellate case law.159 Leaving the 2021 

IC Rule in place would have risked 

greater confusion regarding its relation 

to well-settled circuit precedent. Thus, 

the 2021 IC Rule’s new standard 

introduced uncertainty that did not 

exist before.160

Additionally, the Department 

continues to believe that the aspects of 

the 2021 IC Rule’s analysis introduced 

confusion, making that rule’s guidance 

vulnerable to misapplication. Confusion 

about how to apply the 2021 IC Rule 

was evident in many of the comments 

submitted in opposition to the 

Department’s proposal to rescind and 

replace that rule. For example, several 

commenters inaccurately described the 

2021 IC Rule as establishing a ‘‘twofactor test,’’ see, e.g., CEI; National 

Demolition Association (‘‘NDA’’), while 

others mistakenly assumed that noncore factors were only considered when 

the two core factors pointed to opposite 

classification outcomes. See, e.g., 

Information Technology & Innovation 

Foundation; News/Media Alliance (‘‘N/ 

MA’’); Professional Golfers’ Association 

of America (‘‘PGA’’).161 Some 

commenters appeared to conflate the 

reduced importance of non-core factors 

under the 2021 IC Rule’s analysis with 

a reduced need to consider such factors 

at all. See, e.g., National Federation of 

Independent Businesses (‘‘NFIB’’); 

SHRM.162 Additionally, some 

commenters viewed the 2021 IC Rule’s 

economic reality test, in its totality, as 

essentially the same as a common law 

control test.163 See The National Council 

of Agricultural Employers (asserting that 

common law definitions of independent 

contractor status ‘‘are consistent with 

the 2021 IC Rule’’); U.S. Chamber 

(asserting that ‘‘despite the ostensible 

variances between the economic 

realities and common law control tests, 

‘there is no functional difference 

between’ these tests’’). 

Commenter confusion about the 2021 

IC Rule is unsurprising because that rule 

set forth a novel analysis which has not 

been applied by any court. The 

confusion evident in the comments 

received reinforces the Department’s 

assessment, as explained in the NPRM, 

that the 2021 IC Rule could have 

resulted in misapplication of the 

economic reality test and may have 

conveyed to employers that more 

workers could be classified as 

independent contractors than prior to 

the 2021 IC Rule. 

C. Risks to Workers From the 2021 IC 

Rule 

In the NPRM, the Department 

explained that to the extent the 2021 IC 

Rule’s guidance resulted in the 

misclassification of employees as 

independent contractors, the resulting 

denial of FLSA protections could harm 

the affected workers. These protections 

include being paid at least the federal 

minimum wage for all hours worked, 

overtime compensation for hours 

worked over 40 in a workweek, and 

protection against retaliation for 

complaining about, for example, a 

violation of the FLSA. The Department 

further explained in the NPRM that the 

2021 IC Rule did not fully consider 

these potential consequences for 

workers. The NPRM noted that this 

result could have a disproportionate 

impact on women and people of color, 

to the extent such workers are 

overrepresented in low-wage positions 

where misclassification is more 

likely.164 The NPRM further noted that 

women and people of color experience 

multiple types of economic inequities in 

the labor force, including gender and 

racial wage gaps and occupational 

segregation, and that the 

misclassification of these workers as 

independent contractors deprives them 

of wage and hour protections that could 

help alleviate some of this inequality.165

Many commenters, including worker 

advocacy groups, labor unions, and 

other stakeholders, shared views about 

the 2021 IC Rule’s effect on employees 

vulnerable to misclassification. The 

Department also received significant 

feedback regarding the potential effects 

of this rulemaking on independent 

contractors, as well as from commenters 

who did not agree that the 2021 IC Rule 

would or could increase the prevalence 

of misclassification. 

Many commenters agreed with the 

Department’s assessment that the 

misclassification of employees as 

independent contractors remains a 

serious problem for workers, businesses, 

and the broader economy. Several 

commenters referenced studies or data 

estimating a high prevalence of 

misclassification in the economy, in 

addition to those mentioned in the 

NPRM’s regulatory impact 

analysis.166 See, e.g., NABTU (citing 

multiple studies estimating the 

misclassification of construction 

workers in various states); State AGs 

(discussing a June 2022 report 

estimating that ‘‘at least 10 percent of 

New York State’s workers are 

misclassified as independent 

contractors’’ and a December 2022 

report estimating that ‘‘approximately 

259,000 workers in Pennsylvania are 

wrongly classified as independent 

contractors’’). CLASP & GFI asserted 

that the misclassification of employees 

as independent contractors is 

‘‘occurring with increased frequency as 

workplaces ‘fissure,’ ’’ and ‘‘firms . . . 

outsource bigger and bigger portions of 

their workforces to other entities and to 

workers themselves.’’ Similarly, the 

UFCW asserted that misclassification is 

a ‘‘pervasive and growing problem,’’ 

citing one report showing that in 

Washington state, misclassification 

increased from 5 percent of employers 

misclassifying workers in 2008 to 14 

percent of employers misclassifying 

workers in 2017, with construction 

workers, clerical workers, and hotel and 

restaurant workers the most likely to be 

misclassified.’’ Several commenters 

emphasized the prevalence of 

misclassification in specific industries. 

See, e.g., American Federation of State, 


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County and Municipal Employees 

(custodial work); Farmworker Justice 

(agriculture); IntelyCare Inc. (nursing); 

National Domestic Workers Alliance 

(‘‘NDWA’’) (domestic and home care); 

REAL Women in Trucking (trucking); 

Service Employees International Union 

(janitorial and gig work); SMACNA 

(construction). 

Many commenters discussed how the 

misclassification of employees as 

independent contractors deprives 

workers of wages. SWACCA, for 

example, commented that ‘‘the 

estimated 20 percent of construction 

workers who should be treated as 

employees (but are not) lose close to $1 

billion in wages annually.’’ Commenters 

pointed out that misclassification 

undercuts employers that comply with 

the law and causes a ‘‘race to the 

bottom’’ in labor standards. See, e.g., 

AARP; Indiana, Illinois, Iowa 

Foundation for Fair Contracting; 

SWACCA (estimating that ‘‘construction 

companies that treat their workforce as 

independent contractors save at least 20 

to 30 percent on labor costs’’). Gale 

Healthcare Solutions stated that 

‘‘[t]emporary staffing platform 

companies that hire nursing staff as W2 

employees lose talent to companies that 

use a 1099 model, as 1099 agencies 

promote wages that appear higher 

because they do not provide traditional 

protections of employment or account 

for withholding taxes and additional 

expenses required by the W–2 model.’’ 

Alto Experience Inc., a ridesharing 

company that classifies its drivers as 

employees, asserted that the 

misclassification of employees as 

independent contractors constitutes an 

‘‘unfair method of competition in 

commerce’’ that the FLSA was passed to 

prevent. 

Beyond wage effects, commenters 

identified and discussed many other 

consequences of worker 

misclassification. For example, the 

NWLC asserted ‘‘by strengthening the 

employment test to reduce 

misclassification, the Department can 

ensure that more nursing mothers will 

be able to hold their employers 

accountable for providing appropriate 

facilities and adequate break time.’’ See 

also A Better Balance (‘‘[W]e are pleased 

that this rule will help to ensure that 

workers are able to access their rights 

under the Family and Medical Leave 

Act and the Break Time for Nursing 

Mothers law.’’). As discussed more fully 

in section VII, commenters also raised 

other negative consequences of 

misclassification for workers beyond 

those directly related to the FLSA, such 

as: decreased access to employment 

benefits such as health insurance or 

retirement benefits, inability to access 

paid sick leave, unemployment 

insurance, and worker’s compensation, 

a lack of ability to take collective action 

to improve workplace conditions, and a 

lack of anti-discrimination protections 

under various civil rights laws. See, e.g., 

Smith Summerset & Associates LLC; 

UFCW. 

Several commenters emphasized the 

uniquely harmful risks and 

consequences of misclassification for 

workers in certain demographic groups. 

See, e.g., AARP (senior workers); 

California Immigrant Policy Center 

(immigrant workers); Equal Justice 

Center (low-income workers); LCCRUL 

& WLC (workers of color); NWLC 

(women workers). In a joint comment, 

the Action Center on Race and the 

Economy, Color of Change, Liberation in 

a Generation, Unemployed Workers 

United, MediaJustice, the National 

Black Worker Center, Muslims for Just 

Futures, Raise Up South Florida, 

Human Impact Partners, ROC United, 

Interfaith Center on Corporate 

Responsibility, HEAL Food Alliance, 

and the Public Accountability Initiative/ 

LittleSis.org (‘‘ACRE et al.’’) pointed to 

the overrepresentation of workers of 

color in low-wage, labor-intensive 

industries where misclassification is 

pervasive and asserted that they ‘‘view 

misclassification as a critical racial 

justice issue that the DOL must help 

address.’’ 

Many commenters agreed with the 

Department’s assessment that the 2021 

IC Rule has increased the risk of 

misclassification. For example, 

SWACCA asserted that challenges in 

enforcing misclassification in the 

construction industry ‘‘would be 

compounded if enforcement officials 

had to pursue bad actors under the 

January 2021 Rule’s novel interpretation 

of the law that could require protracted 

litigation to clarify and would permit 

more contractors to argue that their 

classification of workers as independent 

contractors is permissible, or at least 

defensible, under the FLSA.’’ The 

International Association of Machinists 

and Aerospace Workers asserted that the 

2021 IC Rule ‘‘creates perverse 

incentives for companies to misclassify 

workers,’’ because ‘‘[t]he more easily a 

company can misclassify its workforce, 

the more incentive for other companies 

to do the same, creating a ‘race to the 

bottom’ in employment practices and 

social standards to the detriment of 

workers.’’ CLASP & GFI and 

Farmworker Justice both commented 

that the 2021 IC Rule’s elevation of the 

‘‘control’’ and ‘‘opportunity for profit or 

loss’’ factors might exacerbate 

misclassification among farmworkers, 

whose employment status is particularly 

dependent on the consideration of 

factors other than the 2021 IC Rule’s 

‘‘core’’ factors. 

Commenters opposed to this 

rulemaking generally did not dispute 

the occurrence or importance of 

employee misclassification, at least in 

certain industries. For example, a 

lawyer representing employers 

acknowledged that ‘‘independent 

contractor status can be abused.’’ See 

also, e.g., HR Policy Association (‘‘The 

Association does not question the fact 

that worker misclassification does occur 

and that individuals may be deprived of 

rights and benefits crucial for their 

livelihood.’’); U.S. Black Chambers, Inc. 

(‘‘[W]e agree that worker 

misclassification is a pressing issue to 

be solved at the Federal level[.]’’). Some 

commenters, however, alleged that 

rescinding and replacing the 2021 IC 

Rule would be an overbroad solution for 

a problem that could be addressed with 

industry-specific measures. See H.R. 

Policy Association; IMC Companies, 

LLC (trucking company) (‘‘What we do 

ask is that the WHD and legislators 

across our country recognize that 

targeted regulation of these [app-based 

technology] companies is the answer to 

this issue.’’). Other commenters asserted 

that, in the NPRM, the Department 

failed to explain how the 2021 IC Rule 

has increased the risk of worker 

misclassification or otherwise hampered 

efforts to reduce misclassification. See, 

e.g., IWF (‘‘The Department has 

provided no evidence that these drastic 

changes are necessary to prevent 

misclassification, or even that 

widespread misclassification actually 

occurred under the 2021 Rule.’’); 

NAWBO. Some commenters referenced 

Departmental press releases published 

after the March 2022 CWI v. Walsh 

decision (which ruled that the 2021 IC 

Rule had taken effect in March 2021) as 

evidence that the Department is 

successfully using the 2021 IC Rule to 

combat misclassification. See, e.g., 

Coalition of Business Stakeholders 

(‘‘DOL has repeatedly boasted about the 

cases it has brought showing improper 

classification of independent 

contractors and the amounts of back pay 

remedies it has secured.’’); see also Flex; 

U.S. Chamber. 

Having considered the comments, the 

Department remains of the view that the 

misclassification of employees as 

independent contractors is a serious 

problem affecting workers who do not 

receive proper wages and businesses 

that have to compete in the economy 

against businesses that unlawfully 

misclassify their workers. As explained 

more fully in section III.B., the 2021 IC 


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167The 2021 IC Rule asserted that ‘‘legal 

uncertainty arising from . . . shortcomings of the 

multifactor economic reality test may deter 

innovative, flexible work arrangements,’’ but 

declined to provide any evidence in response to 

comments questioning that claim, explaining it was 

‘‘unclear what empirical data could measure 

innovation that is not occurring due to legal 

uncertainty.’’ 86 FR 1175. 

Rule increased the risk of worker 

misclassification by adding considerable 

confusion and uncertainty over the 

proper analysis for distinguishing 

between FLSA-covered employees and 

independent contractors. By elevating 

certain factors, devaluing other factors, 

and precluding the consideration of 

certain relevant facts, the novel—and 

unprecedented—analysis in the 2021 IC 

Rule has improperly narrowed the focus 

of the inquiry in a way that may have 

led employers to believe the test no 

longer includes as many considerations; 

the comments received evidenced such 

misunderstanding. If widespread 

misperceptions about the 2021 IC Rule 

articulated by some of its supporters in 

the comments are any indication, such 

confusion and misapplication of that 

rule could deprive many workers of 

protections they are entitled to under 

the FLSA. 

The Department’s 2022 press releases 

addressing misclassification 

enforcement referenced by some 

commenters primarily involved 

investigations by the Department that 

were initiated before the 2021 IC Rule 

was published and/or covered a period 

of investigation prior to March 8, 2021. 

In any event, the Department’s ability to 

pursue some enforcement actions 

involving misclassification while 

applying the 2021 IC Rule’s guidance is 

not a persuasive reason to retain the 

2021 IC Rule. The Department is not 

promulgating this rule because the 2021 

IC Rule renders the Department 

powerless to enforce misclassification. 

Rather, the 2021 IC Rule’s guidance 

injected a new framework for analyzing 

whether workers are employees or 

independent contractors under the 

FLSA that is inconsistent with decades 

of case law interpreting the Act. As 

explained earlier, the Department is 

further concerned that widespread 

stakeholder confusion over the 2021 IC 

Rule and its guidance regarding how its 

factors should be applied (as discussed 

in section II.B.) may be causing some 

misclassification that would not occur 

in the absence of the rule. For these 

reasons, the Department believes that 

rescinding the 2021 IC Rule will likely 

both reduce misclassification and 

restore the Department’s ability to 

consider all relevant facts under a 

totality-of-the-circumstances economic 

reality test that does not predetermine 

the weight of certain factors, consistent 

with the text of the FLSA and decades 

of judicial precedent. 

Other commenters expressed concern 

that rescinding the 2021 IC Rule will 

result in the widespread reclassification 

of workers who should be considered 

independent contractors. See Cambridge 

Investment Research, Inc. (‘‘[T]he 

practical result of the [NPRM] . . . will 

be that many workers—including 

workers who want to be independent 

contractors—will be reclassified as 

employees under the FLSA.’’); SBA 

Office of Advocacy (‘‘Small businesses 

and independent contractors have told 

Advocacy that this rule may be 

disruptive and detrimental to the 

millions of businesses in industries that 

rely upon the independent contractor 

model.’’). This concern was also 

expressed by numerous self-identified 

independent contractors, who feared 

reclassification or lost work 

opportunities as an unintended 

consequence of the rulemaking. 

Some commenters contended that the 

NPRM’s guidance was inappropriately 

broad and would encompass as 

employees individuals who they assert 

are appropriately classified as 

independent contractors. See, e.g., IBA 

(asserting that the NPRM would 

improperly ‘‘broaden the test and 

thereby expand the meaning of 

‘employee’ to encompass individuals 

who under current law would qualify 

independent contractors’’); National 

Association of Insurance and Financial 

Advisors (‘‘NAIFA’’) (‘‘NAIFA believes 

that [the NPRM] wrongly construes the 

scope of FLSA coverage and would thus 

misclassify many independent 

insurance agents and brokers as 

employees.’’). Other commenters 

asserted that ambiguity inherent in 

reverting to a ‘‘totality-of-thecircumstances’’ analysis would deter 

businesses from engaging with 

independent contractors. See, e.g., 

Beacon Center of Tennessee (asserting 

that the NPRM would ‘‘rob[ ] businesses 

of the regulatory certainty needed to 

effectively operate and make personnel 

decisions, which is likely to have a 

chilling effect on hiring new employees 

or contractors’’); NFIB (‘‘Companies . . . 

will be less likely to engage a contractor 

or consultant if there’s uncertainty over 

a worker’s status since a finding of 

misclassification can result in ruinous 

penalties’’); Opportunity Solutions 

Project (‘‘If implemented, the proposal 

would make it more difficult for 

entrepreneurs and independent workers 

to find companies willing to take on the 

risk of becoming their client.’’). 

Other commenters disagreed that the 

Department’s proposal would result in 

the reclassification of appropriately 

classified independent contractors. For 

example, an individual commenter 

wrote that ‘‘[i]mproving classification 

rules and returning to a back-to-basics 

approach used for over fifty years does 

not mean independent contractors will 

automatically be classified as 

employees.’’ Noting that ‘‘[t]he Proposed 

Rule is a restatement of decades of court 

precedents and WHD guidance,’’ UBC 

remarked that ‘‘[a]ny employer who has 

been correctly classifying its 

independent contractors has no worry 

that the Proposed Rule will result in 

liability under the FLSA.’’ Multiple 

business stakeholders and selfidentified independent contractors 

commented that they did not expect 

such reclassification for workers in their 

industry. For example, LPL Financial 

stated that it believes that the 

Department’s proposal ‘‘will not result 

in the reclassification of independent 

financial professionals as employees’’ 

and it ‘‘commend[ed] the DOL for 

undertaking the rulemaking process and 

proposing a rule that recognizes that 

entrepreneurs who establish and build 

small businesses utilizing their 

managerial skills and professional 

expertise can operate in an independent 

contractor model to create 

multigenerational financial advising 

practices.’’ Over 1,000 financial advisors 

affiliated with Ameriprise and LPL 

Financial submitted separate campaign 

comments in support of the NPRM, 

asserting that ‘‘[the] proposal will allow 

me to continue to choose to be an 

independent contractor.’’ See also 

International Dale Carnegie Franchise 

Association (‘‘The IDCFA is confident 

that independent instructors would not 

be reclassified as employees under the 

Proposed IC Rule.’’). 

Having considered the comments, the 

Department continues to believe that 

this rulemaking will not jeopardize 

legitimate independent contracting 

arrangements. Fears to the contrary are 

not realistic given that the Department 

is adopting guidance derived from the 

same analysis that courts have applied 

for decades and have been continuing to 

apply since the 2021 IC Rule took effect. 

There is no evidence that the status quo 

prior to the 2021 IC Rule was hindering 

the use of independent contractors.167

Because the FLSA’s economic reality 

test is broad and fact-specific, the 

Department cannot categorically declare 

that individual workers in particular 

occupations or industries will always 

qualify as independent contractors 

applying the guidance provided in this 

rule. However, keeping in mind that the 

Department is adopting guidance in this 


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168See generally 87 FR 62230. 169See supra, nn.63 and accompanying text. 

rule that is essentially identical to the 

standard it applied for decades prior to 

the 2021 IC Rule, the Department agrees 

with those commenters who stated that 

workers properly classified as 

independent contractors prior to the 

2021 IC Rule will likely continue to be 

properly classified as independent 

contractors under this rule and 

disagrees with other commenter 

assertions that this rule will ‘‘cause 

workers who have long been properly 

classified as independent contractors 

. . . to improperly lose their 

independent status.’’ ABC; see also, e.g., 

Finseca (expressing concern that the 

NPRM ‘‘could materially disrupt longstanding, well-understood, and properly 

classified independent contractor 

relationships’’); National Association of 

Chemical Distributors (asserting that the 

NPRM would ‘‘disrupt longstanding 

business models’’). Rather, because this 

final rule is aligned with longstanding 

case law, the Department does not 

anticipate that independent contractors 

(who sometimes also self-identify as 

freelancers or small/micro business 

owners) who are correctly classified as 

independent contractors under current 

circuit case law would be reclassified 

applying the guidance provided in this 

rule. 

In sum, the Department’s rulemaking 

to rescind and replace the 2021 IC Rule 

is motivated, in part, by an assessment 

that the guidance provided here will 

likely benefit workers as a whole, 

including those workers at risk of being 

misclassified as independent 

contractors as well as those who are 

appropriately classified as independent 

contractors. 

D. The Benefits of Replacing the Part 

795 Regulations on Employee or 

Independent Contractor Status 

Until the 2021 IC Rule, the 

Department had not previously 

promulgated generally applicable 

regulations on independent contractor 

classification in the FLSA’s 83 years of 

existence. In light of the consistency of 

the economic reality test as adopted by 

the circuits, the Department had instead 

relied on subregulatory documents to 

provide generally applicable guidance 

for the Department and the regulated 

community on determining employee or 

independent contractor status under the 

FLSA. In the NPRM, the Department 

explained that, although it believes that 

its earlier subregulatory guidance 

provided appropriate guidance to the 

regulated community, the Department 

upon further consideration recognized 

that publishing regulatory guidance 

would be beneficial for stakeholders, 

particularly because the Department had 

published a regulation in 2021. The 

NPRM elaborated that detailed federal 

regulations would be easier to locate 

and read for interested stakeholders 

than applicable circuit case law, 

potentially helping workers and 

businesses better understand the 

Department’s interpretation of their 

rights and responsibilities under the 

law. Additionally, the NPRM explained 

that adopting detailed regulations that 

are aligned with existing precedent 

could better protect workers, who were 

placed at a greater risk of 

misclassification as a consequence of 

the 2021 IC Rule.168

Several commenters agreed with the 

Department’s reasons for replacing the 

2021 IC Rule with alternative regulatory 

guidance. These commenters generally 

asserted that detailed regulatory 

guidance brings added clarity to 

interested parties. See, e.g., NELP (‘‘[T]o 

address confusion that can stem from a 

multifactor balancing test, the 

commentary to the proposed rule 

clarifies how each of the factors 

(described in more detail below) 

informs the economic dependence 

analysis, i.e., how and why each factor 

helps to answer the question of whether 

a worker is truly in business for 

themself.’’); State AGs (‘‘Subregulatory 

guidance is not as robust as 

promulgating a new rule.’’); Winebrake 

& Santillo, LLC (supporting the NPRM 

for ‘‘clarifying topics which had not 

been fully explored by all courts’’). 

LIUNA asserted that the regulatory 

guidance’s ‘‘expert synthesis of 

complicated precedents will . . . clarify 

the FLSA and promote its uniform 

application.’’ 

Other commenters commended the 

accessibility of generally applicable 

regulatory guidance. See UBC (‘‘In one 

place, without searching through WHD 

guidance and court cases, employers 

and workers can go to the rule for 

information that will assist in correct 

classification. This need for rulemaking, 

albeit for slightly different reasons, is 

where the interest of the proponents of 

the 2021 Rule and drafters of the NPRM 

are aligned.’’). Some business 

stakeholders also agreed with the 

potential benefits of regulatory 

guidance. See, e.g., Consumer Brands 

Association (‘‘The CPG industry 

believes strongly in the potential 

opportunities afforded through clear 

rulemaking’’); CWC (‘‘We . . . concur 

with DOL’s assessment that a clear 

explanation of the test in easily 

accessible regulatory text is valuable.’’). 

Some labor unions and worker 

advocacy organizations opined that the 

Department needs to promulgate 

regulatory guidance to counteract 

confusion introduced by the 2021 IC 

Rule. See State AGs (asserting that ‘‘a 

new rule is necessary because the 2021 

Rule was such a drastic departure from 

the status quo’’); UBC (‘‘The 2021 Rule’s 

confusion and encouragement of 

misclassification . . . creates the 

necessity for the Proposed Rule with its 

adherence to the intent of Congress and 

judicial precedents.’’); see also NECA & 

IBEW. 

Several commenters, however, 

disagreed that the Department should 

issue regulations addressing 

independent contractor status under the 

FLSA. Some of these commenters 

asserted that the Department has no 

legal authority or expertise to do so. See, 

e.g., ArcBest (‘‘Congress has not 

delegated authority to DOL to define 

‘independent contractor’—a definition 

with far-reaching economic and 

political consequences.’’); Boulette 

Golden & Marin L.L.P. (‘‘[W]hile the 

DOL may have authority to issue 

guidance on its view of the term 

‘employee,’ the DOL does not have any 

authority to offer guidance on the 

meaning of the term ‘independent 

contractor.’ ’’); IBA (‘‘The DOL has no 

special expertise in interpreting 

Supreme Court precedent.’’). Insight 

Association and several individual 

commenters asserted that Congress 

should address the distinction between 

FLSA-covered employees and 

independent contractors rather than the 

Department. Finally, CPIE asserted that 

‘‘this area of the law is one that is not 

appropriate for general regulatory 

guidance,’’ urging the Department to 

‘‘continue its policy of issuing 

subregulatory guidance on the 

application of the economic reality test 

to specific facts’’ if it rescinded the 2021 

IC Rule. 

Having considered the comments, the 

Department continues to believe not 

only in the benefits of adopting 

alternative guidance on the distinction 

between FLSA-covered employees and 

independent contractors, but also in the 

value of providing such guidance in 

easily-accessible regulatory text. 

Although the Department previously 

issued regulatory guidance on this issue 

specific to the sharecropping and 

lumber industries in parts 780 and 

788,169 the Department believes that 

regulatory text that can be applied to 

workers in any industry is beneficial to 

the regulated community. 

Further, as noted in the 2021 IC Rule, 

the Department ‘‘without question has 

relevant expertise in the area of what 


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170 86 FR 1176. 

171 Id. 

172See Jessica Looman, ‘‘Misclassification of 

Employees as Independent Contractors Under the 

Fair Labor Standards Act,’’ U.S. Department of 

Labor Blog (June 3, 2022), https://blog.dol.gov/ 

2022/06/03/misclassification-of-employees-asindependent-contractors-under-the-fair-laborstandards-act. 

173 ‘‘[A]n agency need not—indeed cannot—base 

its every action upon empirical data; depending 

upon the nature of the problem, an agency may be 

entitled to conduct . . . a general analysis based on 

informed conjecture.’’ Chamber of Com. of U.S. v. 

SEC, 412 F.3d 133, 142 (D.C. Cir. 2005) (internal 

quotation and citation omitted). 

174See 87 FR 62219. 

175An agency’s reliance on ‘‘its own and its staff’s 

experience, the many comments received, and other 

evidence, in addition to [ ] limited and conflicting 

empirical evidence’’ meets APA requirements. 

Chamber of Com., 412 F.3d at 142. 

176 87 FR 62230. 

177 Id. (citing 86 FR 1238). 

constitutes an employment relationship 

under the FLSA, given its responsibility 

for administering and enforcing the Act 

and its decades of experience doing 

so.’’ 170 As also noted in the 2021 IC 

Rule, the Department’s ‘‘authority to 

interpret the Act comes with its 

authority to administer and enforce the 

Act.’’ 171 The Department issues 

interpretations on a range of issues 

under the Act, and addressing which 

workers are employees protected by the 

Act or independent contractors not 

subject to the Act is one such issue. The 

Department’s attention to relevant 

judicial precedent interpreting the Act 

is key to providing such guidance. 

The Department acknowledges that 

some commenters would prefer 

Congress to address this issue through 

legislation and to adopt one uniform 

standard that would apply across 

federal laws. See, e.g., ASTA; CPIE. 

However, in the absence of 

congressional legislation to amend the 

FLSA, the Department believes that this 

final rule will provide detailed guidance 

on employee or independent contractor 

status that is not only consistent with 

the FLSA and the decades of case law 

interpreting it, but clearer and more 

robust than the Department’s earlier 

subregulatory guidance on the topic. 

E. Timing of the Rulemaking 

Many of the commenters opposed to 

this rulemaking asserted that the 

Department’s rulemaking to rescind and 

replace the 2021 IC Rule is premature or 

otherwise ill-timed. See, e.g., CPIE 

(‘‘[CPIE] urges DOL to defer action until 

courts have had an opportunity to apply 

the 2021 IC Rule.’’); CWI (‘‘The most 

obvious alternative action ‘within the 

ambit of the existing policy’ is simply to 

allow the 2021 IC Rule to go into effect 

and study its results, rather than assume 

unproven consequences.’’); MEP (‘‘MEP 

strongly believes WHD should allow the 

courts to weigh in on the current rule 

before determining the analysis does not 

work and replacing it with a standard 

that will clearly create substantial 

confusion and uncertainty for the 

regulated community.’’). 

Some commenters noted the added 

costs and uncertainty attributable to the 

Department promulgating the 2021 IC 

Rule and subsequently proposing to 

rescind and replace it. See American 

Association of Advertising Agencies 

(‘‘4A’s’’) (‘‘The regulatory whiplash here 

is real, and costly, and should not be 

taken so lightly by DOL.’’); see also App 

Association; N/MA; Vegas Chamber. 

Other commenters cited to various 

economic conditions that caution (in 

their view) against any rulemaking that 

would deter independent contracting. 

See, e.g., NRF & NCCR (‘‘As the 

American economy and the modern 

workplace continue to evolve in the 

wake of the COVID–19 pandemic, it is 

imperative that policymakers account 

for the wide range of innovative and 

imaginative methods by which 

individuals engage in the marketplace 

and feed their families.’’); Scopelitis, 

Garvin, Light, Hanson & Feary 

(‘‘Scopelitis’’) (‘‘The Proposed Rule 

would add pressure to already stressed 

supply chains.’’). 

The Department disagrees with the 

various timing arguments advanced by 

commenters urging the Department to 

delay or withdraw this rulemaking, 

though it is mindful of the impact that 

changes in the Department’s guidance 

may end up having on the regulated 

community. As the Department has 

explained, there are compelling reasons 

to rescind and replace the 2021 IC Rule, 

including its significant departure from 

judicial precedent, the confusion it has 

introduced for affected stakeholders, 

and the consequences for workers and 

competing businesses attributable to an 

increased risk of misclassification. 

Allowing the 2021 IC Rule to stay in 

effect for a longer period would not 

ameliorate any of those concerns. To the 

contrary, as NELP pointed out, ‘‘over 

time . . . negative consequences . . . 

will be exacerbated.’’ The fact that no 

court has applied the 2021 IC Rule in 

the year since the district court’s 

decision in CWI v. Walsh is not a 

justification for its retention. 

The Department further finds 

arguments about stakeholder reliance on 

the 2021 IC Rule to be unpersuasive. 

Before the 2021 IC Rule’s effective date, 

the Department issued rules intending 

to delay the effective date of and then 

withdraw the 2021 IC Rule, while also 

identifying concerns with the 2021 IC 

Rule. The Department then announced 

on June 3, 2022 that it was initiating a 

new rulemaking on employee and 

independent contractor classification 

under the FLSA.172 Thus, the regulated 

community has been on notice since 

very soon after the 2021 IC Rule’s 

publication as to the Department’s 

concerns regarding the 2021 IC Rule, 

including the way in which it upset 

decades of precedent the regulated 

community and workers had previously 

been relying on to distinguish between 

employees and independent contractors. 

Finally, the Department disagrees 

with commenters that it is obligated to 

wait for more time to gather data before 

rescinding the 2021 IC Rule and 

promulgating a new rule.173 As 

discussed in the NPRM, the Department 

considered waiting for a longer period 

to monitor the effects of the 2021 IC 

Rule but believed that the potential 

confusion and disruption from the 2021 

IC Rule outweighed any potential 

benefit from this monitoring.174 In 

making the decision to proceed with 

this final rule, the Department drew 

upon its extensive experience in 

interpreting and enforcing the FLSA and 

its consideration of the comments 

received.175 The Department believes 

that this rule, which provides guidance 

that is consistent with longstanding 

precedent, provides more consistency 

for stakeholders than the 2021 IC Rule. 

IV. Alternatives Considered 

In the NPRM, the Department noted 

that it had considered four alternatives 

to what it proposed.176 The Department 

further noted that it had previously 

considered and rejected two of those 

alternatives—issuing guidance adopting 

either the common law test or the ABC 

test for determining FLSA employee or 

independent contractor status—in the 

2021 IC Rule.177

Regarding adoption of the common 

law test, as the Department explained in 

the NPRM, that test is contrary to the 

‘‘suffer or permit’’ language in section 

3(g) of the FLSA, which the Supreme 

Court has interpreted as requiring a 

broader definition of employment than 

under the common law. Accordingly, 

the Department stated that the common 

law test is inconsistent with the FLSA 

because that test ‘‘is not sufficiently 

protective in assessing worker 

classification under the FLSA.’’ 

Regarding adoption of an ABC test, as 

the Department explained, the Supreme 

Court has held that the economic reality 

test is the applicable standard for 

determining workers’ classification 


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178See generally id. at 62231. 

179See generally id. at 62231–32. 

180See generally id. at 62232. 

181A number of commenters discussed the 

common law test in their comments, but not in the 

context of consideration of the common law test as 

an alternative. Instead, these commenters, for 

example, compared the analysis in the 2021 IC Rule 

to the common law test or compared the economic 

realities test generally to the common law test. 

182See, e.g., Darden, 503 U.S. at 326; Portland 

Terminal, 330 U.S. at 150–51. 

under the FLSA as an employee or 

independent contractor, and ‘‘the 

existence of employment relationships 

under the FLSA ‘does not depend on 

such isolated factors’ as the three 

independently determinative factors in 

the ABC test, ‘but rather upon the 

circumstances of the whole activity.’ ’’ 

Because an ABC test is, in the 

Department’s view, inconsistent with 

Supreme Court precedent interpreting 

the FLSA, the Department explained 

that ‘‘it could only implement an ABC 

test if the Supreme Court revisits its 

precedent or if Congress passes 

legislation that alters the applicable 

analysis under the FLSA.’’ 178

As a third alternative, the Department 

considered proposing to only partially 

rescind the 2021 IC Rule and instead 

retain some aspects of it. In discussing 

this alternative, the Department listed 

numerous instances in which its NPRM 

was consistent or in agreement with the 

2021 IC Rule. The Department 

explained that it considered ‘‘simply 

removing the problematic ‘core factors’ 

analysis from the 2021 IC Rule and 

retaining the five factors as described in 

th[at] rule.’’ However, the Department 

rejected this approach because 

numerous ways in which that rule 

described the factors were in tension 

with judicial precedent and 

longstanding Department guidance and 

‘‘narrow[ed] the economic reality test by 

limiting the facts that may be 

considered as part of the test, facts 

which the Department believes are 

relevant in determining whether a 

worker is economically dependent on 

the employer for work or in business for 

themself.’’ For those reasons, the 

Department ‘‘concluded that in order to 

provide clear, affirmative regulatory 

guidance that aligns with case law and 

is consistent with the text and purpose 

of the Act as interpreted by courts, a 

complete rescission and replacement of 

the 2021 IC Rule is needed’’ as opposed 

to a partial rescission.179

As a fourth alternative, the 

Department considered rescinding the 

2021 IC Rule and, instead of 

promulgating new regulations, 

providing guidance on employee or 

independent contractor classification 

through subregulatory guidance. In 

discussing this alternative, the 

Department reiterated the reasons why 

it believed that rescission of the 2021 IC 

Rule was necessary. The Department 

acknowledged that prior to the 2021 IC 

Rule, it did not have general guidance 

published in the Code of Federal 

Regulations on the classification of 

workers as employees or independent 

contractors. The Department explained 

that issuing a new rule rather than 

subregulatory guidance would allow the 

Department to provide in-depth 

guidance that is more closely aligned 

with circuit case law, allows the 

Department to formally collect and 

consider a wide range of views by using 

the notice-and-comment process, and 

may further improve consistency among 

courts regarding the classification of 

workers because courts are accustomed 

to considering relevant agency 

regulations. For these reasons, the 

Department decided not to propose 

rescinding the 2021 IC Rule and 

providing only subregulatory guidance, 

and to instead propose the regulations 

set forth in the NPRM.180

A few commenters expressly 

addressed the first alternative—adopting 

a common law control test.181 For 

example, State AGs agreed with the 

Department’s reasoning that the 

common law control test is inconsistent 

with the FLSA. State AGs stated that 

‘‘[t]he common law test, which focuses 

on control rather than economic 

dependence, provides a narrower 

definition of employment than the 

broad ‘suffer or permit’ language of the 

FLSA’’ and that the common law test 

therefore ‘‘conflicts with the broad 

statutory definition of ‘employ’ in the 

FLSA.’’ UFCW added: ‘‘Correctly, the 

DOL’s proposed rule does not 

incorporate the narrower common law 

independent contractor standard 

because Congress sought for the FLSA to 

guard against labor exploitation by 

intentionally covering employment 

relationships that may not have 

constituted employer and employees 

under common law’’ (emphasis 

omitted). ASTA disagreed. Noting the 

various tests under federal law for 

determining employment, it advocated 

for ‘‘the adoption of a single standard to 

evaluate worker status for all federal 

purposes.’’ The commenter 

acknowledged the Department’s view 

that it lacks the authority to do so, but 

asserted that ‘‘the simplest means to that 

end would be amendment of the FLSA 

to replace the economic reality test with 

the right of control test.’’ 

Having considered the comments, the 

Department reaffirms its position that 

the FLSA’s definitions, as interpreted by 

courts, reflect Congress’ rejection of the 

common law test as determining 

employee status under the Act. The 

Department continues to believe that 

adopting the common law test would be 

contrary to FLSA section 3(g)’s ‘‘suffer 

or permit’’ language, which under 

Supreme Court and federal appellate 

precedent requires a broader definition 

of employment than the common law 

test.182

A number of commenters addressed 

the second alternative—adopting an 

ABC test. Most commenters agreed with 

the Department’s proposed rejection of 

an ABC test as inconsistent with current 

precedent and/or expressed opposition 

to an ABC test. For example, CCI stated 

that, ‘‘[w]hile the ABC test may be 

appropriate in some circumstances (for 

example collective bargaining rights), 

we believe the Department is correct to 

return to a broader ‘totality-of-thecircumstances’ analysis for wage and 

overtime protections under the Fair 

Labor Standards Act.’’ UBC described 

the rejection of an ABC test as an 

‘‘adherence to precedent.’’ State AGs 

stated that, although ‘‘the ABC test 

arguably protects against employee 

misclassification better than other tests 

in use’’ and ‘‘several of the undersigned 

State AGs apply the ABC test,’’ they 

‘‘understand the Department believes it 

is constrained under current law from 

implementing the ABC test under the 

FLSA[.]’’ 

SBLC ‘‘applaud[ed] the DOL for 

declining calls to adopt an ABC test, 

like what is currently used in California, 

or a similar test that would apply a 

stringent requisite factor test rather than 

a balancing test.’’ The International 

Franchise Association (‘‘IFA’’) 

‘‘support[ed] the DOL’s explicit 

statement in its 2022 NPRM that the 

ABC test, which is used in states like 

California and Massachusetts, is 

‘inconsistent’ with controlling Supreme 

Court authority under the FLSA.’’ The 

App Association expressed concerns 

with the ABC test and ‘‘discourage[d] 

alignment in federal regulation with 

California’s approach.’’ The Coalition of 

Trucking Stakeholders stated that the 

Department ‘‘properly acknowledge[d] 

that the adoption of any ABC-like test, 

which is not based upon an economicrealities assessment, would be contrary 

to precedent’’ (citation omitted). And 

noting that the ABC test ‘‘assumes all 

workers are employees unless they can 

demonstrate that they meet specific 

criteria,’’ The Owner-Operator 

Independent Drivers Association 

(‘‘OOIDA’’) stated that ‘‘the Department 

is correct in its assessment that the ABC 


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183See Tony & Susan Alamo, 471 U.S. at 301 

(‘‘The test of employment under the Act is one of 

‘economic reality.’ ’’); Whitaker House, 366 U.S. at 

33 (‘‘ ‘economic reality’ rather than ‘technical 

concepts’ is . . . the test of employment’’ under the 

FLSA) (citing Silk, 331 U.S. at 713; Rutherford, 331 

U.S. at 729). 

184Rutherford, 331 U.S. at 730. 

185Silk, 331 U.S. at 716. 

186See supra section II.B. 

187The assertions of LA Fed & Teamsters Locals 

that Supreme Court precedent could have been 

interpreted differently and that the six traditional 

economic realities factors could be ‘‘fit within the 

three elements of the ABC Test’’ are unavailing 

considering how Supreme Court precedent has 

actually been interpreted and applied for decades. 

188LIUNA endorsed NABTU’s recommendation. 

SMACNA similarly recommended that ‘‘[i]n the 

construction industry, the DOL should create a 

rebuttable presumption that ‘laborers and 

mechanics’ are ‘employees’ of the engaging 

business.’’ 

189 In any event, there are arguably some 

similarities between an ABC test and most 

alternative analyses under the FLSA. For example, 

the 2021 IC Rule provided that two factors were 

‘‘core’’ factors and gave them near-dispositive 

weight if they both indicated the same status, which 

was a step away from a multifactor totality-of-thecircumstances analysis and a step closer to a test 

(like an ABC test) where each factor is dispositive. 

And the 2021 IC Rule considered control like an 

ABC test and considered control to be a ‘‘core’’ 

factor, giving it more weight and making it closer 

to the dispositive factor that it is under the ABC 

test. 

Test is not consistent with the history of 

the FLSA because it establishes 

independently determinative factors.’’ 

See also C.A.R. (supporting the decision 

not to adopt the ABC test). 

Some commenters advocated for 

adoption of an ABC test. For example, 

the Los Angeles County Federation of 

Labor, AFL–CIO & Locals 396 and 848 

of the International Brotherhood of 

Teamsters (‘‘LA Fed & Teamsters 

Locals’’) acknowledged that ‘‘the 

Department is correct in its conclusion 

that the lower federal courts have 

developed a fairly consistent version of 

what is referred to as the economic 

realities test by identifying a list of six 

non-exclusive factors to frame their 

analysis,’’ but asserted that ‘‘there is 

nothing in the FLSA’s legislative history 

nor in the Supreme Court’s precedent 

that compels this exact six-factor 

framing.’’ Discussing Rutherford and 

Silk, the commenter argued that 

Supreme Court precedent does not 

require a six-factor economic realities 

test, prohibit adoption of an ABC test, 

or prevent adoption of a test that 

includes dispositive factors or presumes 

employee status unless the employer 

proves otherwise. See also Blitman & 

King LLP; National Employment 

Lawyers Association (‘‘NELA’’); Nichols 

Kaster. 

Having considered the comments, the 

Department is not adopting an ABC test. 

The Department continues to believe 

that an ABC test would be inconsistent 

with Supreme Court and federal 

appellate precedent interpreting and 

applying the FLSA, and therefore, this 

final rule declines to adopt an ABC test. 

The Supreme Court has repeatedly 

explained that ‘‘economic reality’’ is the 

applicable standard for determining 

whether a worker is an employee or not 

under the FLSA.183 The Supreme Court 

has further explained that the existence 

of employment relationships under the 

FLSA does not depend on ‘‘isolated 

factors but rather upon the 

circumstances of the whole activity,’’ 184

and that ‘‘[n]o one [factor] is controlling 

nor is the list complete.’’ 185 As 

explained in section II, federal courts of 

appeals have consistently interpreted 

this Supreme Court precedent to apply 

a nonexhaustive multifactor economic 

realities analysis in which there is no 

presumption of employee status that 

must be rebutted, no one factor is 

determinative, and all of the factors 

must be considered and weighed.186

The Department is grounding the 

economic realities analysis set forth in 

this final rule in the decades of federal 

appellate case law applying such 

analyses and is rescinding the 2021 IC 

Rule because of its deviations from that 

case law. An ABC test, on the other 

hand, has a presumption of employee 

status, considers only three factors— 

each of which can be determinative on 

its own—and does not result in all of 

the factors being weighed or even 

necessarily considered. Adopting the 

ABC test would be a similarly 

unsupported deviation from that case 

law, would have no moorings in the 

case law applying the FLSA or the 

Department’s prior guidance, and could 

undermine the Department’s wellfounded reasons for rescinding and 

replacing the 2021 IC Rule.187 For all of 

these reasons, this final rule does not 

adopt an ABC test. 

NABTU stated that, although it 

‘‘believes that the ‘ABC test’ is the better 

test for determining worker 

classification, NABTU understands that 

absent congressional action, DOL must 

operate within the parameters of the 

statute as defined by controlling 

Supreme Court precedent’’ (footnote 

omitted). NABTU nonetheless 

recommended that, ‘‘for purposes of 

applying the economic reality test to the 

construction industry, DOL adopt a 

rebuttable presumption that all 

construction workers are 

employees.’’ 188 The Department 

declines this recommendation for two 

reasons. First, the Department’s intent 

in promulgating this final rule is to 

provide as much as possible a general 

analysis for determining employee or 

independent contractor status. NABTU’s 

recommendation, on the other hand, is 

specific to one industry. Second, 

regardless of its scope, this 

recommendation implicates the same 

concerns as discussed in the above 

paragraph. Specifically, this approach 

would not be consistent with Supreme 

Court precedent and federal appellate 

case law interpreting and applying that 

precedent in part because that precedent 

and case law have not adopted a 

rebuttable presumption of employee 

status when determining employee or 

independent contractor status under the 

FLSA. Thus, the Department believes 

that it is not an option to adopt a 

rebuttable presumption of employee 

status in this context for the same 

reasons that the Department also 

declines to adopt an ABC test. 

A number of commenters objected 

that the Department’s proposed test (in 

particular the integral factor) might have 

the same effect—either unintendedly or 

not—as an ABC test. See, e.g., CWI; 

FMI—The Food Industry Association 

(‘‘FMI’’); Customized Logistics and 

Delivery Association (‘‘CLDA’’); Erik 

Sherman; Western States Trucking 

Association (‘‘WSTA’’). However, as 

discussed in section V.C.5, the 

suggestion that this final rule’s 

economic realities analysis essentially 

implements an ABC test is baseless. As 

explained above, the economic realities 

analysis considers multiple factors (no 

one of which is dispositive) and weighs 

them as part of a totality-of-thecircumstances analysis to determine if 

the worker is economically dependent 

on the employer for work or in business 

for themself. An ABC test, on the other 

hand, presumes that a worker is an 

employee unless the employer can show 

that each of the three factors is satisfied. 

(In other words, each factor is 

dispositive on its own and the other 

factors need not be considered if one 

points to employee status.) In sum, this 

final rule’s economic realities test is not 

an ABC test, and any concern that its 

economic realities analysis is or will 

become an ABC test is thus 

unfounded.189

A few commenters addressed 

generally the NPRM’s discussion of the 

alternatives considered by the 

Department. State AGs, in addition to 

commenting on the first and second 

alternatives, commented that ‘‘retaining 

portions of the 2021 Rule that are 

consistent with the Proposed Rule 

would not provide needed clarity 

because the governing principle of the 

2021 Rule was a marked departure from 


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190 In addition, discussing alternatives that an 

agency may be legally constrained from adopting is 

permissible and encouraged under OMB guidance. 

OMB Circular A–4 advises that agencies ‘‘should 

discuss the statutory requirements that affect the 

selection of regulatory approaches. If legal 

constraints prevent the selection of a regulatory 

action that best satisfies the philosophy and 

principles of Executive Order 12866, [agencies] 

should identify these constraints and estimate their 

opportunity cost. Such information may be useful 

to Congress under the Regulatory Right-to-Know 

Act.’’ 

191The 2021 IC Rule, which WPI urged be 

permitted by the Department ‘‘to remain in effect,’’ 

considered only one viable alternative if the 

commenter’s logic applied. See 86 FR 1238 

(considering three alternatives: ‘‘[c]odification of 

the common law control test,’’ codification of a 

‘‘six-factor ‘economic reality’ balancing test,’’ and 

‘‘[c]odification of the ‘ABC’ test’’). 

192 2022 WL 1073346, at *18 (internal quotation 

marks and citation omitted). 

193As a general matter, agency action must be 

upheld in the face of an arbitrary and capricious 

challenge if the agency ‘‘articulate[s] a satisfactory 

explanation for [the] action including a rational 

connection between the facts found and the choice 

made.’’ Little Sisters of the Poor Saints Peter & Paul 

Home v. Pennsylvania, 140 S. Ct. 2367, 2383 (2020) 

(citation omitted); see also City of Abilene v. EPA, 

325 F.3d 657, 664 (5th Cir. 2003) (‘‘If the agency’s 

reasons and policy choices conform to minimal 

standards of rationality, then its actions are 

reasonable and must be upheld.’’) (citation 

omitted). 

194 87 FR 62232. 

195 Id. 

196 Id. 197See City of Abilene, 325 F.3d at 664; see also 

California v. Azar, 950 F.3d 1067, 1096 (9th Cir. 

2020) (When reviewing agency action under the 

arbitrary and capricious standard, a court ‘‘cannot 

‘ask whether a regulatory decision is the best one 

possible or even whether it is better than the 

alternatives’ ’’ and is ‘‘prohibited from ‘secondguessing the [agency]’s weighing of risks and 

benefits and penalizing [it] for departing from the 

. . . inferences and assumptions’ of others.’’) 

(citations omitted). 

198 87 FR at 62232. 

199The Department in its 2021 IC Rule also 

reached the same conclusion that the Department 

is reaching here: relying solely on subregulatory 

guidance is not the preferable alternative. 

the Department’s longstanding 

position.’’ In their view, the 2021 IC 

Rule’s ‘‘emphasis on two ‘core’ factors 

. . . negated the need to fully consider 

the remaining factors,’’ and therefore ‘‘a 

full rescission of the 2021 Rule is 

needed to provide clarity to workers, 

employers, and the public.’’ Regarding 

the fourth alternative, State AGs stated 

that ‘‘merely rescinding the 2021 Rule 

and issuing subregulatory guidance will 

not provide the direction necessary to 

achieve consistent application of the 

economic reality test.’’ In their view, ‘‘a 

new rule is necessary because the 2021 

Rule was such a drastic departure from 

the status quo’’ and would ‘‘provide 

needed regulatory guidance for the 

consistent application of the economic 

reality test by courts and employers.’’ 

State AGs agreed with the Department’s 

assessment of the four alternatives and 

that ‘‘a full rescission of the 2021 Rule 

and replacement with the Proposed 

Rule is most appropriate for clarity and 

consistency with the FLSA.’’ 

WPI commented that it ‘‘is well 

settled that agencies are required to 

consider alternatives within the ambit of 

the regulation being considered,’’ 

including ‘‘less restrictive rules than 

those proposed’’ (citations omitted). 

WPI further commented that the district 

court in CWI v. Walsh ‘‘held that DOL 

failed to consider any alternatives in the 

withdrawal of the 2021 IC Rule’’ and 

asserted that ‘‘[t]he Department repeats 

this error and only pays lip service to 

these requirements by ‘considering’ four 

alternatives, two of which are not even 

legally viable options.’’ The commenter 

faulted the Department for 

‘‘conclud[ing] in identical fashion to the 

2021 rule that codifying a common law 

or ABC test would not be legally 

permissible, yet . . . nevertheless 

continu[ing] to ‘analyze’ these two 

alternatives despite the knowledge that 

neither can be adopted.’’ The 

commenter concluded that the NPRM’s 

‘‘consideration of only two viable 

alternatives falls short of the 

requirements under the APA and is thus 

arbitrary and capricious’’ (citing the 

district court’s decision in CWI v. 

Walsh). 

As an initial matter, although the 

Department believes that the common 

law control test and an ABC test are not 

feasible options in this rulemaking, as 

discussed above, several commenters 

advocated for the adoption of one or the 

other of those tests.190 In any event, the 

district court’s decision in CWI v. Walsh 

(which is on appeal to the Fifth Circuit) 

does not support WPI’s assertion that a 

rule’s consideration of ‘‘only two viable 

alternatives’’ makes a rule arbitrary and 

capricious under the APA.191 The 

district court ruled that ‘‘agency action 

is arbitrary and capricious when the 

agency considers only the binary choice 

of whether to retain or rescind a policy, 

without also considering less disruptive 

alternatives.’’ 192 In this rulemaking, the 

Department considered less disruptive 

alternatives than fully rescinding and 

replacing the 2021 IC Rule, including a 

partial rescission of the 2021 IC Rule.193

In the Department’s judgment, however, 

only removing the 2021 IC Rule’s 

designation of two factors as the ‘‘core’’ 

factors would not undo the numerous 

ways in which that rule’s discussion of 

the factors were ‘‘in tension with 

judicial precedent and longstanding 

Department guidance’’ and unjustifiably 

narrowed the facts that may be 

considered when applying the 

factors.194 Thus, the Department 

concluded that, ‘‘in order to provide 

clear, affirmative regulatory guidance 

that aligns with case law and is 

consistent with the text and purpose of 

the Act as interpreted by courts, a 

complete rescission and replacement of 

the 2021 IC Rule is needed’’ as opposed 

to a partial rescission.195 As further 

detailed above, the Department also 

specifically considered rescinding the 

2021 IC Rule and providing guidance on 

employee or independent contractor 

classification through subregulatory 

guidance instead of through new 

regulations. The Department reiterated 

the reasons why it believed that 

rescission of the 2021 IC Rule was 

necessary and identified numerous 

benefits in favor of issuing a new rule 

rather than relying on subregulatory 

guidance.196 Having considered the 

comment, the Department continues to 

believe that, in addition to rescinding 

the 2021 IC Rule, promulgating new 

regulations is preferable to providing 

only subregulatory guidance. Although 

WPI disagrees with the judgments that 

the Department is making, the 

Department plainly considered less 

disruptive alternatives and made 

reasonable judgments in not adopting 

those alternatives.197

Finally, WPI claimed that the NPRM 

did not consider ‘‘simply reverting to 

interpretive guidance already in place 

prior to the 2021 IC Rule’’ and 

‘‘ignore[d] this option in a purported 

quest for clarity.’’ In the commenter’s 

view, there is already clarity in the 

economic reality test because of the case 

law explaining and interpreting it, and 

the commenter added that the NPRM 

went ‘‘beyond any position the 

Department has taken historically’’ and 

was not ‘‘faithful to settled caselaw and 

analysis by courts upon which it claims 

to base its proposed rule.’’ As an initial 

matter, the Department considered (as 

the fourth alternative) ‘‘rescinding the 

2021 IC Rule and providing guidance on 

employee or independent contractor 

classification through subregulatory 

guidance instead of through new 

regulations.’’ 198 As discussed in the 

NPRM and this final rule, the 

Department concludes that issuing new 

regulations is the preferable alternative 

to subregulatory guidance.199 Moreover, 

as explained generally throughout the 

NPRM and this final rule and 

specifically in their discussions of each 

economic reality factor, the 

Department’s regulatory text and 

accompanying guidance seek 

consistency with, and are grounded in, 

existing case law. The 2021 IC Rule 

departed from case law in numerous 

ways, and contrary to WPI’s comment, 


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200 29 CFR 500.20(h)(1), (4). 

201Comments regarding this aspect of the NPRM 

are discussed in section V.F. below. 

202 87 FR 62233 (proposed § 795.100). 

203 87 FR 62233 (proposed § 795.105(a), (b)). 

204 87 FR 62233 (proposed § 795.105(b)). 

the Department’s stated goal in 

promulgating this final rule is to realign 

the Department’s guidance with that 

case law. Moreover, to the extent that 

commenters argued that the NPRM’s 

proposed analysis was not supported by 

applicable case law, the Department 

considered those comments and, where 

appropriate, made changes in this final 

rule in response. 

As explained in section III, the 

Department believes that replacing the 

2021 IC Rule with regulations 

addressing the multifactor economic 

reality test that more fully reflect the 

case law and continue to be relevant to 

the modern economy is helpful for 

workers and employers in 

understanding how to apply the law in 

this area. These regulations and the 

explanatory preamble provide in-depth 

guidance, and because courts are 

accustomed to considering relevant 

agency regulations, issuing these 

regulations may further improve 

consistency among courts regarding this 

issue. The Department is therefore 

rescinding the 2021 IC Rule and issuing 

this final rule to replace part 795; the 

provisions of the regulation are 

discussed below. 

V. Final Regulatory Provisions 

Having reviewed commenter feedback 

submitted in response to the proposed 

rule, the Department is finalizing the 

following regulations to provide 

guidance regarding whether workers are 

employees or independent contractors 

under the FLSA. The regulations 

include a new part 795 and crossreferences in 29 CFR 780.330(b) and 

788.16(a) to part 795. Of particular note, 

the regulations set forth in this final rule 

do not use ‘‘core factors’’ and instead 

return to a totality-of-the-circumstances 

analysis of the economic reality test in 

which the factors do not have a 

predetermined weight and are 

considered in view of the economic 

reality of the whole activity. Regarding 

the economic reality factors, this final 

rule returns to the longstanding framing 

of investment as a separate factor, and 

integral as an integral part of the 

potential employer’s business rather 

than an integrated unit of production. 

The final rule also provides broader 

discussion of how scheduling, remote 

supervision, price setting, and the 

ability to work for others should be 

considered under the control factor, and 

it allows for consideration of reserved 

rights while removing the provision in 

the 2021 IC Rule that minimized the 

relevance of retained rights. Further, the 

final rule discusses exclusivity in the 

context of the permanency factor, and 

initiative in the context of the skill 

factor. The Department also made 

several adjustments to the proposed 

regulations after consideration of the 

comments received, including revisions 

to the regulations regarding the 

investment factor and the control factor 

(specifically addressing compliance 

with legal obligations). 

Additionally, in the 2021 IC Rule, the 

Department proposed not to revise its 

regulation addressing employee or 

independent contractor status under 

MSPA in 29 CFR 500.20(h)(4), stating, 

in part, that the MSPA regulation and 

the 2021 IC Rule both applied an 

economic reality test in which the 

ultimate inquiry was economic 

dependence. In the NPRM, the 

Department similarly did not propose to 

make any revisions to the MSPA 

regulation, which adopts by reference 

the FLSA’s definition of ‘‘employ,’’ and 

considers ‘‘whether or not an 

independent contractor or employment 

relationship exists under the Fair Labor 

Standards Act’’ to interpret employee or 

independent contractor status under 

MSPA.200 The test contained in the 

MSPA regulation is substantially similar 

to the proposed test here, and the 

comments received in this rulemaking 

did not address MSPA. Accordingly, the 

Department is not revising the MSPA 

regulation at this time. 

Finally, the Department also proposed 

to formally rescind the 2021 IC Rule.201

In the Department’s view, the operative 

effects of rescinding the 2021 IC Rule 

are as follows. With this final rule, the 

2021 IC Rule is formally rescinded. This 

rescission operates independently of the 

new content in this final rule, as the 

Department intends the rescission to be 

severable from the substantive 

regulatory text added as part 795. For 

the reasons set forth in this final rule, 

the Department believes that rescission 

of the 2021 IC Rule is appropriate, 

regardless of the new regulations in this 

final rule. Thus, even if the entirety of 

the part 795 regulations promulgated by 

this final rule or any part thereof were 

invalidated, enjoined, or otherwise not 

put into effect, the Department would 

not intend that the 2021 IC Rule remain 

in effect, and the Department would rely 

on federal appellate case law and 

provide subregulatory guidance for 

stakeholders as appropriate unless or 

until it decided to engage in additional 

rulemaking. 

The Department responds to 

commenters’ feedback on the proposed 

rule below. 

A. Introductory Statement (§ 795.100) 

Proposed § 795.100 explained that the 

interpretations in part 795 will guide 

WHD’s enforcement of the FLSA and are 

intended to be used by employers, 

employees, workers, and courts to 

assess employment status under the 

Act.202 Commenters did not generally 

address this section, which is very 

similar to the 2021 IC Rule introductory 

statement, except to note that these 

regulations would be interpretive 

guidance. See, e.g., NELP; WPI. The 

Department is adopting this section 

without change. 

B. Economic Dependence (§ 795.105) 

In the NPRM, the Department 

proposed to simplify § 795.105(a) of the 

2021 IC Rule and make additional 

clarifying edits to § 795.105(b).203

Proposed § 795.105(a) would continue 

to make clear, as the 2021 IC Rule did, 

that independent contractors are not 

‘‘employees’’ under the Act. The 

Department did not receive significant 

comments regarding this and is 

adopting it without change. 

The Department proposed that 

paragraph § 795.105(b) would affirm 

that economic dependence is the 

ultimate inquiry for determining 

whether a worker is an independent 

contractor or an employee; this 

paragraph also makes clear that the 

plain language of the statute is relevant 

to the analysis.204 The Department 

explained that this proposed section 

would focus the analysis on whether the 

worker is in business for themself and 

clarified that economic dependence 

does not focus on the amount the 

worker earns or whether the worker has 

other sources of income. 

As a preliminary matter, Cetera 

Financial Group urged the Department 

to ‘‘recognize that economic 

dependence often does not exist and 

certainly should not be presumed’’ and 

that it ‘‘should be the subject of a 

threshold inquiry prior to applying the 

other factors in the economic realities 

test, or, at a minimum, added as an 

additional factor.’’ As the Department 

explained in the NPRM, the question of 

economic dependence is the ultimate 

inquiry, and the factors are tools or 

guideposts for answering that inquiry, 

so it would not be appropriate to make 

‘‘economic dependence’’ an additional 

factor or a threshold inquiry. The 

Department agrees, however, that 

economic dependence should never be 

presumed and that when it does not 

exist, that worker is not an employee. 


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205 86 FR 1178. 

206See id. at 1172–73; see also Cornerstone Am., 

545 F.3d at 343 (‘‘To determine if a worker qualifies 

as an employee, we focus on whether, as a matter 

of economic reality, the worker is economically 

dependent upon the alleged employer or is instead 

in business for himself.’’); Flint Eng’g, 137 F.3d at 

1440 (noting that ‘‘the economic realities of the 

relationship govern, and the focal point is whether 

the individual is economically dependent on the 

business to which he renders service or is, as a 

matter of economic fact, in business for himself’’); 

Superior Care, 840 F.2d at 1059 (‘‘The ultimate 

concern is whether, as a matter of economic reality, 

the workers depend upon someone else’s business 

. . . or are in business for themselves.’’). 

207Scantland, 721 F.3d at 1312 (quoting Mednick 

v. Albert Enters., Inc., 508 F.2d 297, 301–02 (5th 

Cir. 1975)). 

208 DialAmerica, 757 F.2d at 1385. 

209See 86 FR 1173; see also McLaughlin v. 

Seafood, Inc., 861 F.2d 450, 452 (5th Cir. 1988), 

modified on reh’g, 867 F.2d 875 (5th Cir. 1989) 

(reasoning that ‘‘[l]aborers who work for two 

different employers on alternate days are no less 

economically dependent than laborers who work 

for a single employer’’); Halferty v. Pulse Drug Co., 

Inc., 821 F.2d 261, 267–68 (5th Cir. 1987) (rejecting 

the employer’s argument that the worker’s wages 

were too little to constitute dependence). 

210See Halferty, 821 F.2d at 268. 

Commenters generally agreed that 

economic dependence was the right lens 

for evaluating whether an employment 

relationship exists under the FLSA. See, 

e.g., CPIE; IBA; NELP; Outten & Golden. 

The AFL–CIO and others, for example, 

noted that ‘‘[c]ourts have interpreted the 

FLSA’s broad suffer or permit to work 

language as seeking to answer one 

foundational question regarding the 

relationship between a worker and the 

entity to whom that worker provides 

their labor—whether as a matter of 

economic reality that worker is 

dependent upon the business to which 

they render service.’’ At least one 

commenter, however, stated that using 

the idea of economic dependence as a 

‘‘litmus test’’ is ‘‘exceptionally 

challenging to prove or meet in today’s 

complex world of business operations 

for both large and small business.’’ See 

Vegas Chamber. Additionally, some selfidentified freelancers questioned how 

the definition of ‘‘economic 

dependence’’ would apply to a freelance 

worker who may, for example, be a 

writer for multiple publications. One 

freelancer explained that ‘‘selfemployed independent contractors do 

not see it as having that many 

employers [but rather] view those 

publications as customers.’’ 

Some commenters stated that the 

Department’s proposed language 

broadened the definition of ‘‘economic 

dependence’’ and objected to this 

perceived broadening. See, e.g., 

Goldwater Institute, Job Creators 

Network Foundation. The Antonin 

Scalia Law School’s Administrative Law 

Clinic (‘‘Scalia Law Clinic’’), for 

instance, commented that the 

Department’s proposed definition of 

economic dependence ‘‘wrongly states 

that a worker can be an employee 

merely because she is dependent in 

some way on a business, and it 

incorrectly says that a worker’s income 

is entirely irrelevant to whether a 

worker is dependent on a business.’’ 

Similarly, the Goldwater Institute stated 

that the proposal ‘‘creates a broad new 

definition of ‘economic dependence’ 

that does not focus on the amount of 

income earned or whether the 

independent contractor has other 

income streams.’’ Several commenters 

further stated that the Department had 

put forward a new definition of 

economic dependence ‘‘that a worker is 

an employee if they are merely 

‘economically dependent’ on a business 

in a small or inconsequential way.’’ See, 

e.g., NAIFA. Smith Summerset and 

Associates did not disagree with the 

content of § 795.105(b) but suggested 

that the provision be edited for clarity, 

noting that the regulatory language 

referring to ‘‘other income streams’’ is 

‘‘unnecessarily abstract and confusing’’ 

and suggested incorporating alternative 

language from the preamble that the 

Department will be adopting. 

The Department notes that this 

concept of economic dependence—one 

which does not focus on the amount of 

income earned or whether the worker 

has other income streams—has been the 

Department’s consistent position. 

Although some commenters believed 

the Department was proposing a 

different approach, the concept of 

economic dependence in the NPRM and 

this final rule is identical to the 2021 IC 

Rule, which stated that, ‘‘other forms of 

dependence, such as dependence on 

income or subsistence, do not count’’ 

and that ‘‘dependence of income or 

subsistence, is not a relevant 

consideration in the economic reality 

test.’’ 205 The Department continues to 

believe that this position is correct and 

most consistent with the concept of 

economic dependence for work. As 

noted in the 2021 IC Rule and raised 

again in comments received in response 

to the NPRM, a minority of courts have 

applied a ‘‘dependence-for-income’’ 

approach that considers whether the 

worker has other sources of income or 

wealth or is financially dependent on 

the employer. Most courts, however, as 

well as the Department, believe a 

‘‘dependence-for-work’’ approach that 

considers whether the worker is 

dependent on the employer for work or 

depends on the worker’s own business 

for work is the better interpretation. 

This approach focuses the analysis on 

whether the worker is in business for 

themself (and thus dependent upon 

themself for work), or whether the 

worker is dependent upon the potential 

employer for work.206 This approach is 

also consistent with the majority of case 

law. As the Eleventh Circuit has 

explained, ‘‘in considering economic 

dependence, the court focuses on 

whether an individual is ‘in business for 

himself’ or is ‘dependent upon finding 

employment in the business of 

others.’ ’’ 207 Economic dependence, 

however, ‘‘does not concern whether the 

workers at issue depend on the money 

they earn for obtaining the necessities of 

life . . . . Rather, it examines whether 

the workers are dependent on a 

particular business or organization for 

their continued employment.’’ 208

Additionally, consistent with the 2021 

IC Rule, economic dependence does not 

mean that a worker who works for other 

employers, earns a very limited income 

from a particular employer, or is 

independently wealthy cannot 

nevertheless be economically dependent 

on any particular employer for purposes 

of the FLSA.209 As the Fifth Circuit has 

explained, ‘‘it is not dependence in the 

sense that one could not survive 

without the income from the job that we 

examine, but dependence for continued 

employment.’’ 210

Lastly, as a global matter, some 

commenters objected to the 

Department’s use of the word 

‘‘employer’’ throughout the proposed 

regulatory provisions and recommended 

that the Department use an alternate 

term such as ‘‘potential employer’’ 

instead because it made it seem as if the 

result of the analysis was predetermined 

in favor of employee status. See, e.g., 

National Association of Convenience 

Stores (‘‘NACS’’); National Home 

Delivery Association (‘‘NHDA’’); 

Scopelitis. 

Having considered the comments, the 

Department is adopting § 795.105(a) and 

(b) largely as proposed, explaining that 

economic dependence is the ultimate 

inquiry, and that an employee is 

someone who, as a matter of economic 

reality, is economically dependent on 

an employer for work—not for income. 

The Department is also making three 

clarifying edits. First, in response to 

comments, the Department uses the 

phrase ‘‘worker’s potential employer’’ or 

‘‘potential employer’’ instead of the 

word ‘‘employer’’ in § 795.105(a). The 

Department did not intend for its use of 

the word ‘‘employer’’ to predetermine 

any result and makes the change 

throughout the regulatory text. The 

Department is using the terms 


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211 87 FR 62234–37 (proposed § 795.110). 

212 Id. 

‘‘employer,’’ ‘‘potential employer,’’ and 

‘‘the worker’s potential employer’’ 

throughout the preamble discussion, 

and the terms are not intended to 

predetermine any result. Second, the 

Department is adding the statutory 

definition of ‘‘employer’’ to § 795.105(a) 

for completeness. And third, consistent 

with the 2021 IC Rule and the proposed 

regulatory text, the Department is 

finalizing language that makes clear that 

other sources of income or amount of 

pay are not relevant to economic 

dependence, although, in response to 

comments, the Department is making 

some minor edits for additional clarity. 

The Department also proposed to 

delete § 795.105(c) and (d) of the 2021 

IC Rule because it believed that the 

factors of the economic reality test 

should not be given a predetermined 

weight and designated as ‘‘core’’ or 

‘‘additional guideposts.’’ As discussed 

in section III (Need for Rulemaking) as 

well as in section V.C., the Department 

is proceeding with the removal of these 

paragraphs, and discussion of the 

economic reality test and the individual 

factors is being moved to § 795.110. The 

comments regarding the discontinuation 

of ‘‘core factors’’ and the Department’s 

return to the economic reality test’s 

longstanding totality-of-thecircumstances analysis are discussed in 

section V.C. 

C. Economic Reality Test and Economic 

Reality Test Factors (§ 795.110) 

In the NPRM, the Department 

proposed to replace § 795.110 (Primacy 

of actual practice) from the 2021 IC Rule 

with a provision discussing the 

economic reality test and the economic 

reality factors. Proposed § 795.110(a) 

introduced the economic reality test, 

emphasizing that the economic reality 

factors are guides to be used to conduct 

a totality-of-the-circumstances analysis. 

It also explained that the factors are not 

exhaustive, and no single factor is 

dispositive.211 The Department then 

proposed to address the economic 

reality factors in § 795.110(b).212

Many commenters supported the 

Department’s return to the longstanding 

totality-of-the-circumstances economic 

reality analysis, stating that it would 

provide clarity and align with the 

statutory text and relevant case law. See, 

e.g., IBT; Leadership Conference on 

Civil and Human Rights (‘‘Leadership 

Conference’’); NELP; REAL Women in 

Trucking; State AGs; William E. Morris 

Institute for Justice. Outten & Golden, 

for instance, commented that the NPRM 

‘‘properly establishes that the purpose 

of the ‘economic reality’ factors is to 

inform and illuminate the ‘economic 

dependence’ inquiry, while no one 

factor independently drives the 

analysis.’’ NECA and IBEW commented 

that they ‘‘support returning to the longstanding six-factor balancing test, which 

will ensure certainty and clarity for 

construction employers and employees, 

provide protection to law-abiding 

responsible contractors and workers in 

the construction industry, and reduce 

burdensome and costly litigation.’’ 

Securities Industry Financial Markets 

Association (‘‘SIFMA’’) agreed that 

‘‘[t]he Department of Labor is correct to 

note that it is the totality of the 

circumstances that one must look at to 

properly determine status’’ and 

observed that ‘‘courts have found that 

there is no ‘rule of thumb’, but that they 

must instead look at ‘the total 

situation.’ ’’ Similarly, the Shriver 

Center on Poverty Law commented that 

the ‘‘proposed rule’s six-factor ‘economy 

reality’ analysis is a sensible, totality-ofthe circumstances approach that takes 

into account all relevant aspects of the 

worker’s relationship with the hiring 

entity, is not easily manipulated by 

employers, and is well-supported by 

Supreme Court and circuit court 

precedent.’’ Regarding the Department’s 

explanations accompanying each factor, 

NELP commented that ‘‘[b]y sharpening 

the focus of each factor, the proposed 

rule provides greater clarity, which will 

encourage employer compliance and 

reduce misclassification while still 

enabling true independent contractors 

to run their businesses as they see fit.’’ 

The Transport Workers Union of 

America commented that the 

Department’s proposal ‘‘will ensure that 

the legal line between those realities 

matches the facts on the ground. The 

six-factor test envisioned in this rule 

accurately reflects the everyday 

relationship between workers and their 

employers. None of our members would 

risk becoming independent contractors 

under this rule (as they would have 

under the previous administration’s 

proposal).’’ Likewise, SWACCA stated 

that the Department’s proposal ‘‘will 

achieve more certainty than the January 

2021 Rule because it reflects a standard 

that the courts have clarified and 

explained in numerous specific contexts 

through decades of judicial rulings. It is 

a well understood body of law that 

employers, workers, enforcement 

officials, private attorneys, and the 

federal courts all have considerable 

experience applying.’’ 

Several commenters emphasized that 

the Act’s definitions should guide the 

analysis. The LA Fed & Teamsters 

Locals, for example, observed that 

‘‘[c]ourts have interpreted the FLSA’s 

broad suffer or permit to work language 

as seeking to answer one foundational 

question regarding the relationship 

between a worker and the entity to 

whom that worker provides their labor.’’ 

They added that the 2021 IC Rule 

‘‘improperly elevates certain factors and 

prevents consideration of certain facts, 

would invite employers to find ways to 

cloak a worker’s dependence in a veneer 

of independence and would fail to 

account for changes in working 

structures that come with societal 

progress.’’ 

In contrast, other commenters stated 

that the Department’s proposal to 

replace the ‘‘core factor’’ analysis and 

return to the totality-of-thecircumstances analysis undermined the 

clarity of the 2021 IC Rule, creating 

more uncertainty and confusion. See, 

e.g., Consumer Brands Association; 

CWI; Forest Resources Association; 

I4AW; NYS Movers and 

Warehousemen’s Association; WSTA. 

For example, the 4A’s stated that the 

Department’s proposal to return to a 

‘‘totality-of-the-circumstances analysis, 

in which the economic reality factors 

are no longer weighted more heavily 

based on importance, represents a 

change from the 2021 Independent 

Contractor Rule that will inevitably 

bring uncertainty and confusion for 

advertising agencies and the U.S. 

business community at large.’’ FSI 

commented that ‘‘[b]y expanding the 

range of relevant factors and expressly 

refusing to give guidance on how to 

weigh them against each other, DOL 

actively undermines the clarifying 

improvements of the 2021 Rule and 

works against its own stated objectives.’’ 

Several commenters objected to the 

Department’s framing of the proposal as 

a return to a longstanding analysis, 

instead opining that the NPRM set forth 

a novel test. See, e.g., Mackinac Center 

for Public Policy; WPI. Many of these 

commenters expressed concern that the 

proposed rule would have detrimental 

effects on their industries, work 

opportunities, and earnings. See, e.g., 

American Council of Life Insurers 

(‘‘ACLI’’) (identifying aspects of the 

proposal that ‘‘would be enormously 

economically disruptive to the local 

businesses and preferred livelihoods of 

these individuals’’); Buckeye Institute 

(‘‘[B]y making it more expensive and 

more difficult to undertake independent 

work, this rule will shrink the available 

labor pool for employers.’’); PGA 

(commenting that the proposal could 

‘‘[t]hreaten the source of income of 

thousands of workers across the country 


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213 87 FR 62234. 

214 29 U.S.C. 203(d), (e)(1), (g). 

215 88 F.3d 925, 929 n.5 (11th Cir. 1996). 

216See, e.g., Darden, 503 U.S. at 326 (noting that 

‘‘employ’’ is defined with ‘‘striking breadth’’ (citing 

Rutherford, 331 U.S. at 728)); Rosenwasser, 323 

U.S. at 362 (‘‘A broader or more comprehensive 

coverage of employees . . . would be difficult to 

frame.’’); Robicheaux v. Radcliff Material, Inc., 697 

F.2d 662, 665 (5th Cir. 1983) (‘‘The term ‘employee’ 

is thus used ‘in the broadest sense ‘ever . . . 

included in any act.’’ ’’ (quoting Donovan v. Am. 

Airlines, Inc., 686 F.2d 267, 271 (5th Cir. 1982))). 

217 29 U.S.C. 202. 

in a time of economic uncertainty’’); 

National Pork Producers Council (‘‘As a 

result, pork producers and other 

business owners could be subject to 

increased legal and tax issues.’’). 

Other commenters stated that the 

2021 IC Rule’s core factor analysis was 

better suited to the issues of the current 

economy than the Department’s 

proposal. For instance, the Job Creators 

Network Foundation commented that 

the Department’s proposal ‘‘conflicts 

with the way America’s economy works 

today’’ and that the new economy 

would be ‘‘significantly diminished’’ if 

the proposal were to move forward. In 

contrast, other commenters stated that 

the NPRM ‘‘accurately analyzes modern 

workplace trends and provides detailed 

guidance on how these changes to the 

nature of work itself must be integrated 

and considered within those six 

identified factors (and within the 

additional factors that may arise in 

particular factual scenarios).’’ LA Fed & 

Teamsters Locals; see also LCCRUL & 

WLC (commenting that the NPRM 

‘‘closely aligns with long-standing 

judicial precedent and that has proven 

well-suited to adapt to the myriad forms 

of working arrangements that have 

existed in the over 80 years since the 

FLSA’s passage, as well as to 

unforeseeable work structures that will 

appear in the future’’). 

Some commenters stated that the 

Department’s proposed factors were too 

broad and not tethered to economic 

dependence. IBA and CPIE, for example, 

commented that the proposed 

regulations ‘‘are not faithful to 

answering the question of economic 

dependence’’ and instead ‘‘consistently 

resolve alternative interpretations of a 

specific factor in the direction of 

broadening the scope of the factor.’’ 

Similarly, some commenters stated that 

the Department’s proposal expanded the 

range of relevant factors and ‘‘hold[s] a 

thumb on the analytical scale towards 

employment.’’ See SHRM. The U.S. 

Chamber stated that the proposed rule 

‘‘would not only lead to significant 

reclassification of independent 

contractors but would also lead to a 

considerable increase in litigation. The 

bias in favor of employee status, which 

appears throughout the Proposed Rule, 

makes the risk that independent 

contractors would be misclassified as 

employees especially acute, with 

potentially dramatic consequences for 

entire industries.’’ See also Boulette 

Golden & Marin LLP (commenting that 

the Department has attempted ‘‘to 

narrow the scope of the economic 

reality test and suggests an individual is 

not an employee only if the employee 

has a free-standing business’’). 

Relatedly, other commenters requested 

that ‘‘[i]f it is the Department’s intent 

that this rule should uphold practices 

that were in place for years before the 

2021 Independent Contractor Rule, then 

we believe any final rule should 

confidently state that most workers 

would not see a change.’’ See OOIDA. 

Several commenters requested that 

the Department provide additional 

guidance regarding how to weigh the 

factors in various scenarios. See, e.g., 

Grantmakers in the Arts; National Small 

Business Association. NRF & NCCR, for 

example, commented that ‘‘[t]his 

approach provides little guidance as to 

how individuals and businesses should 

apply those factors when they do not all 

point in the same direction.’’ 

Commenters also stated that, in contrast 

to the 2021 IC Rule, potential overlap 

among factors made this test more 

challenging to understand. For example, 

the Club Management Association of 

America and the National Club 

Association (‘‘CMAA & NCA’’) 

commented that ‘‘[e]ach factor includes 

multiple subjective elements for 

consideration that are not distinct from 

other factors’’ and the Alabama 

Trucking Association stated that the 

proposal ‘‘also create[ed] subtests that 

overlap at least conceptually or 

completely with aspects of other parts of 

the test.’’ See also MEP (‘‘Overlap makes 

it more difficult for the regulated 

community to understand how to 

analyze the different elements of the 

contractual relationship.’’). 

Various commenters requested that 

the Department state that workers in 

their particular industry or occupation 

were bona fide independent contractors. 

See, e.g., Insights Association (strongly 

urging ‘‘the addition of a clarification 

that market research participants 

receiving incentives are independent 

contractors’’); American Securities 

Association (stating its belief ‘‘that, 

consistent with this precedent, there is 

wisdom in including in the Proposed 

Rule an exemption for the financial 

services and insurance industries’’); 

C.A.R. (‘‘C.A.R. asks the DOL to not 

apply any new rule to established 

industries whose businesses have 

already addressed this long-standing 

issue.’’); National Alliance of Forest 

Owners (‘‘NAFO’’) (requesting ‘‘a safe 

harbor provision to provide forestry 

businesses a clear standard for 

classifying workers as independent 

contractors’’). 

After considering all comments and as 

discussed in detail below, the 

Department is adopting § 795.110(a) as 

proposed. 

Regarding comments that the 

Department’s proposal is generally 

biased in favor of employee status, or 

that its analysis of each factor places a 

‘‘thumb on the scale’’ toward 

employment, the Department reiterates 

that its proposal is consistent with 

longstanding judicial precedent and, 

critically, the plain language of the Act. 

The Department agrees with those 

commenters who emphasized the Act’s 

relevant statutory definitions. As it has 

stated previously, the Department 

believes that determining whether an 

employment relationship exists under 

the FLSA begins with the Act’s 

definitions.213 The Act’s text is 

expansive, defining ‘‘employer’’ to 

‘‘include[ ] any person acting directly or 

indirectly in the interest of an employer 

in relation to an employee,’’ 

‘‘employee’’ as ‘‘any individual 

employed by an employer,’’ and 

‘‘employ’’ to ‘‘include[ ] to suffer or 

permit to work.’’ 214 Prior to the FLSA’s 

enactment, the phrasing ‘‘suffer or 

permit’’ was commonly used in state 

laws regulating child labor. As the 

Eleventh Circuit explained in Antenor 

v. D & S Farms, ‘‘[t]he ‘suffer or permit 

to work’ standard derives from state 

child-labor laws designed to reach 

businesses that used middlemen to 

illegally hire and supervise 

children.’’ 215 In other words, the 

standard was designed to ensure that an 

employer could be covered under the 

labor law even if they did not directly 

control a worker or used an agent to 

supervise the worker. The Supreme 

Court has explicitly and repeatedly 

recognized that this ‘‘suffer or permit’’ 

language demonstrates Congress’s intent 

for the FLSA to apply broadly and more 

inclusively than the common law 

standard.216 This textual breadth 

reflects Congress’s stated intent. Section 

2 of the Act, Congress’s ‘‘declaration of 

policy,’’ states that the Act is intended 

to eliminate ‘‘labor conditions 

detrimental to the maintenance of the 

minimum standard of living necessary 

for health, efficiency, and general wellbeing of workers.’’ 217 Particularly 

relevant to misclassification, section 2 

identifies ‘‘unfair method[s] of 

competition in commerce’’ as an 

additional condition ‘‘to correct and as 


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218 Id.; see also Rosenwasser, 323 U.S. at 361–62; 

Pilgrim Equip., 527 F.2d at 1311 (‘‘Given the 

remedial purposes of the legislation, an expansive 

definition of ‘employee’ has been adopted by the 

courts.’’). 

219Brief for the Administrator at 10, Rutherford 

Food Corp. v. McComb, 331 U.S. 722 (1947) (No. 

562), 1947 WL 43939, at *10 (quoting Portland 

Terminal, 330 U.S. at 150–51). 

220 Id. at *10–11. 

221Some commenters contended that the 

Department’s discussion in this section of cases 

where the Supreme Court repeatedly recognized 

that the definitions of ‘‘employ,’’ ‘‘employee,’’ and 

‘‘employer’’ that establish who is entitled to the 

FLSA’s protections were written broadly and have 

been appropriately interpreted broadly, failed to 

properly account for the Court’s more recent 

decision in Encino Motorcars v. Navarro, 138 S. Ct. 

1134 (2018), which overturned a rule of 

interpretation that applied to exemptions. See U.S. 

Chamber; FSI. In Encino, the Supreme Court 

addressed an exemption from the FLSA’s overtime 

pay requirements and ruled that the ‘‘narrow 

construction’’ principle—that FLSA exemptions 

should be narrowly construed—should no longer be 

used. The Court explained that instead, such 

exemptions should be given a fair reading, stating 

‘‘[b]ecause the FLSA gives no textual indication that 

its exemptions should be construed narrowly, there 

is no reason to give [them] anything other than a 

fair (rather than a narrow) interpretation.’’ Encino, 

138 S. Ct. at 1142 (internal quotations and citation 

omitted). Though this decision did not apply to the 

Act’s definitions (which have not been interpreted 

under the ‘‘narrow construction’’ principle), the 

Department recognizes that some courts have gone 

beyond Encino and extended the ‘‘fair reading’’ 

principle to other parts of the Act or to the Act 

generally. See, e.g., McKay v. Miami-Dade Cnty., 36 

F.4th 1128, 1133 (11th Cir. 2022). There is no need 

to rely on the ‘‘fair reading’’ principle here because 

there is a clear textual indication in the Act’s 

definitions, by the inclusion of the ‘‘suffer or 

permit’’ language, that broad coverage under the 

Act was intended. See 29 U.S.C. 203(g). Thus, even 

if it were applied, such broad coverage would be 

a ‘‘fair’’ interpretation under Encino because the 

broad scope of who is an employee under the FLSA 

comes from the definitions themselves and not any 

‘‘narrow-construction’’ principle. See id. Moreover, 

Encino did not hold that the FLSA’s remedial 

purpose may never be considered, it simply noted 

that it is a ‘‘flawed premise that the FLSA ‘pursues’ 

its remedial purpose ‘at all costs.’ ’’ Id. at 1142 

(quoting Am. Express Co. v. Italian Colors Rest., 570 

U.S. 228, 234 (2013)) (emphasis added). Indeed, 

other courts have appropriately continued to 

consider the purpose of the Act. See, e.g., Uronis 

v. Cabot Oil & Gas Corp., 49 F.4th 263, 269 (3d Cir. 

2022) (‘‘As a remedial statute, the FLSA . . . is 

broadly construed, and ‘must not be interpreted or 

applied in a narrow, grudging manner.’ ’’) (quoting 

Brock v. Richardson, 812 F.2d 121, 124 (3d Cir. 

1987)). The Department does not agree with the 

commenters’ views that any pre-Encino case law 

discussing the remedial purpose of the Act has been 

abrogated, and it notes that courts have not changed 

their application of the economic reality test to 

determine employee status based on Encino. 

Finally, the Department reiterates that, to the extent 

that the language in the 2021 IC Rule preamble 

implied that the Act’s remedial purpose can never 

be considered, including when determining 

whether an individual is an employee or an 

independent contractor under the FLSA, the 

Department clarifies that it believes that this would 

be an unwarranted extension of the Supreme 

Court’s decision. See, e.g., 86 FR 1207–08 

(discussing Encino’s application in response to 

commenters’ concerns that the 2021 IC Rule 

conflicted with the FLSA’s remedial purpose). 

222Cornerstone Am., 545 F.3d at 343 (citing 

Darden, 503 U.S. at 326; Herman v. Express SixtyMinutes Delivery Serv., Inc., 161 F.3d 299, 303 (5th 

Cir. 1998)). 

223Rutherford, 331 U.S. at 728–30. 

224Rosenwasser, 323 U.S. at 362. 

225See Silk, 331 U.S. at 716–18 (applying the test 

under the SSA); Rutherford, 331 U.S. at 730 (same 

under the FLSA). 

226Rutherford, 331 U.S. at 729; see also Whitaker 

House, 366 U.S. at 31–32 (describing the same as 

it relates to homeworkers). 

227Cornerstone Am., 545 F.3d at 343 (citing 

Express Sixty-Minutes, 161 F.3d at 303). 

228 Id.; see also Pilgrim Equip., 527 F.2d at 1311– 

12 (‘‘[T]he final and determinative question must be 

whether the total of the testing establishes the 

personnel are so dependent upon the business with 

which they are connected that they come within the 

protection of [the] FLSA or are sufficiently 

independent to lie outside its ambit.’’). 

229See, e.g., Flint Eng’g, 137 F.3d at 1441 

(explaining that ‘‘[n]one of the factors alone is 

dispositive; instead, the court must employ a 

totality-of-the-circumstances approach’’). 

rapidly as practicable . . . 

eliminate.’’ 218

In its 1947 brief before the Supreme 

Court in Rutherford, the Department 

explained that the Act ‘‘contains its own 

definitions, comprehensive enough to 

require its application to many persons 

and working relationships, which prior 

to this Act, were not deemed to fall 

within an employer-employee 

category.’’ 219 The Department 

continued, stating that ‘‘[t]he purposes 

of this Act require a practical, realistic 

construction of the employment 

relationship . . . and the broad 

language of the statutory definitions is 

more than adequate to support such a 

construction.’’ 220 The determination of 

whether a worker is covered under the 

FLSA must be made in the context of 

the Act’s own definitions and the 

courts’ expansive reading of its 

scope.221 The FLSA’s ‘‘particularly 

broad’’ definition of ‘‘employee’’ 

encompasses all workers who are, ‘‘as a 

matter of economic reality, . . . 

economically dependent upon the 

alleged employer.’’ 222 The Supreme 

Court agreed, reiterating the breadth and 

reach of the Act’s definitions to work 

relationships that were not previously 

considered to constitute employment 

relationships and emphasizing that the 

determination of an employment 

relationship under the FLSA depends 

not on ‘‘isolated factors but rather upon 

the circumstances of the whole 

activity.’’ 223

Thus, the Department’s analysis does 

not place a ‘‘thumb on the scale’’ for 

employment. Rather, it was Congress’s 

clear intent in fashioning the Act (which 

has been repeated by courts for decades) 

that the statutory language sweep 

broader than the common law and 

encompass all workers who are 

‘‘suffered or permitted’’ to work, and the 

test for employment must reflect that 

plain language and clear intent. The 

Department emphasizes again, however, 

that there is a wide assortment of bona 

fide independent contractors across 

industries and occupations, and it 

believes that the regulations as finalized 

in this rule allow for this range of work 

relationships—from employees to 

independent contractors—to be 

appropriately classified. 

The Department has also considered 

the comments opining that the 

Department’s totality-of-thecircumstances economic reality test will 

cause confusion or uncertainty and that 

the 2021 IC Rule’s core factors analysis 

was clearer. The Department believes, 

however, that an analysis that has been 

applied for decades and is aligned with 

the breadth of the relevant statutory 

definitions and binding judicial 

precedent is not only more faithful to 

the Act but also more familiar to the 

regulated community, workers, and 

those enforcing the Act. 

The economic reality test was 

developed by the Supreme Court in 

interpreting and applying the social 

legislation of the 1930s, including the 

FLSA.224 In 1947, the Supreme Court 

issued two decisions, Silk and 

Rutherford, that used an economic 

reality test to determine employment 

status.225 As explained in Rutherford, 

the ‘‘economic reality’’ test is designed 

to bring within such legislation 

‘‘persons and working relationships 

which, prior to this Act, were not 

deemed to fall within an employeremployee category.’’ 226 Only a worker 

who ‘‘is instead in business for himself’’ 

is an independent contractor not 

covered by the Act.227 The ‘‘focus’’ and 

‘‘ultimate concept’’ of the determination 

of whether a worker is an employee or 

an independent contractor, then, is ‘‘the 

economic dependence of the alleged 

employee.’’ 228 The statutory language 

thus frames the central question that the 

economic reality test asks—whether the 

worker is economically dependent on 

an employer who suffers or permits the 

work or whether the worker is in 

business for themself. 

To aid in answering this ultimate 

inquiry of economic dependence, 

several factors have been considered by 

courts and the Department as 

particularly probative when conducting 

a totality-of-the-circumstances analysis 

of whether a worker is an employee or 

an independent contractor under the 

FLSA.229 In Silk, the Supreme Court 

suggested that ‘‘degrees of control, 

opportunities for profit or loss, 

investment in facilities, permanency of 

relation and skill required in the 

claimed independent operation are 


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230 331 U.S. at 716. 

231 Id. 

232See id. 

233Rutherford, 331 U.S. at 729–30. 

234Pilgrim Equip., 527 F.2d at 1311. 

235 Id. 

236Off Duty Police, 915 F.3d at 1055 (alterations 

and internal quotations omitted). 

237See generally supra n.52. 

238See, e.g., Cornerstone Am., 545 F.3d at 344 

(discussing relative investments); Superior Care, 

840 F.2d at 1060 (discussing the use of skill as it 

relates to business-like initiative). 

239 86 FR 1170; see also Saleem, 854 F.3d at 139– 

40; Cornerstone Am., 545 F.3d at 343; Keller v. Miri 

Microsystems LLC, 781 F.3d 799, 807 (6th Cir. 

2015); Flint Eng’g, 137 F.3d at 1440–41. 

240Superior Care, 840 F.2d at 1058–59; 

DialAmerica, 757 F.2d at 1382–83; McFeeley, 825 

F.3d at 241; Off Duty Police, 915 F.3d at 1055; 

Lauritzen, 835 F.2d at 1534–35; Alpha & Omega, 39 

F.4th at 1082; Driscoll, 603 F.2d at 754–55; Paragon, 

884 F.3d at 1235; Scantland, 721 F.3d at 1311–12; 

Morrison, 253 F.3d at 11. 

241See, e.g., Superior Care, 840 F.2d at 1058–59; 

Morrison, 253 F.3d at 11 (citing Superior Care, 840 

F.2d at 1058–59). 

242See, e.g., Hobbs, 946 F.3d at 836. 

important for decision.’’ 230 The Court 

also drew a distinction between workers 

who are an integral part of the business 

but are not the directors of their 

business, and workers who ‘‘depend 

upon their own initiative, judgment, 

and energy for a large part of their 

success.’’ 231 The Court cautioned that 

no single factor is controlling and that 

the list is not exhaustive.232 In 

Rutherford, the Court used a similar 

analysis when concluding that the 

workers in that case were employees, 

considering ‘‘the circumstances of the 

whole activity,’’ and relied on the fact 

that the workers’ work was ‘‘a part of 

the integrated unit of production.’’ 233

These considerations identified by the 

Supreme Court are the same factors that 

the Department set forth in its NPRM. 

Courts, employers, workers, and 

enforcement personnel have been 

considering these factors for over 75 

years. As such, the Department does not 

see a credible basis for comments that 

predict sharply increased litigation, 

dramatic curtailment of opportunities, 

or massive reclassification of workers. 

This is the analysis that the Department 

(except for the 2021 IC Rule) and courts 

have applied for more than 7 decades to 

classify workers under the Act, and the 

predictions raised in the comments as 

concerns have not been evident. 

Moreover, this final rule represents the 

Department’s most comprehensive 

guidance regarding the economic reality 

test used by courts to determine 

employee or independent contractor 

status. As such, to the extent there was 

litigation around this issue due to a lack 

of clarity, that should be further 

alleviated by this rulemaking. As 

explained further in the economic 

analysis in section VII, because of this 

alignment with a longstanding analysis, 

the Department does not expect 

widespread reclassification as a result of 

this rule. 

Rather, the economic reality test, the 

case law, and the Department’s position 

have remained remarkably consistent 

since the 1940s, and throughout this 

time the test has demonstrated its ability 

to address evolving workplace trends. 

The test’s focus has remained on 

whether the worker is in business for 

themself, with the inquiry directed 

toward the question of economic 

dependence. This consistency is, at least 

in part, due to the fact that the analysis 

works for a broad swath of work 

arrangements, both longstanding and 

emerging, and its overarching rationale 

based on economic dependence makes 

common sense. It is not surprising that 

some courts and the Department may 

have used somewhat different iterations 

of the factors over the last several 

decades, as the factors ‘‘are aids—tools 

to be used to gauge the degree of 

dependence of alleged employees on the 

business with which they are 

connected.’’ 234 These factors are only 

guideposts, and ‘‘[i]t is dependence that 

indicates employee status. Each [factor] 

must be applied with that ultimate 

notion in mind.’’ 235 This is why most 

courts, and the Department, have long 

made clear that additional factors may 

be relevant when applying the test to a 

particular case. It is also expected that 

outcomes may vary somewhat among 

workers even in the same profession, for 

example, because the test demands a 

fact-specific analysis. Facts like job 

titles or whether a worker receives a 

1099 form are not probative of the 

economic realities of the relationship. 

Rather, in undertaking this analysis, 

each factor is examined and analyzed in 

relation to one another and to the Act’s 

definitions. Importantly, ‘‘[n]one of 

these factors is determinative on its 

own, and each must be considered with 

an eye toward the ultimate question— 

the worker’s economic dependence on 

or independence from the alleged 

employer.’’ 236

While the Department appreciates, as 

some commenters noted, that two 

factors (like any test with fewer factors) 

are simpler in some ways than six 

factors, the Department believes that it 

would be a disservice to stakeholders to 

present an analysis that is contrary to 

how courts view the totality-of-thecircumstances analysis. Courts have 

repeatedly admonished against a 

mechanical application of the factors 

and have required a full analysis of all 

relevant factors, which is why the 

Department believes that any clarity 

created by shrinking the test to two core 

factors and artificially weighting them is 

illusory. As addressed in the NPRM, 

since Silk and Rutherford, federal courts 

of appeals have applied the economic 

reality test to distinguish independent 

contractors from employees who are 

entitled to the FLSA’s protections. 

Federal appellate courts considering 

employee or independent contractor 

status under the FLSA generally analyze 

the economic realities of the work 

relationship using the factors identified 

in Silk and Rutherford.237 There is 

significant and widespread uniformity 

among the federal courts of appeals in 

the application of the economic reality 

test, although there is slight variation as 

to the number of factors considered or 

how the factors are framed (for example, 

whether relative investment is 

considered within the investment factor, 

or whether skill must be used with 

business-like initiative).238 As the 2021 

IC Rule explained, ‘‘[m]ost courts of 

appeals articulate a similar test,’’ and 

these courts consistently caution against 

the ‘‘mechanical application’’ of the 

economic reality factors, view the 

factors as tools to ‘‘gauge . . . economic 

dependence,’’ and ‘‘make clear that the 

analysis should draw from the totality of 

circumstances, with no single factor 

being determinative by itself.’’ 239 All of 

the federal courts of appeals that have 

addressed employee or independent 

contractor status under the FLSA 

consider five of the same factors.240

Briefly, these factors include the degree 

of control exercised by the employer 

over the worker, skill, permanency, 

opportunity for profit or loss, and 

investment, although the Second Circuit 

and the D.C. Circuit treat the worker’s 

opportunity for profit or loss and the 

worker’s investment as a single 

factor.241 Nearly all federal courts of 

appeals expressly consider a sixth 

factor, whether the work is an integral 

part of the employer’s business. The 

Fifth Circuit has not adopted the 

integral factor as an enumerated factor 

but has at times assessed integrality as 

an additional relevant factor.242 As 

such, courts can and do accord weight 

to different factors depending upon the 

particular facts of a case. And because 

courts are the ultimate arbiter of 

disputes regarding worker classification, 

an analysis that is aligned with how 

courts view the issue is the most 

beneficial guidance that the Department 

can provide to stakeholders. 

Regarding comments that the 

Department should provide additional 

guidance regarding how to weigh the 


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243See, e.g., Scantland, 721 F.3d at 1312 (quoting 

Mednick, 508 F.2d at 301–02); see also Saleem, 854 

F.3d at 139–140; Mr. W Fireworks, 814 F.2d at 

1054–55. 

244See, e.g., Scantland, 721 F.3d at 1312 (the 

economic reality factors ‘‘serve as guides, [and] the 

overarching focus of the inquiry is economic 

dependence’’); Pilgrim Equip., 527 F.2d at 1311 

(The economic reality factors ‘‘are aids—tools to be 

used to gauge the degree of dependence of alleged 

employees on the business with which they are 

connected. It is dependence that indicates 

employee status. Each test must be applied with 

that ultimate notion in mind.’’). 

245See, e.g., Lauritzen, 835 F.2d at 1534 (referring 

to the economic reality factors and stating that 

‘‘[c]ertain criteria have been developed to assist in 

determining the true nature of the relationship, but 

no criterion is by itself, or by its absence, 

dispositive or controlling.’’). 

246 Independent contractors are not ‘‘employees’’ 

for purposes of the FLSA. See generally Portland 

Terminal, 330 U.S. at 152 (stating that the 

‘‘definition ‘suffer or permit to work’ was obviously 

not intended to stamp all persons as employees’’). 

247Silk, 331 U.S. at 716. 

factors, the Department believes that 

adding mechanistic rules for analyzing 

the factors would be contrary to judicial 

precedent and would limit the test’s 

intended flexibility. As explained in the 

NPRM, this totality-of-thecircumstances analysis considers all 

factors that may be relevant and, in 

accordance with the case law, does not 

assign any of the factors a 

predetermined weight. Limiting and 

weighting the factors in a predetermined 

manner undermines the very purpose of 

the test, which is to consider—based on 

the economic realities—whether a 

worker is economically dependent on 

the employer for work or is in business 

for themself.243 Importantly, each factor, 

considered in isolation, does not 

determine whether a worker is 

economically dependent on an 

employer for work or in business for 

themself. Rather, the factors are tools or 

indicators and must be analyzed 

together in order to answer this ultimate 

inquiry. This is the guidance that the 

Department has tried to provide for each 

factor, as discussed in this section 

below.244 Depending on the facts and 

circumstances of a case, it is to be 

expected that one or more factors may 

be more probative than the other factors. 

The analysis, however, cannot be 

conducted like a scorecard or a 

checklist. For example, two factors that 

strongly indicate independent 

contractor status in a particular case 

could possibly outweigh other factors 

that indicate employee status, and vice 

versa. But to assign a predetermined and 

immutable weight to certain factors 

ignores the totality-of-thecircumstances, fact-specific nature of 

the inquiry that is intended to reach a 

multitude of employment relationships 

across occupations and industries and 

over time. Similarly, it is possible that 

not every factor will be particularly 

relevant in each case and that is also to 

be expected.245 Accordingly, the 

Department believes that the nuanced 

analysis that accompanies each factor 

below is more appropriate guidance 

than rote instructions for weighing the 

factors. 

Regarding comments that certain 

relevant facts may overlap among the 

factors, as explained in the NPRM, the 

Department believes that emphasizing 

the discrete nature of each particular 

factor and evaluating each factor in a 

vacuum fails to analyze the entire range 

of potential employment relationships 

in the manner demanded by the Act’s 

text and accompanying case law. 

Additionally, the test must be able to 

identify the vast variety of legitimate 

independent contractor relationships.246

As such, the Department does not wish 

to be overly prescriptive regarding 

overlap among factors, because doing so 

encourages a more formulaic 

application of the factors as a checklist, 

when instead the factors are guides to 

determining, by looking at all relevant 

facts, the economic reality of the 

situation. Applying a formulaic or rote 

analysis that isolates each factor is 

contrary to decades of case law, 

decreases the utility of the economic 

reality test, and makes it harder to 

analyze the ultimate inquiry of 

economic dependence. Rather, the 

analysis needs to be flexible enough to 

apply to all kinds of work, and all kinds 

of workers, from traditional economy 

jobs to jobs in emerging business 

models. As the Supreme Court stated in 

Silk, ‘‘[p]robably it is quite impossible to 

extract from the [SSA] a rule of thumb 

to define the limits of the employeremploye[e] relationship’’ but the Court 

identified factors as ‘‘important’’: 

‘‘degrees of control, opportunities for 

profit or loss, investment in facilities, 

permanency of relation[,] and skill 

required in the claimed independent 

operation’’ and added that ‘‘[n]o one is 

controlling, nor is the list complete.’’ 247

With this rule, the Department is 

providing its most detailed guidance to 

date regarding the application of each of 

the considerations identified by the 

Supreme Court as being important to the 

determination of whether a worker is an 

employee under the Act. 

As to those comments stating that the 

proposed rule was not well-suited to the 

modern economy, the Department 

disagrees. The Department notes that 

the cases addressing employee vs. 

independent contractor status discussed 

in this rule and using the economic 

reality test apply to a wide range of 

today’s workers, from cable installers to 

exotic dancers to health care workers, 

and the Department’s enforcement 

experience applying the economic 

reality test is similarly varied. With this 

rulemaking, the Department describes 

the economic reality factors that reflect 

the totality-of-the-circumstances 

approach that courts have taken for 

decades and are still applying to today’s 

workplaces, and provides an analysis as 

to how the Department considers each 

factor in today’s workplaces, based on 

case law and the Department’s 

enforcement expertise in this area. For 

example, the investment factor is 

returned to being a separate factor, 

considers facts such as whether the 

investment is capital or entrepreneurial 

in nature, and considers the worker’s 

investments relative to the employer’s 

investments. Significant additional 

guidance is provided for the control 

factor, including detailed discussions of 

how scheduling, supervision, pricesetting, and the ability to work for 

others should be considered when 

analyzing the degree of control exerted 

over a worker. And the integral factor is 

returned to its longstanding 

Departmental and judicial 

interpretation, rather than the 

‘‘integrated unit of production’’ 

approach that was included in the 2021 

IC Rule. 

The Department declines commenter 

requests to provide any industryspecific or occupation-wide exemptions 

or carve-outs to this rule. As explained 

elsewhere, the Department intends these 

regulations to apply to a broad range of 

work relationships and will continue to 

assess the need for more specific 

subregulatory guidance. 

Finally, multiple commenters seemed 

to refer to worker classification as a 

preference or suggested that the 

Department’s proposal would infringe 

upon workers’ or businesses’ choices. 

See, e.g., Cambridge Investment 

Research (commenting that the result of 

the NPRM ‘‘will be that many workers— 

including workers who want to be 

independent contractors—will be 

reclassified as employees under the 

FLSA’’); Transcend Software and 

Technology Solutions (commenting that 

the proposal would create an 

environment ‘‘where the freedom for 

entrepreneurs to operate as independent 

contractors is significantly 

diminished’’). For instance, the NDA 

stated that it ‘‘believes employers and 

workers should have the freedom and 

flexibility to engage in labor 

arrangements that meet the specific 

needs and preferences of both parties 

involved,’’ and Cetera Financial Group 

commented that the ‘‘Department could 


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248Barrentine v. Arkansas-Best Freight Sys., Inc., 

450 U.S. 728, 740 (1981) (listing cases). 

249Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 

706 (1945). 

250Tony & Susan Alamo, 471 U.S. at 302 (citing 

Barrentine, 450 U.S. 728 and Brooklyn Sav., 324 

U.S. 697). 

251 Jewell Ridge Coal Corp. v. UMWA Local 6167, 

325 U.S. 161, 167 (1945). 

252 Id. (internal quotation marks omitted). 

253 29 U.S.C. 202(a); Brooklyn Sav., 324 U.S. at 

710. 

254See generally 87 FR 62274–75 (proposed 

§ 795.110(b)(1)). 255See generally id. at 62237–39. 

take a huge step toward . . . certainty 

[for stakeholders] by including the 

expressed intention of the parties as a 

threshold criteria for the existence of 

economic dependence.’’ While 

businesses are certainly and 

unequivocally able to organize their 

businesses as they prefer consistent 

with applicable laws, and workers are 

free to choose which work opportunities 

are most attractive to them, if a worker 

is an employee under the FLSA, then 

those FLSA-protected rights cannot be 

waived by either party. 

The Supreme Court’s ‘‘decisions 

interpreting the FLSA have frequently 

emphasized the nonwaivable nature of 

an individual employee’s right[s] . . . 

under the Act’’ and ‘‘have held that 

FLSA rights cannot be abridged by 

contract or otherwise waived.’’ 248 The 

Supreme Court has identified at least 

three reasons for this nonwaiver rule. 

First, the Court has determined, based 

on the legislative history of the FLSA, 

that the Act constituted ‘‘a recognition 

of the fact that due to the unequal 

bargaining power as between employer 

and employee, certain segments of the 

population required federal compulsory 

legislation to prevent private contracts 

on their part which endangered national 

health and efficiency.’’ 249 According to 

the Court, the protective purposes of the 

Act thus ‘‘require that it be applied even 

to those who would decline its 

protections’’; otherwise, ‘‘employers 

might be able to use superior bargaining 

power to coerce employees to . . . 

waive their protections under the 

Act.’’ 250 Second, in enacting the FLSA, 

Congress sought to establish a ‘‘uniform 

national policy of guaranteeing 

compensation for all work’’ performed 

by covered employees.251 Consequently, 

‘‘[a]ny custom or contract falling short 

of that basic policy, like an agreement 

to pay less than the minimum wage . . . 

cannot be utilized to deprive employees 

of their statutory rights.’’ 252 Third, the 

Court has held that permitting 

employees to waive their FLSA rights is 

inconsistent with the explicit purpose of 

the Act to protect employers against 

unfair methods of competition.253

Accordingly, FLSA rights cannot be 

waived by either party under the law. 

The Department is finalizing 

§ 795.110(a) as proposed. In the sections 

that follow, the Department is providing 

a detailed analysis about the application 

of each factor based on case law and the 

Department’s enforcement experience as 

a guide for employers and workers in 

determining whether a worker is an 

employee or an independent contractor, 

with each factor discussed through the 

lens of economic dependence. 

1. Opportunity for Profit or Loss 

Depending on Managerial Skill 

(§ 795.110(b)(1)) 

Regarding the opportunity for profit 

or loss depending on managerial skill 

factor, the Department proposed that 

this factor consider ‘‘whether the worker 

exercises managerial skill that affects 

the worker’s economic success or failure 

in performing the work.’’ The 

Department identified a nonexclusive 

list of facts that may be relevant when 

considering this factor: whether the 

worker determines or can meaningfully 

negotiate the charge or pay for the work 

provided; whether the worker accepts or 

declines jobs or chooses the order and/ 

or time in which the jobs are performed; 

whether the worker engages in 

marketing, advertising, or other efforts 

to expand their business or secure more 

work; and whether the worker makes 

decisions to hire others, purchase 

materials and equipment, and/or rent 

space. The Department added that, if a 

worker has no opportunity for a profit 

or loss, then this factor suggests that the 

worker is an employee. The Department 

said further that some decisions by a 

worker that can affect the amount of pay 

that a worker receives, such as the 

decision to work more hours or take 

more jobs, generally do not reflect the 

exercise of managerial skill indicating 

independent contractor status under 

this factor.254

The Department explained that the 

proposed regulatory text for this factor 

focused the opportunity for profit or 

loss factor on whether the worker 

exercises managerial skill that affects 

the worker’s economic success or failure 

in performing the work. The Department 

noted that the 2021 IC Rule similarly 

considered managerial skill, but 

explained that the proposed regulatory 

text more accurately reflects the 

consideration of the profit or loss factor 

in the case law and reflects the ultimate 

inquiry into the worker’s economic 

dependence or independence. The 

Department further explained that many 

federal courts of appeals ‘‘apply this 

factor with an eye to whether the worker 

is using managerial skill to affect the 

worker’s opportunity for profit or loss’’ 

and discussed that case law. The 

Department also noted that its proposal 

would consider investment as a separate 

factor, unlike the 2021 IC Rule’s 

consideration of investment within its 

opportunity for profit or loss factor. 

Additionally, the Department explained 

that the proposed regulatory text stating 

that the fact that a worker has no 

opportunity for a loss indicates 

employee status is consistent with the 

overall inquiry into economic 

dependence and is supported by the 

case law. Finally, the Department 

discussed the case law and its prior 

guidance supporting its view that a 

worker’s decision to work more hours 

(when paid hourly) or work more jobs 

(when paid a flat fee per job) where the 

employer controls assignment of hours 

or jobs is similar to decisions that 

employees routinely make and does not 

reflect managerial skill.255

In addition to the numerous 

comments generally supporting the 

Department’s six-factor analysis, a 

number of commenters expressed 

support for the NPRM’s discussion of 

the opportunity for profit or loss 

depending on managerial skill factor. 

For example, Smith Summerset & 

Associates LLC ‘‘highly applaud[ed] 

inclusion of ‘managerial skill’ in the 

title line and in the first sentence of the 

proposed’’ regulatory text and stated 

that ‘‘the exercise of managerial skill is 

a sine qua non of independent 

contractor status.’’ LA Fed & Teamsters 

Locals agreed ‘‘that it is managerial skill 

that matters when analyzing whether a 

worker’s earning ability is relevant to 

the employee status analysis’’ (emphasis 

omitted). Several commenters 

(including Farmworker Justice, NWLC, 

and the Shriver Center) stated that ‘‘a 

worker who has the power to make key 

business decisions that affect their 

opportunity for profit or loss is more 

likely to be an independent contractor 

than a worker who does not have power 

over these decisions.’’ Similarly, NELP 

expressed agreement with the proposal 

‘‘to explicitly tie the opportunity for 

profit or loss to a worker’s managerial 

skill, not their ability to work longer’’ 

(emphasis omitted). See also Gale 

HealthCare Solutions. OOIDA agreed 

with the Department’s rejection of how 

the 2021 IC Rule discussed this factor, 

commenting: ‘‘We believe that the 2021 

Rule may have opened additional 

opportunities for truckers to fall prey to 

lease-purchase schemes by stipulating 

that an individual only needed to 

exhibit exercise of initiative or 


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256 Id. at 62274–75 (proposed § 795.110(b)(1)). 

management of investment for the factor 

to weigh towards the individual being 

an independent contractor. The 

formulation of the factor may have 

dismissed predatory leasing 

arrangements because an owneroperator otherwise exercised some 

initiative in the management of their 

work.’’ 

Regarding the Department’s proposal 

that decisions to work more hours or 

take more jobs ‘‘generally do not reflect 

the exercise of managerial skill 

indicating independent contractor status 

under this factor,’’ 256 NDWA agreed, 

stating that ‘‘a worker’s ability to impact 

their pay by working more hours or 

taking more jobs does not show the 

exercise of managerial skill indicating 

independent contractor status.’’ IBT also 

agreed with the NPRM’s ‘‘rejection of 

the proposition that a worker[’s] 

decision to take additional hours or 

tasks indicates ‘managerial skill.’ ’’ See 

also Leadership Conference, ROC 

United, UFCW. 

Several commenters found the 

NPRM’s listing of potentially relevant 

facts when applying this factor to be 

helpful. Real Women in Trucking noted 

that this factor can appropriately 

indicate employee or independent 

contractor status for truck drivers and 

that the NPRM’s ‘‘addition of relevant 

facts to consider under this factor . . . 

provides helpful context to differentiate 

between these scenarios.’’ Smith 

Summerset & Associates LLC 

‘‘applaud[ed] the specific examples of 

managerial skill listed in the 

[proposal].’’ And UFCW stated that, 

‘‘[c]orrectly, the proposed rule 

highlights whether the worker can 

meaningfully negotiate, accept or 

decline jobs, and engage in efforts to 

expand their independent business.’’ 

Some other commenters that generally 

supported the Department’s six-factor 

analysis requested changes to or 

clarifications of the opportunity for 

profit or loss depending on managerial 

skill factor. For example, UFCW cited 

agreements that it says are imposed by 

companies like Instacart, Uber, and Lyft 

that prohibit workers from connecting 

with or soliciting their customers and 

stated that ‘‘actively prohibit[ing] 

workers from developing an 

independent business is evidence of a 

lack of opportunity to profit or loss 

based managerial skill.’’ UFCW also 

stated that, ‘‘when black-box algorithms 

solely dictate their available work, pay, 

and other economic conditions,’’ 

‘‘[w]orkers are powerless to negotiate or 

make any managerial decisions.’’ The 

Department agrees that such facts would 

be probative of whether a worker has an 

opportunity for profit or loss depending 

on managerial skill but also reiterates 

that no one fact is dispositive under this 

factor. 

Real Women in Trucking requested 

that the Department address ‘‘free 

market’’ load boards (load boards are 

matching systems where shippers post 

freights that they need carried and 

carriers post their availability), which, 

in the commenter’s view, ‘‘offer an 

opportunity to control profit or loss 

(unlike internal load boards).’’ 

Similarly, OOIDA explained its view 

that ‘‘the mere fact that an individual 

purchases equipment or services from a 

business they work with does not 

necessarily indicate an employee 

relationship.’’ OOIDA further explained 

that ‘‘[t]here are many owner-operators 

who choose to make purchases from the 

business they are leased to because it is 

a profitable deal’’ and provided an 

example involving a group discount on 

tires. OOIDA ‘‘believe[s] that the 

NPRM’s totality-of-the-circumstances 

approach should be able to distinguish 

between these types of situations.’’ The 

Department appreciates these concerns 

and agrees that the test put forth is 

flexible enough to account for a wide 

variety of situations, but its intent in 

promulgating this final rule is to 

provide as much as possible a general 

standard for determining employee or 

independent contractor status. The 

requested guidance is technical and 

industry-specific and is better addressed 

outside of rulemaking after this final 

rule takes effect. 

Smith & Summerset recommended 

adding ‘‘depending on managerial skill’’ 

to the third sentence of the regulatory 

text so that it reads: ‘‘If a worker has no 

opportunity for profit or loss depending 

on managerial skill, then this factor 

suggests that the worker is an 

employee.’’ The commenter stated that, 

‘‘[w]ithout the managerial skill qualifier, 

the reader is invited to quickly think of 

working more or fewer hours as an 

opportunity for profit or loss.’’ However, 

the subsequent sentence in the 

regulatory text addresses working more 

hours. Moreover, the intent of the third 

sentence is to explain that, where a 

worker who has no opportunity for 

profit or loss, this factor indicates 

employee status. Qualifying that 

explanation with a reference to 

managerial skill is unnecessary, because 

regardless of managerial skill, the 

worker’s lack of an opportunity for 

profit or loss points this factor toward 

employee status. 

NELA recommended a number of 

changes to this factor. It stated that a 

‘‘worker who can experience ‘profit’ 

with no attached risk of business loss is 

not truly in business for themselves,’’ 

and suggested that the following 

language from the NPRM preamble be 

added to the regulatory text: ‘‘The fact 

that a worker has no opportunity for a 

loss indicates employee status. Workers 

who incur little or no costs or expenses, 

simply provide their labor, and/or are 

paid hourly, piece rate, or flat rate are 

unlikely to experience a loss. This factor 

suggests employee status in those 

circumstances.’’ However, the third 

sentence of the regulatory text already 

explains that this factor indicates 

employee status where a worker has no 

opportunity for a loss. NELA further 

suggested that the Department should 

‘‘incorporate the flip side’’ of its above 

suggestion and state that ‘‘the chance for 

a ‘loss’ with no corresponding 

opportunity for profit is a sign of 

dependence on the employer, which 

points toward employee status.’’ Again, 

the third sentence of the regulatory text 

already covers circumstances where the 

worker has ‘‘no opportunity for a profit 

or loss.’’ NELA also suggested that the 

following language be added to the 

regulatory text: ‘‘The fact that an 

employer may impose fines, penalties, 

or chargebacks on a worker for faulty 

performance does not mean that the 

worker may experience a loss. These 

kinds of costs are likely to make workers 

more dependent on their employers, 

and therefore more like employees.’’ 

(The first sentence is from the NPRM 

preamble, and the second sentence is 

new language suggested by NELA.) The 

Department declines to add this 

language to the regulatory text. The 

Department notes that although fines, 

penalties, and chargebacks can indicate 

a worker’s economic dependence on the 

employer, whether they indicate 

dependence may depend on the 

circumstances. 

NELA additionally suggested 

changing the regulatory text identifying 

accepting or declining jobs as a relevant 

factor so that it would read: ‘‘whether 

the worker exercises managerial skill in 

accepting or declining jobs without 

employer input or chooses the order 

and/or time in which the jobs are 

performed independent from employer 

control.’’ In the Department’s view, 

however, adding a reference to 

‘‘managerial skill’’ is unhelpful because 

accepting or declining jobs is an 

underlying fact that is relevant to 

determining whether the worker 

exercises managerial skill. And adding 

references to ‘‘employer input’’ and 

‘‘employer control’’ are unnecessary 

because the focus of this factor is 

whether the worker has an opportunity 


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257 Id. at 62238; see also Scantland, 721 F.3d at 

1316–17. 258 29 CFR 795.110(a)(1)–(2). 

for profit or loss through managerial 

skill, and there are many aspects of 

accepting/declining jobs and choosing 

the order/time to perform jobs—not only 

‘‘employer input’’ and ‘‘employer 

control’’—which may shed light on 

whether those decisions and choices 

exemplify managerial skills. Finally, 

NELA suggested adding two sentences 

to the regulatory text. The first sentence 

would read: ‘‘A worker’s technical 

proficiency in completing each job is 

not the type of managerial skill that 

would indicate independent contractor 

status.’’ This suggested sentence is, in 

the Department’s view, correct in the 

abstract. As the Department explained 

in the NPRM, ‘‘where a worker is paid 

by the job, the worker’s decision to work 

more jobs and the worker’s technical 

proficiency in completing each job are 

not the type of managerial skill that 

would indicate independent contractor 

status under this factor.’’ 257 However, 

the Department also identifies in the 

regulatory text instances of managerial 

skill, such as efforts to expand a 

business or secure more work, hiring 

others, and purchasing materials and 

equipment, that can affect a worker’s 

opportunity for profit or loss by, at least 

in part, increasing the worker’s 

technical proficiency. The focus of this 

factor should be the degree of 

managerial skill, and the Department 

does not believe that adding a blanket 

statement regarding technical 

proficiency to the regulatory text would 

be helpful because doing so could 

distract from evaluating managerial 

skill. Technical proficiency in 

completing a job, even if it affects a 

worker’s earnings, is alone insufficient 

for this factor to indicate independent 

contractor status, but, ultimately, 

whether that technical proficiency is the 

product of managerial skill is probative 

of employee or independent contractor 

status. NELA’s second suggested 

sentence would read: ‘‘Managerial skill 

will typically affect opportunity for 

profit or loss beyond a given job, and 

will relate to the worker’s business as a 

whole.’’ The Department believes that 

the second suggested sentence is not 

necessarily probative of this factor and 

is not a point emphasized in the case 

law. 

Numerous commenters opposed, 

disagreed with, and/or requested 

changes to or clarifications of the 

proposed opportunity for profit or loss 

depending on managerial skill factor. 

For example, several commenters raised 

concerns that certain of the facts in the 

nonexclusive list of facts identified by 

the Department as relevant to this factor 

cannot be satisfied in their particular 

industries. Texas Association for Home 

Care & Hospice stated that, ‘‘[i]n home 

care, independent contractor clinicians 

cannot hire other workers for the 

purposes of completing the contracted 

jobs (i.e., patient visits) they have 

accepted from the home care agency’’ 

because of ‘‘stringent human resources 

and patient care regulations from both 

state and federal regulatory agencies.’’ It 

added that workers ‘‘purchase and 

maintain their own equipment,’’ but if 

the worker ‘‘accepts a specialized 

patient job, for instance a wound care 

patient, then the home care agency must 

purchase and provide to the 

independent contractor clinician the 

appropriate wound care supplies . . . as 

ordered by the physician.’’ The ACLI 

stated that, ‘‘[w]ithout question, 

[insurance agents’] profit or loss 

depends upon their own managerial 

skill,’’ but ‘‘insurance regulations, 

including New York Insurance Law 

§ 4228, set strict limits on the 

commissions that insurers can pay to 

agents, who are ‘‘unable to negotiate or 

change their commission structure.’’ 

And although it ‘‘generally supports the 

Department’s proposed application’’ of 

this factor, the American Securities 

Association expressed concern that this 

factor ‘‘globally suggests, without any 

exceptions, that ‘whether the worker 

determines or can meaningfully 

negotiate the charge or pay for the work 

provided’ is a relevant factor.’’ Because 

‘‘insurance and financial services 

regulations . . . set strict limits on the 

premiums that can be charged to 

customers and on the commissions that 

can be paid to agents and advisors,’’ it 

asserted that financial professionals 

would not be seen as independent 

under this factor. The American 

Securities Association suggested that 

the Department ‘‘eliminate from 

consideration whether the worker can 

meaningfully negotiate his or her pay 

from the list of potentially relevant facts 

under this factor,’’ include a carveout, 

or ‘‘clarify that a brokerage firm 

establishing prices to meet regulatory 

supervision obligations or 

considerations of its registered 

representatives does not create an 

employee relationship and is at most a 

neutral factor.’’ ABC suggested that the 

NPRM ‘‘improperly presumes that 

independent contractors must have a 

staff and a marketed ‘business’ to 

‘manage.’ ’’ It stated that ‘‘many 

independent contractors deliberately 

offer their services to employers of their 

choosing for the express purpose of 

avoiding negotiating costs’’ and ‘‘do not 

want to run a business that requires 

overhead for services, advertising and 

hiring support staff.’’ It added that ‘‘[i]t 

should be made clear that a worker who 

does solicit work from multiple clients 

remains an independent contractor.’’ 

Finally, although it ‘‘generally agree[d] 

with the description of this factor,’’ the 

California Chamber of Commerce (‘‘CA 

Chamber’’) expressed concern ‘‘that this 

factor would weigh against a gig worker 

being an independent contractor simply 

because the company for which they 

perform work sets pricing.’’ 

Having considered these comments, 

the Department adopts its proposed list 

of facts that may be relevant when 

applying this factor. The list is plainly 

nonexclusive, and neither any fact listed 

nor this factor will be dispositive of a 

worker’s status. As the regulatory text 

provides, ‘‘no one factor or subset of 

factors is necessarily dispositive,’’ and 

the ‘‘outcome of the analysis does not 

depend on isolated factors but rather 

upon the circumstances of the whole 

activity.’’ 258 The status of the workers 

identified by these comments will be 

determined by multiple facts bearing on 

their work relationships, and 

accordingly, these commenters’ 

concerns do not reflect how the 

Department’s analysis will be applied. 

Consistent with a totality-of-thecircumstances analysis, not hiring 

others and not advertising, for example, 

do not make the worker an employee or 

even conclusively determine that this 

factor indicates employee status. (And 

as discussed below, certain decisions to 

‘‘not’’ take business actions such as 

those listed in the regulatory text may 

be as indicative of managerial skill as 

decisions to take those business 

actions.) In that same vein, soliciting 

work from multiple clients, for example 

and while of course relevant, does not 

guarantee that a worker is an 

independent contractor or even that this 

factor points to independent contractor 

status. In addition, the Department 

believes that the nonexclusive list of 

facts that are potentially relevant to this 

factor provides helpful guidance, as 

other commenters have stated. And 

even if a particular fact is not probative 

or always points in one direction for a 

particular worker in a particular 

industry, that does not mean that the 

fact is not probative on a general level. 

The Department is striving to provide a 

generally applicable regulation in this 

rulemaking and will provide additional 


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259Fight for Freelancers commented that the 

Department does ‘‘not define what constitutes 

marketing and advertising’’ (one of the listed facts) 

and asked: ‘‘What, specifically, must we do to 

satisfy your definition of marketing and 

advertising?’’ The Department believes that the 

terms ‘‘marketing’’ and ‘‘advertising’’ are well 

understood, and engaging in marketing or 

advertising are just examples of types of managerial 

skill that may be relevant when applying this factor. 

No worker needs to ‘‘satisfy’’ any of these facts; all 

facts relevant to the worker’s opportunity for profit 

or loss depending on managerial skill should be 

considered. 

260 87 FR 62238 (citing, inter alia, Franze, 826 F. 

App’x at 76–78; Flint Eng’g, 137 F.3d at 1441; 

Superior Care, 840 F.2d at 1058–59; Snell, 875 F.2d 

at 810). 

guidance after this final rule takes 

effect.259

Although the U.S. Chamber agreed 

that the facts listed in the regulatory text 

are ‘‘relevant to whether workers are 

independent contractors or employees,’’ 

it stated that the NPRM was ‘‘wrong to 

require a worker to ‘exercise’ these 

decisions to exemplify independent 

contractor status.’’ Analogizing to the 

NPRM’s discussion of how reserved 

rights can be relevant in addition to 

actual practice, the U.S. Chamber 

asserted that ‘‘the more important 

question is whether the worker has the 

opportunity to impact their profits and 

losses by engaging in various activities 

such as working for other companies, 

regardless of whether the worker 

actually acts on that opportunity.’’ CWI 

criticized the NPRM for, in its view, 

‘‘requir[ing] consideration of whether 

the worker actually exercises his skill to 

impact economic success.’’ CWI 

asserted that the NPRM ‘‘consistently 

references ‘opportunity,’ not actual 

exercise of that opportunity, as the 

relevant touchstone’’ and added that: 

‘‘Whether a worker chooses to exercise 

the opportunities for profit and loss 

available to him is fundamentally his 

own business decision. It is the ability 

to follow that business judgment—even 

to his detriment—that is the hallmark of 

the independence he is afforded.’’ See 

also N/MA; NRF & NCCR. 

Having considered the comments on 

this point, the Department is revising 

the final regulatory text to emphasize 

the worker’s ‘‘opportunities’’ for profit 

or loss based on managerial skill and to 

delete the reference to whether the 

worker ‘‘exercises’’ managerial skill. 

The Department concurs that the term 

‘‘opportunities,’’ which encompasses 

opportunity more broadly than 

‘‘whether the worker exercises 

managerial skill,’’ is more consistent 

conceptually with the case law 

analyzing this factor and with the 

remainder of the regulatory text. 

Although the Department did not intend 

for the ‘‘exercises managerial skill’’ 

language to be limiting, focusing on 

‘‘opportunities’’ should capture the facts 

relevant to a worker’s profit or loss and 

managerial skill, as explained further in 

the discussion of comments in the 

following paragraph. 

The Coalition of Business 

Stakeholders stated that ‘‘[m]any 

independent contractors offer their 

services to select employers for the 

express purpose of avoiding negotiating 

costs for services, advertising, and 

hiring support staff,’’ and that the 

NPRM ‘‘utterly fails to account for 

workers’ preference for having an 

independent contractor relationship that 

avoids these costs.’’ The commenter 

asserted that this ‘‘framework would 

virtually always weigh in favor of 

employment status.’’ NRF & NCCR 

stated that ‘‘the fact that someone might 

not engage in certain practices or take 

on certain risks that would further 

impact the level of profit or loss should 

not result in a finding that the 

individual is not an independent 

contractor, unless that person is 

prevented from doing so by the entity 

with whom the individual contracts.’’ 

According to the commenter, for 

example, ‘‘[a] carpenter or plumber who 

chooses to market through word of 

mouth and to complete one job at a 

time, and not hire helpers and make the 

investments necessary to work on 

multiple job[s] simultaneously, is no 

less an independent contractor than a 

carpenter or plumber who has made 

different choices about how to operate 

his or her business.’’ The Department 

believes that the opportunity, for 

example, to hire others or purchase 

materials and equipment, and a decision 

to not take such action based on a 

consideration of possible costs and 

rewards, can indicate managerial skill. 

For this to be the case, the worker must 

have a real opportunity to take the 

action and make an independent 

business decision indicating managerial 

skill to not take the action. In other 

circumstances, not taking an action may 

not indicate managerial skill. For 

example, if the action requires approval 

from the employer (for example, the 

employer must approve any person 

hired by the worker as a helper) or the 

action is not feasible financially (for 

example, the worker is lower-paid and 

cannot hire others or make purchases), 

then there is likely no opportunity for 

the worker to make an independent 

business decision indicating managerial 

skill. Regardless, no one action or lack 

of action should determine whether this 

factor indicates employee or 

independent contractor status; the 

Department identifies in the regulatory 

text a number of possibly relevant facts, 

and other relevant facts may be 

considered too. 

Several commenters expressed 

concern that the mention of ‘‘managerial 

skill’’ in the proposed regulatory text 

did not include references to 

‘‘initiative,’’ ‘‘business acumen,’’ and 

‘‘judgment.’’ For example, CWI stated 

that the proposed regulatory text 

‘‘narrows the inquiry’’ as compared to 

the 2021 IC Rule, which referenced 

‘‘business acumen or judgment’’ in its 

discussion of this factor. CWI further 

stated that the NPRM’s preamble 

‘‘acknowledge[d] that ‘initiative,’ 

‘business acumen,’ and ‘judgment’ are 

informative of the opportunity-forprofit-or-loss factor’’ (citing 87 FR 

62238). CWI requested that the 

Department ‘‘retain the 2021 IC Rule’s 

formulation of the standard.’’ See also 

N/MA. The U.S. Chamber added that 

the proposed regulatory text ‘‘wrongly 

narrows the inquiry to ‘whether the 

worker exercises managerial skill,’ as 

opposed to ‘managerial skill or business 

acumen or judgment,’ as stated in the 

2021 IC Rule.’’ The Department did not 

intend to exclude initiative, judgment, 

or business acumen from the inquiry 

under this factor. The NPRM’s preamble 

explained that considering initiative 

and judgment is very similar to 

considering managerial skill.260

Accordingly, in light of the comments 

and the discussion of managerial skill in 

the NPRM’s preamble and the cases 

cited therein, the Department is 

modifying the regulatory text to clarify 

that managerial skill includes ‘‘initiative 

or business acumen or judgment.’’ Thus, 

with this change and the change 

discussed above, the first sentence of 

the regulatory text for this factor reads: 

‘‘This factor considers whether the 

worker has opportunities for profit or 

loss based on managerial skill 

(including initiative or business acumen 

or judgment) that affect the worker’s 

economic success or failure in 

performing the work.’’ 

CPIE commented that, although 

earlier court decisions ‘‘properly 

considered an individual’s opportunity 

for loss in evaluating the individual’s 

economic dependence,’’ the U.S. 

economy has changed, and ‘‘[t]here are 

countless numbers of individuals today 

who operate thriving businesses with 

their laptop computers and incur no risk 

of loss whatsoever.’’ The commenter 

asserted that ‘‘[t]he fact that these 

individuals operate a type of business 

that does not require a substantial 

financial investment should not deny 

them their right to offer their services as 


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261 Id. 

262 Id. at 62239 (citing Off Duty Police, 915 F.3d 

at 1059; Flint Eng’g, 137 F.3d at 1441; Selker Bros., 

949 F.2d at 1294; Snell, 875 F.2d at 810; Lauritzen, 

835 F.2d at 1536; DialAmerica, 757 F.2d at 1386). 

263 87 FR 62239. 

264 Id. (citing Karlson v. Action Process Serv. & 

Private Investigations, LLC, 860 F.3d 1089, 1095 

(8th Cir. 2017)); Express Sixty-Minutes, 161 F.3d at 

304). 

265 Id. (citing Off Duty Police, 915 F.3d at 1059; 

Scantland, 721 F.3d at 1316–17; Capital Int’l, 466 

F.3d at 308; Snell, 875 F.2d at 810). 

independent contractors.’’ Having 

considered this comment, the 

Department stands by its position that 

‘‘the fact that a worker has no 

opportunity for a loss indicates 

employee status.’’ 261 The Department 

believes that the risk of a loss as a 

possible result of the worker’s 

managerial decisions indicates that the 

worker is in business for themself. 

Although a worker need not experience 

a loss or even likely experience a loss 

for this factor to indicate independent 

contractor status, the scenario presented 

by the commenter—‘‘no risk of loss 

whatsoever’’—does not suggest that the 

worker is an independent contractor 

because at least some risk of a loss is 

inherent in operating an independent 

business. Moreover, the Department’s 

position is grounded in the case law, 

which has recognized that the lack of 

possibility of a loss indicates employee 

status.262 The Department notes, 

however, that whether the worker in the 

scenario presented by the commenter is 

an employee or independent contractor 

depends on application of all of the 

factors and a consideration of the 

totality of the circumstances because 

neither this factor nor any other factor 

is necessarily dispositive. Thus, workers 

‘‘who operate thriving businesses with 

their laptop computers and incur no risk 

of loss whatsoever’’ (the scenario 

presented by the commenter) may be 

employees or independent contractors 

depending on all of the factors. 

A number of commenters expressed 

concerns with and/or sought changes to 

the last sentence of the regulatory text: 

‘‘Some decisions by a worker that can 

affect the amount of pay that a worker 

receives, such as the decision to work 

more hours or take more jobs, generally 

do not reflect the exercise of managerial 

skill indicating independent contractor 

status under this factor.’’ For example, 

NHDA stated that each decision by a 

‘‘driver to accept or reject an 

opportunity (in this case, a load) is a 

business decision that affects his/her 

economic success’’ and ‘‘involves the 

weighing of an opportunity cost’’ (i.e., 

‘‘the cost of accepting that load versus 

the revenue to be earned and also 

against the foregone opportunity to 

transport a different load’’). NHDA 

further stated that, for these reasons, 

this sentence ‘‘is misleading and 

susceptible to short-circuiting a proper 

analysis.’’ See also Scopelitis (same). 

Flex described this sentence as 

‘‘misleading’’ and ‘‘likely lead[ing] to 

the discounting of evidence that is, in 

fact, highly relevant to a worker’s 

‘opportunity for profit or loss depending 

on managerial skill.’ ’’ It stated that, ‘‘[i]f 

a cashier at a fast-food restaurant 

voluntarily chooses to work overtime or 

pick up an additional shift, that 

decision would not support 

independent contractor status[,]’’ but if 

a driver ‘‘who was planning to drive 

clients five days one week is solicited 

by a new client for a lucrative 

opportunity on Saturday, the decision to 

accept that new client and work an extra 

day is plainly an entrepreneurial 

decision that reflects managerial 

decision making.’’ Flex explained that 

‘‘technological advances . . . have 

facilitated independent contractors’ 

ability to quickly determine what 

earnings opportunities and hours 

worked will yield for them the biggest 

return on the investment of their time.’’ 

SHRM added that ‘‘[t]he economic 

reality is that a worker who can profit 

by taking other jobs is more 

independent—and therefore less 

economically dependent on the 

employer—than an employee who 

cannot,’’ and that ‘‘[t]he ability to make 

that choice should point to an 

independent relationship.’’ CWI stated 

that ‘‘[t]he Department’s commentary 

even cites authority noting that 

choosing among ‘which jobs were most 

profitable’ is evidence of independent 

contractor status, but the Proposed Rule 

contains no similar nuance.’’ See also 

U.S. Chamber; MEP. 

Having considered these comments, 

the Department believes that the last 

sentence of the proposed regulatory text 

for this factor can be more precise. In 

the NPRM, the Department explained 

this concept as follows: ‘‘a worker’s 

decision to work more hours (when paid 

hourly) or work more jobs (when paid 

a flat fee per job) where the employer 

controls assignment of hours or jobs is 

similar to decisions that employees 

routinely make and does not reflect 

managerial skill.’’ 263 The proposed 

regulatory text, however, did not 

account for payment for the hours and 

jobs at a fixed rate or the employer’s 

control over the flow of work. The 

NPRM recognized that courts have held 

that a worker’s ability to freely choose 

among jobs based on the worker’s 

assessment of the comparable 

profitability of those jobs can indicate 

independent contractor status when 

applying the opportunity for profit or 

loss factor.264 Other cases relied on by 

the Department in the NPRM involved 

workers who were paid at set or fixed 

rates and/or situations where more work 

was dictated by the employer’s needs as 

opposed to the worker’s initiative.265

Based on the comments, the discussion 

in the NPRM, and the case law, the 

Department is revising the last sentence 

of the opportunity for profit or loss 

factor. In the NPRM, that sentence read: 

‘‘Some decisions by a worker that can 

affect the amount of pay that a worker 

receives, such as the decision to work 

more hours or take more jobs, generally 

do not reflect the exercise of managerial 

skill indicating independent contractor 

status under this factor.’’ As revised, 

that sentence reads (with the new 

language in italics): ‘‘Some decisions by 

a worker that can affect the amount of 

pay that a worker receives, such as the 

decision to work more hours or take 

more jobs when paid a fixed rate per 

hour or per job, generally do not reflect 

the exercise of managerial skill 

indicating independent contractor status 

under this factor.’’ The Department also 

considered adding to the regulatory text 

a reference to the employer’s control of 

assignment of the hours or jobs. 

Although such control may be relevant 

in this context, the Department believes 

that the fact that the hours or jobs are 

paid at a fixed rate is more indicative 

that the worker is not exercising 

managerial skill by taking more such 

hours or jobs. 

Fight for Freelancers asserted that 

there was a conflict between this 

provision regarding working more hours 

or jobs and the provision stating that 

accepting or declining jobs can be a 

relevant fact when applying this factor. 

The Coalition of Business Stakeholders 

commented that the NPRM is ‘‘unclear 

on whether, when assessing the 

opportunity for profit or loss factor, a 

worker’s ability to accept or decline 

work weighs in favor of independent 

contractor status.’’ The Department 

believes these comments overlook the 

totality-of-the-circumstances nature of 

the analysis; there is no particular factor 

to satisfy. In addition, the text addresses 

two concepts that are not in conflict. 

The last sentence of the regulatory text 

(as revised) addresses a worker who can 

earn more by working more hours or 

taking more jobs. That worker is 

working more to earn more but not 

exercising managerial skill (at least in 

that regard). On the other hand, a 

worker may be able to accept and 


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266 87 FR 62237–38 (citing, inter alia, Franze, 826 

F. App’x at 76–78; Razak, 951 F.3d at 146; Verma, 

937 F.3d at 229 (citing Selker Bros., 949 F.2d at 

1293); Off Duty Police, 915 F.3d at 1059; Iontchev 

v. AAA Cab Serv., Inc., 685 F. App’x 548, 550 (9th 

Cir. 2017); McFeeley, 825 F.3d at 241 (citing Capital 

Int’l, 466 F.3d at 304–05); Keller, 781 F.3d at 812; 

Scantland, 721 F.3d at 1312; Flint Eng’g, 137 F.3d 

at 1441; Snell, 875 F.2d at 810; Superior Care, 840 

F.2d at 1058–59; Lauritzen, 835 F.2d at 1535; 

Driscoll, 603 F.2d at 754–55). 

267CPIE discussed technical proficiency and 

commented: ‘‘An individual’s ability to maximize 

the profitability attributable to the individual’s 

technical proficiency will depend on the 

individual’s managerial skill and ability to 

persuasively communicate to a potential client the 

value of such proficiency.’’ The Department 

generally agrees with this statement to the extent 

that it focuses the inquiry on the worker’s 

managerial skill. 

268See generally 87 FR 62275 (proposed 

§ 795.110(b)(2)). 

decline jobs where the jobs have varying 

degrees of potential profitability and the 

worker must determine which jobs to 

pursue and how much of the worker’s 

time and resources should be devoted to 

the various jobs. That worker is 

exercising managerial skill (at least in 

that regard), which weighs in favor of 

independent contractor status. 

MEP commented that ‘‘managerial 

skill should be broadly defined’’ and 

that ‘‘managerial skill should include an 

individual’s ability to complete the 

work more efficiently or effectively.’’ 

World Floor Covering Association 

(‘‘WFCA’’) commented that, although it 

‘‘recognizes that merely working longer 

hours or more efficiently does not 

distinguish an independent contractor 

from an employee,’’ ‘‘[a]n individual 

who uses initiation or judgment to 

perform a job more efficiently can 

generate greater profits, even if 

compensated by the hour or by 

piecework rates.’’ WFCA suggested that 

‘‘depending on managerial skill’’ be 

stricken from the title of this factor and 

that the first sentence of the regulatory 

text be revised to state: ‘‘This factor 

considers whether the worker exercises 

managerial skills, implements 

innovations, or uses other 

entrepreneurial concepts that affects the 

worker’s economic success or failure in 

performing the work.’’ For the reasons 

explained in the NPRM and in this 

section, managerial skill is properly the 

focus of the opportunity for profit or 

loss factor because it helps to 

distinguish between decisions that 

affect a worker’s earnings and the use of 

initiative, judgment, or business acumen 

that may create opportunities for profit 

or loss. As further explained in the 

NPRM, whether the worker’s 

opportunity for profit or loss depends 

on managerial skill (or initiative or 

judgment as discussed above) is 

ingrained in the case law.266

Accordingly, striking ‘‘depending on 

managerial skill’’ would not be 

supported. And although being 

innovative and acting entrepreneurially 

are synonymous with managerial skill, 

implementing innovations and using 

entrepreneurial concepts are not 

necessarily synonymous with the 

worker’s managerial skill if those 

innovations and concepts are developed 

and perfected by others. WFCA’s 

suggested language would detract the 

focus from, and not necessarily be 

consistent with, managerial skill. 

In addition, WFCA provided 

examples of workers who can ‘‘install 

complex wood or tile patterns’’ and 

requested that implementing ‘‘new 

techniques or innovations’’ and 

developing ‘‘specialized or unique 

skills’’ be added to the nonexclusive list 

of facts that may be relevant when 

applying this factor. However, as 

discussed in this section, implementing 

techniques or innovations is not 

necessarily indicative of managerial 

skill and may instead relate more to 

how the worker performs the work. The 

same may be said about developing 

skills; especially considering the 

examples provided by WFCA, these 

skills seem more about performing 

particular work. As discussed above in 

response to NELA’s comment that 

technical proficiency in completing 

each job is not managerial skill 

indicative of independent contractor 

status, the focus of this factor is the 

worker’s managerial skill and not the 

worker’s performance of particular jobs. 

Accordingly, the Department declines to 

make the changes requested by 

WFCA.267

The Department is finalizing the 

opportunity for profit or loss depending 

on managerial skill factor 

(§ 795.110(b)(1)) with the modifications 

discussed herein. 

Example: Opportunity for Profit or Loss 

Depending on Managerial Skill 

A worker for a landscaping company 

performs assignments only as 

determined by the company for its 

corporate clients. The worker does not 

independently choose assignments, 

solicit additional work from other 

clients, advertise the landscaping 

services, or endeavor to reduce costs. 

The worker regularly agrees to work 

additional hours in order to earn more. 

In this scenario, the worker does not 

exercise managerial skill that affects 

their profit or loss. Rather, their 

earnings may fluctuate based on the 

work available and their willingness to 

work more. Because of this lack of 

managerial skill affecting opportunity 

for profit or loss, these facts indicate 

employee status under the opportunity 

for profit or loss factor. 

In contrast, a worker provides 

landscaping services directly to 

corporate clients. The worker produces 

their own advertising, negotiates 

contracts, decides which jobs to perform 

and when to perform them, and decides 

when and whether to hire helpers to 

assist with the work. This worker 

exercises managerial skill that affects 

their opportunity for profit or loss. 

Thus, these facts indicate independent 

contractor status under the opportunity 

for profit or loss factor. 

2. Investments by the Worker and the 

Potential Employer (§ 795.110(b)(2)) 

Regarding the investments factor, the 

Department proposed that this factor 

consider ‘‘whether any investments by a 

worker are capital or entrepreneurial in 

nature.’’ The provision stated that 

‘‘[c]osts borne by a worker to perform 

their job,’’ such as ‘‘tools and equipment 

to perform specific jobs and the 

worker’s labor,’’ ‘‘are not evidence of 

capital or entrepreneurial investment 

and indicate employee status.’’ The 

provision further stated that 

investments that are capital or 

entrepreneurial in nature and thus 

indicative of independent contractor 

status are those that ‘‘generally support 

an independent business and serve a 

business-like function, such as 

increasing the worker’s ability to do 

different types of or more work, 

reducing costs, or extending market 

reach.’’ The Department also proposed 

that ‘‘the worker’s investments should 

be considered on a relative basis with 

the employer’s investments in its overall 

business.’’ The provision further said 

that ‘‘[t]he worker’s investments need 

not be equal to the employer’s 

investments, but the worker’s 

investments should support an 

independent business or serve a 

business-like function for this factor to 

indicate independent contractor 

status.’’ 268

The Department explained that its 

proposal to treat investments as its own 

separate factor in the economic reality 

analysis is consistent with its approach 

prior to the 2021 IC Rule and with the 

approach of most courts. The 

Department further explained that 

considering investments as part of the 

opportunity for profit or loss factor, as 

the 2021 IC Rule did, is flawed because, 

among other reasons, it ‘‘may 

incorrectly tilt the analysis in favor of 

independent contractor outcomes’’ and 

‘‘have the effect in some cases of 


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269See generally id. at 62240–41. 

270See generally id. at 62241–43. 

preventing investment from affecting 

the analysis.’’ The Department set forth 

its reasons (and the supporting case law) 

for focusing on the nature and reason for 

the worker’s investment and why the 

worker’s investment must be capital in 

nature for it to indicate independent 

contractor status. Consistent with that 

focus, the Department further explained 

(with a discussion of supporting case 

law) that ‘‘the use of a personal vehicle 

that the worker already owns to perform 

work—or that the worker leases as 

required by the employer to perform 

work—is generally not an investment 

that is capital or entrepreneurial in 

nature.’’ 269

Finally, the Department explained 

that its proposal to evaluate the worker’s 

investment in relation to the employer’s 

investment in its business ‘‘is not only 

consistent with the totality-of-thecircumstances analysis that is at the 

heart of the economic reality test, but it 

would also provide factfinders with an 

additional tool to differentiate between 

a worker’s economic dependence and 

independence based on the particular 

facts of the case.’’ The Department 

discussed the federal appellate case law 

supporting its proposal and addressed 

any contrary federal appellate case 

law.270

In addition to the numerous 

comments generally supporting the 

Department’s six-factor analysis, a 

number of commenters expressed 

support for the NPRM’s treatment of 

investments as a separate factor in the 

economic realities analysis. NWLC 

explained that, ‘‘[c]onsistent with the 

Department’s guidance from its earliest 

applications of the economic reality test 

until the 2021 Rule, the proposed rule 

considers investments by the worker 

and the employer as a factor distinct 

from opportunity for profit or loss.’’ LA 

Fed & Teamsters Locals stated that the 

2021 IC Rule had ‘‘improperly 

combine[d]’’ the investments factor with 

the opportunity for profit or loss factor 

and that the NPRM’s treatment of the 

investments factor as a separate factor 

‘‘more faithfully adheres to the long 

history of jurisprudence defining how to 

determine the economic reality.’’ The 

State AGs agreed that treating 

investments as a separate factor is 

‘‘consistent with the case law.’’ Gale 

Healthcare Solutions expressed 

‘‘support [for] the proposal to treat 

worker investment as a standalone 

factor in the economic reality analysis 

rather than as part of [the] opportunity 

for profit or loss analysis.’’ Others, 

including NELP, Real Women in 

Trucking, IBT, and AFL–CIO, expressed 

similar support. 

A number of commenters also 

supported the substance of the NPRM’s 

discussion of the investments factor. For 

example, Leadership Conference 

appreciated the clarification that the 

NPRM’s investments factor would 

provide, stating that ‘‘[a] true 

independent contractor should make 

significant capital or entrepreneurial 

investments in their business, especially 

relative to the entity that hired them.’’ 

The Shriver Center agreed that the 

investments of ‘‘a true independent 

contractor . . . must be capital or 

entrepreneurial, as opposed to tools that 

a worker is required by a business to 

have in order to perform a job.’’ Others, 

including Farmworker Justice, Real 

Women in Trucking, and LIUNA, 

commented similarly. See also NELP, 

Winebrake & Santillo, LLC, Gale 

Healthcare Solutions. 

ROC United described as crucial the 

NPRM’s clarification ‘‘that ‘the use of a 

personal vehicle that the worker already 

owns to perform work—or that the 

worker leases as required by the 

employer to perform work—is generally 

not an investment that is capital or 

entrepreneurial in nature.’ ’’ AFL–CIO 

‘‘strongly encourage[d] [the Department] 

to include in the Final Rule its 

observation’’ regarding a worker’s use of 

a personal vehicle. LA Fed & Teamsters 

Locals agreed that the NPRM’s approach 

to a worker’s use of a personal vehicle 

was right and added that evaluating the 

worker’s investment relative to the 

employer’s ‘‘is critical because even 

when employers push the cost of tools 

and supplies onto the workers doing the 

work at the core of the employer’s 

business, the employers often have even 

larger investments.’’ 

Some commenters that generally 

supported the Department’s six-factor 

analysis requested changes to or 

clarifications of the investments factor. 

In particular, a number of commenters 

addressed costs and expenses that 

employers require workers to bear or 

that they otherwise impose on workers 

and argued that such costs and expenses 

are not of a capital or entrepreneurial 

nature indicating independent 

contractor status. For example, 

Intelycare asserted that when a nursing 

agency shifts fees for malpractice 

insurance onto workers, those fees are 

not an investment by the workers. 

Intelycare added: ‘‘We urge the 

Department to close such loopholes and 

instruct that companies cannot shift or 

attempt to disguise their own 

investments in an effort to avoid 

employee classification.’’ Gale 

Healthcare Solutions likewise requested 

that the Department ‘‘clarify that when 

a company shifts its ‘investment’ cost or 

a typical cost of doing business to 

workers (e.g., . . . purchasing group 

malpractice insurance and deducting 

the cost from workers’ pay), this 

transferred cost does not constitute 

worker investment.’’ LA Fed & 

Teamsters Locals requested that the 

Department make ‘‘clear in its final rule 

that any investments that an employer 

requires fall into th[e] category of nonprobative investments, and provide 

additional guidance to ensure that 

employers cannot find additional ways 

to manipulate these factors.’’ NELP 

similarly requested that the Department 

‘‘clarify that investments made by a 

worker that reflect a contractual 

demand by the hiring entity, rather than 

an independent business investment 

decision or meaningful negotiation 

between business parties, should not 

weigh towards independent contractor 

status.’’ NELP added: ‘‘Without this 

clarification, hiring entities may 

misclassify workers as independent 

contractors and require or pressure 

them, as a condition of receiving work, 

to make expenditures that appear large 

in comparison to an undercapitalized 

hiring entity—such as a fly-by-night 

subcontractor or labor broker—to avoid 

accountability.’’ 

Having considered these comments, 

the Department agrees that costs 

unilaterally imposed by an employer on 

a worker are not capital or 

entrepreneurial in nature. Where the 

worker has no meaningful say either in 

the fact that the cost will be imposed or 

the amount, the cost cannot be an 

investment indicating that the worker is 

in business for themself. Using 

malpractice insurance for nurses as an 

example, if such insurance is required 

by law or regulation and a nursing 

staffing agency purchases and maintains 

the insurance for the nurses and passes 

that cost on to, or imposes a charge for 

insurance on, the nurses, that cost does 

not indicate independent contractor 

status. But, if insurance is required by 

law or regulation, and the nurse can 

choose among policies based on their 

prices and coverages and does 

independently procure a policy, then 

the cost of the insurance could be 

capital or entrepreneurial in nature and 

indicative of independent contractor 

status. For these reasons, the 

Department is modifying the relevant 

sentence from the regulatory text 

regarding the investments factor to add 

the following text: ‘‘and costs that the 


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271NELP additionally commented that 

‘‘[c]larifying the relationship between [the 

investments and opportunity for profit or loss] 

factors will help identify situations (like the 

personal vehicle example . . .) where a corporation 

may be transferring the cost of doing business to its 

workers, who are required to make expenditures 

that are not independent decisions impacting their 

businesses’ profits or losses.’’ The Department 

believes that its discussion in this paragraph and 

the following paragraph, as well as its discussion 

below regarding the investments factor as it relates 

to the opportunity for profit or loss factor, provide 

additional clarity. 

272On the other hand, where a driver has ‘‘the 

means to engage in the freight-hauling business 

only because [the employer] advanced a truck, 

equipment, and many other resources up front on 

[the employer’s] own credit’’ and is charged for 

those costs, the investment factor indicates 

employee status. Brant v. Schneider Nat’l, 43 F.4th 

656, 671 (7th Cir. 2022). 

potential employer imposes unilaterally 

on the worker.’’ 271

Relatedly, Real Women in Trucking 

stated that truck drivers who wholly 

own or independently finance a truck 

are true owner-operators because ‘‘[t]his 

type of investment gives [them] the 

ability to keep their truck if they decide 

to stop working for any particular 

company, and accordingly some 

measure of economic independence.’’ 

The commenter further stated that, in 

contrast, ‘‘employer-sponsored leases 

for work equipment, including for 

trucks, are not investments of the kind 

that weigh in favor of independent 

contractor classification.’’ The 

Department generally agrees with this 

distinction, although it is hesitant to 

state that the existence of an employersponsored lease can never indicate 

independent contractor status. 

Consistent with the discussion of 

malpractice insurance in the previous 

paragraph, if a driver is not required to 

lease a truck from the employer, is able 

to consider independent financing 

options, is able to meaningfully 

negotiate the terms of the lease with the 

employer, is not required by the 

employer to work for it for a minimum 

period of time nor prohibited by it from 

using the leased truck to work for 

others, and then decides to lease from 

the employer, the cost of the truck 

leased from the employer could be 

capital or entrepreneurial in nature, 

especially if the lease could ultimately 

result in the driver’s wholly owning the 

truck.272

Regarding the proposed regulatory 

text’s statement that the costs to workers 

of tools to perform specific jobs are not 

capital or entrepreneurial investments, 

LIUNA suggested the following 

addition: ‘‘The mere utility of a worker’s 

tools to perform similar work for other 

employers does not render the worker’s 

purchase of those tools an 

entrepreneurial investment, especially 

where the pertinent employer invests far 

more in facilitating or purchasing the 

employees’ work.’’ In support, LIUNA 

stated that ‘‘[t]he weight of authority 

. . . overwhelmingly suggests that the 

potential utility of a workers’ tools for 

other projects does not render those 

workers[] independent contractors.’’ 

This statement, however, overlooks that 

the economic realities analysis 

considers the totality of the 

circumstances. A worker’s use of tools 

alone does not determine whether the 

worker is an employee or independent 

contractor. Moreover, the Department 

believes that a worker’s purchase of 

tools and equipment for use performing 

multiple jobs for multiple employers 

can be a capital or entrepreneurial 

investment. The regulatory text already 

explains that the nature of such 

purchases of tools and equipment needs 

to be determined and that such costs to 

a worker and the worker’s other 

investments should be considered on a 

relative basis with the employer’s 

investments in its overall business. 

Accordingly, the Department declines 

LIUNA’s suggestion. 

NELA stated that the NPRM 

‘‘correctly focuses on whether 

investments are capital or 

entrepreneurial in nature’’ but 

expressed concerns that the 

‘‘Department’s decision to separate the 

‘investment’ prong from the 

‘opportunities for profit and loss’ prong 

. . . goes too far, and detracts from . . . 

needed clarity.’’ According to NELA, 

‘‘[a]n expenditure is only an 

‘investment’ when it may impact profit 

and loss,’’ and ‘‘[i]f an employee has 

spent money for work but has no 

opportunity for profit and loss as a 

result, then the conclusion should be 

that they are not ‘investing’ in 

anything.’’ NELA requested that the 

NPRM ‘‘be edited to clarify that 

‘investment’ inherently implies the 

possibility of profit and is only ‘capital 

or entrepreneurial in nature’ . . . when 

it has a nexus with profit and loss.’’ The 

Department agrees that whether the 

worker’s expenditures may result in 

profits or losses to the worker is highly 

relevant to whether those expenditures 

are capital or entrepreneurial in nature. 

However, because, as explained further 

below, the investment factor is not 

synonymous with the opportunity for 

profit or loss factor and because adding 

a ‘‘nexus with profit or loss’’ 

requirement is not supported by the 

weight of the case law that has 

historically viewed the two factors as 

analytically distinct under the economic 

reality test, the Department declines to 

promulgate an absolute requirement that 

expenditures have ‘‘a nexus with profit 

and loss’’ to be capital or 

entrepreneurial in nature. Moreover, 

such a requirement could be viewed as 

similar to the 2021 IC Rule’s approach 

of combining the consideration of 

investments with opportunity for profit 

or loss—an approach that the 

Department is rejecting as discussed 

below. For all the reasons stated herein, 

the Department is restoring investments 

as its own separate factor. Although 

some overlaps between factors are 

understandable, tying investments to 

profits and losses in the absolute 

manner suggested by NELA would be 

contrary to the Department’s goal of 

rectifying the 2021 IC Rule’s treatment 

of investments as part of the 

opportunity for profit or loss factor. 

NELA further stated that the NPRM 

was ‘‘correct to incorporate a relativeinvestment analysis’’ in this factor, but 

that ‘‘the Department should explain 

that the relative-investment analysis is 

qualitative, not quantitative, to better 

align this prong with the overarching 

dependence/independence inquiry.’’ 

According to NELA, ‘‘[a] qualitative 

review of relative investments helps 

determine whether the investment is 

entrepreneurial in nature,’’ but ‘‘[a]n 

analysis that instead focuses on a 

quantitative comparison of investments 

is rarely conclusive, because not all 

industries are equally capitalintensive.’’ NELA added that ‘‘the 

threshold question of which 

expenditures are entrepreneurial 

‘investments’ versus ‘tools’ makes 

quantitative comparison confusing and 

inconclusive.’’ See also NELP (The 

Department should ‘‘clarify[] that the 

comparison of investments must be 

qualitative.’’); Real Women in Trucking 

(‘‘While a single tractor trailer is a 

relatively small investment compared to 

the fleets of trucks owned by some 

firms, when wholly owned or 

independently financed, it is sufficient 

to support a personal trucking business, 

and thereby meets the standard 

discussed in the Proposed Rule.’’). 

Having considered these comments, 

the Department agrees that focusing the 

comparison of the worker’s and the 

employer’s investments on their 

qualitative natures is helpful. As NELA 

points out, different industries may be 

more or less ‘‘capital-intensive.’’ Thus, 

focusing only on the quantitative 

measures (e.g., dollar values or size) of 

the investments may not achieve the full 

probative value of comparing the 

investments. On the other hand, 

comparing the investments in a 

qualitative manner (i.e., the types of 

investments) is a better indicator of 

whether the worker is economically 


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273 IBT commented that, ‘‘[a]s it is currently 

written, this proposed factor could be 

misinterpreted as it unintentionally excludes from 

consideration, many of the conditions workers who 

work for platform-based companies are subject to.’’ 

IBT added: ‘‘By overemphasizing workers’ ability to 

increase earnings through minimal investment or 

personal initiative, the proposed rule risks inviting 

employers to engage in further tactics to exclude 

more of their workers from the FLSA’s protections.’’ 

The Department disagrees with this 

characterization, especially considering the 

modifications that it has made to the investments 

factor. For all of the reasons explained herein, the 

Department believes that it has struck the right 

balance by focusing on the nature of the worker’s 

investment (it should be capital or entrepreneurial 

to indicate independent contractor status) and by 

qualitatively comparing the worker’s investments to 

the employer’s investments to determine if the 

worker is making similar types of investments as 

the employer to suggest that the worker is in 

business for themself. 

274See, e.g., DialAmerica, 757 F.2d at 1382; 

McFeeley, 825 F.3d at 241; Hobbs, 946 F.3d at 829; 

Off Duty Police, 915 F.3d at 1055; Brant, 43 F.4th 

at 665; Alpha & Omega, 39 F.4th at 1082; Driscoll, 

603 F.2d at 754; Paragon, 884 F.3d at 1235; 

Scantland, 721 F.3d at 1311. 

275See, e.g., WHD Op. Ltr. (Aug. 13, 1954); WHD 

Op. Ltr. FLSA–795 (Sept. 30, 1964); WHD Op. Ltr. 

(Oct. 12, 1965); WHD Op. Ltr. (Sept. 12, 1969); 

WHD Op. Ltr. WH–476, 1978 WL 51437, at *1 (Oct. 

19, 1978); WHD Op. Ltr., 1986 WL 1171083, at *1 

(Jan. 14, 1986); WHD Op. Ltr., 1986 WL 740454, at 

*1 (June 23, 1986); WHD Op. Ltr., 1995 WL 

1032469, at *1 (Mar. 2, 1995); WHD Op. Ltr., 1995 

WL 1032489, at *1 (June 5, 1995); WHD Op. Ltr., 

1999 WL 1788137, at *1 (July 12, 1999); WHD Op. 

Ltr., 2000 WL 34444352, at *1 (July 5, 2000); WHD 

Op. Ltr., 2000 WL 34444342, at *3 (Dec. 7, 2000); 

WHD Op. Ltr., 2002 WL 32406602, at *2 (Sept. 5, 

2002); WHD Fact Sheet #13, ‘‘Employment 

Relationship Under the Fair Labor Standards Act 

(FLSA)’’ (July 2008); AI 2015–1,available at 2015 

WL 4449086 (withdrawn June 7, 2017). 

276See, e.g., Franze, 826 F. App’x at 76; Superior 

Care, 840 F.2d at 1058–59; Morrison, 253 F.3d at 

11 (citing Superior Care, 840 F.2d at 1058–59). 

277 825 F.3d at 243. 

dependent on the employer for work or 

is in business for themself. That is 

because regardless of the amount or size 

of their investments, if the worker is 

making similar types of investments as 

the employer or investments of the type 

that allow the worker to operate 

independently in the worker’s industry 

or field, then that fact suggests that the 

worker is in business for themself. The 

comment from Real Women in Trucking 

captures this point well. Although the 

driver who wholly owns or is 

independently financing a single truck 

is making a quantitatively smaller 

investment (in dollars and size) than the 

employer that has a fleet of trucks, the 

driver is making a similar type of 

investment as the employer and a 

sufficient investment so that the driver 

can operate independently in that 

industry—suggesting independent 

contractor status. Another example is an 

individual photographer who has 

cameras and related equipment, has 

software to edit photos, and works out 

of their home. Although the individual 

may not have the extent of equipment, 

software with every capability, or a 

leased office space like a larger firm, the 

type of investments that the individual 

has made are sufficient in this case for 

the individual to operate independently 

in the photography field—suggesting 

independent contractor status. 

Accordingly, the Department is revising 

the last sentence of the proposed 

regulatory text for the investments factor 

to be two sentences and to read: ‘‘The 

worker’s investments need not be equal 

to the potential employer’s investments 

and should not be compared only in 

terms of the dollar values of investments 

or the sizes of the worker and the 

potential employer. Instead, the focus 

should be on comparing the investments 

to determine whether the worker is 

making similar types of investments as 

the potential employer (even if on a 

smaller scale) to suggest that the worker 

is operating independently, which 

would indicate independent contractor 

status.’’ 273

Numerous commenters opposed, 

disagreed with, and/or requested 

changes to or clarifications of the 

proposed investments factor. For 

example, several commenters opposed 

the NPRM’s proposed treatment of 

investments as its own separate factor. 

NRF & NCCR stated that ‘‘investments 

are so interrelated with profits and 

losses that analyzing them separately is 

duplicative and unnecessary,’’ and that 

the 2021 IC Rule, ‘‘following Second 

Circuit precedent,’’ ‘‘brings clarity and 

helps reduce overlap to this analysis.’’ 

N/MA stated that ‘‘[i]nvestment by a 

worker in their own business creates an 

expense, which by definition creates an 

equation whether the worker may 

experience loss or profit depending on 

the worker’s net profits.’’ CWI stated 

that, ‘‘because the investment factor is 

already sufficiently addressed in the 

opportunity-for-profit-or-loss factor, 

there is no need for it to be addressed 

again as a standalone factor.’’ CWI 

disagreed with the Department’s 

characterization of the 2021 IC Rule on 

this point, stating that the 2021 IC Rule 

‘‘provides that both initiative and 

investment must be considered, though 

both are not required’’ and thus 

‘‘provides that the satisfaction of either 

is a necessary condition for the 

opportunity-for-profit-or-loss factor, but 

not that either is per se sufficient’’ 

(emphases added). See also Coalition of 

Business Stakeholders. FSI stated that 

the NPRM ‘‘introduces redundancy and 

double-counting by assessing a worker’s 

‘investment’ in the business as a 

‘standalone factor.’ ’’ The commenter 

further stated that although the Supreme 

Court in Silk articulated investment as 

a separate factor than opportunity for 

profit or loss, the Court ‘‘analyzed them 

together,’’ which the commenter 

asserted that the Department ‘‘fail[ed] to 

address.’’ Other commenters, such as 

ABC, North American Meat Institute, 

and the U.S. Chamber, also disagreed 

with the NPRM’s treatment of 

investments as its own separate factor. 

Having considered the comments, the 

Department agrees with the comments 

discussed above from commenters 

including AFL–CIO, IBT, LA Fed & 

Teamsters Locals, NELP, and NWLC, 

and is retaining investments as a 

separate factor in the economic realities 

analysis. The Department’s approach is 

consistent with the overwhelming 

majority of federal appellate case law 

and the Department’s practice prior to 

the 2021 IC Rule. Almost all of the 

federal courts of appeals consider 

investments as a separate factor.274 In 

addition, the Department consistently 

identified investments as a separate 

factor in the analysis prior to the 2021 

IC Rule.275 The Department understands 

that the Second and D.C. Circuits 

consider investments and opportunity 

for profit or loss as one factor.276

However, treating investments as a 

separate factor is consistent with the 

approach taken by most federal 

appellate courts, the Department’s 

intent for this final rule to be as 

grounded as possible in the case law, 

and the Department’s prior guidance. 

And as explained below, treating 

investments as a separate factor rather 

than including it in the opportunity for 

profit or loss factor as the 2021 IC Rule 

ensures that investments are considered 

in each case and may result in a fuller 

consideration of relevant facts. 

The Department recognizes that the 

consideration of investments may be 

related to the consideration of the 

opportunity for profit or loss. As 

explained above in response to a 

comment from NELA, whether the 

worker’s expenditures may result in 

profits or losses to the worker is highly 

relevant to whether those expenditures 

are capital or entrepreneurial in nature. 

The U.S. Chamber, for example, cited 

the Fourth Circuit’s decision in 

McFeeley to support its argument that 

‘‘[i]nvesting in one’s business 

necessarily entails creating an 

opportunity for profit or risking a loss 

on that investment.’’ In McFeeley, the 

court noted that the two factors ‘‘relate 

logically to one other’’ 277 but 

nonetheless articulated them 


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278 Id. at 241. 

279 Id. at 243 (‘‘These two factors thus fail to tip 

the scales in favor of classifying the dancers as 

independent contractors.’’). 

280 331 U.S. at 716. Whether the Court in Silk 

actually analyzed the two factors together is 

questionable, particularly with respect to the 

‘‘driver-owners.’’ The Court concluded that ‘‘[i]t is 

the total situation, including the risk undertaken [a 

reference to the facts that they ‘‘own their own 

trucks’’ and ‘‘hire their own helpers’’], the control 

exercised, the opportunity for profit from sound 

management, that marks these driver-owners as 

independent contractors.’’ Id. at 718. 

281 917 F.3d at 382–85. 

282Cromwell v. Driftwood Elec. Contractors, Inc., 

348 F. App’x 57, 60–61 (5th Cir. 2009). 

283 775 F. App’x at 624–25. 

284 721 F.3d at 1316–18. 

285 86 FR 1247 (‘‘This factor weighs towards the 

individual being an independent contractor to the 

extent the individual has an opportunity to earn 

profits or incur losses based on his or her exercise 

of initiative (such as managerial skill or business 

acumen or judgment) or management of his or her 

investment in or capital expenditure on, for 

example, helpers or equipment or material to 

further his or her work.’’). 

286 Id. 287 87 FR 62275 (proposed § 795.110(b)(2)). 288See 835 F.2d at 1537. 

separately 278 and ultimately made 

determinations on each factor as it 

related to the workers’ status as 

employees or independent 

contractors.279 And even assuming that 

the Supreme Court in Silk ‘‘analyzed 

them together’’ as FSI argued, the Court 

did articulate the two factors 

separately.280

Moreover, as decisions from the Fifth 

Circuit and other Circuits demonstrate, 

investments may be relevant to whether 

the worker is economically dependent 

on the employer separate and apart from 

the worker’s opportunity for profit or 

loss. For example, the Fifth Circuit 

found in Parrish that the investment 

factor favored employee status (although 

it merited ‘‘little weight’’ in that case 

given the nature of the work) and that 

the opportunity for profit or loss factor 

favored independent contractor 

status.281 In Cromwell, the Fifth Circuit 

conversely found that the investment 

factor indicated independent contractor 

status because the workers ‘‘invested a 

relatively substantial amount in their 

trucks, equipment, and tools’’ but that 

their opportunity for profit or loss was 

‘‘severely limit[ed].’’ 282 In Nieman, the 

Eleventh Circuit found that the 

investment factor weighed in favor of 

independent contractor status while the 

opportunity for profit or loss factor did 

‘‘not weigh in favor of either’’ 

independent contractor or employee 

status.283 And in Scantland, the 

Eleventh Circuit found that the 

opportunity for profit or loss factor 

‘‘point[ed] strongly toward employee 

status’’ although the investment factor 

weighed slightly in favor of 

independent contractor status.284

The 2021 IC Rule’s treatment of 

investments as part of its opportunity 

for profit or loss factor further reinforces 

the Department’s decision to treat 

investments as a separate factor. The 

2021 IC Rule stated that its opportunity 

for profit or loss factor indicates 

independent contractor status if the 

worker exercises initiative or if the 

worker manages their investment in the 

business.285 Although ‘‘the effects of the 

[worker’s] exercise of initiative and 

management of investment are both 

considered’’ under its opportunity for 

profit or loss factor, the 2021 IC Rule 

clearly stated that a worker ‘‘does not 

need to have an opportunity for profit 

or loss based on both for this factor to 

weigh towards the individual being an 

independent contractor.’’ 286 Thus, 

contrary to, for example, the argument 

of CWI that there would be a ‘‘balancing 

test,’’ the 2021 IC Rule provided that, if 

either initiative or investment suggested 

independent contractor status, the other 

could not change that outcome even if 

it suggested employee status. The 2021 

IC Rule’s approach to investments was 

accordingly flawed because it, in some 

cases, eliminated the role of investments 

in helping to determine a worker’s 

status, particularly when the 

investments or the lack thereof 

indicated that the worker was an 

employee. 

In sum, nothing in this final rule 

forecloses consideration, in an 

appropriate case, of investments as they 

relate to the worker’s opportunity for 

profit or loss. However, for all of the 

reasons set forth above and consistent 

with this final rule’s totality-of-thecircumstances approach, treating 

investments as a separate factor in the 

analysis ensures that investments are 

accorded, at least at the outset of the 

analysis, the same considerations as the 

other factors and that the probative 

value of the investments toward the 

worker’s dependence or independence 

will affect the ultimate outcome of the 

analysis. 

A few commenters objected to the 

proposed regulatory text’s statement 

that the investments factor ‘‘considers 

whether any investments by a worker 

are capital or entrepreneurial in 

nature.’’ 287 CWI commented that 

‘‘[n]othing in Silk or Rutherford 

construed the factor so narrowly,’’ and 

that ‘‘limiting investments to those that 

are ‘capital or entrepreneurial’ would 

disproportionately impact underserved 

communities’’ because ‘‘the standard 

imposes significant barriers for 

individuals without the financial 

resources needed for capital and 

entrepreneurial investments—i.e., it 

penalizes, and removes freedom in 

choosing work arrangements, from those 

without pre-existing financial 

resources.’’ Flex made a similar point, 

stating that ‘‘tools need not be ‘capital 

or entrepreneurial in nature’ to have the 

effect of helping the worker achieve 

economic independence.’’ 

Having considered these comments, 

the Department adopts the proposal that 

whether the worker’s investments are 

capital or entrepreneurial in nature is 

probative of whether they indicate 

employee or independent contractor 

status. Considering the worker’s 

investment in this manner is consistent 

with the overall inquiry of determining 

whether the worker is economically 

dependent on the employer for work or 

is in business for themself because a 

capital or entrepreneurial investment 

indicates that the worker is operating as 

an independent business. More 

specifically, capital or entrepreneurial 

investments tend to help a worker work 

for multiple companies—a characteristic 

of an independent business. 

Accordingly, the examples in the 

regulatory text (‘‘increasing the worker’s 

ability to do different types of or more 

work, reducing costs, or extending 

market reach’’) generally involve efforts 

to work independently for multiple 

companies. Focusing on whether the 

worker’s investments are capital or 

entrepreneurial in nature does not 

construe the factor ‘‘narrowly,’’ as CWI 

asserted. As explained below in 

response to specific comments asserting 

that this factor is limiting, there are no 

minimum-dollar thresholds or other 

requirements for investments to be 

capital or entrepreneurial and thus 

indicate independent contractor status. 

Instead, focusing on the nature of the 

worker’s investments ties this factor to 

the worker’s economic dependence or 

independence. 

Many federal appellate court 

decisions have emphasized how the 

worker’s investment must be capital in 

nature for it to indicate independent 

contractor status. For example, the 

Seventh Circuit determined in Lauritzen 

that migrant farm workers were not 

independent contractors, but 

employees, due in part to the lack of 

capital investments made by the 

workers.288 The court explained that 

investments that establish a worker’s 

status as an independent contractor 

should be ‘‘risk capital [or] capital 

investments, and not negligible items or 

labor itself. . . . The workers here are 

responsible only for providing their own 

gloves [which] do not constitute a 


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289 Id. 

290 884 F.3d at 1236 (quoting Snell, 875 F.2d at 

810). 

291See Mr. W Fireworks, 814 F.2d at 1052; Pilgrim 

Equip., 527 F.2d at 1314. 

292See Off Duty Police, 915 F.3d at 1056 (quoting 

Donovan v. Brandel, 736 F.2d 1114, 1118–19 (6th 

Cir. 1984)). 

293 331 U.S. at 717–18. 

294 Id. at 719. 

295 331 U.S. at 725. 

296 87 FR at 62241 (citing Paragon, 884 F.3d at 

1236 (quoting Snell, 875 F.2d at 810); Lauritzen, 

835 F.2d at 1537). 

297 Id. at 62275 (proposed § 795.110(b)(2)). 

298 Id. As explained above, the Department is 

modifying this provision in response to comments 

to add ‘‘and costs that are unilaterally imposed by 

the potential employer on the worker.’’ 

capital investment.’’ 289 In Paragon, the 

Tenth Circuit explained that ‘‘the 

relevant ‘investment’ is ‘the amount of 

large capital expenditures, such as risk 

capital and capital investments, not 

negligible items, or labor itself.’ ’’ 290

The Fifth Circuit has focused on 

whether the worker has any ‘‘risk 

capital’’ in the work and has found this 

factor to indicate employee status when 

all or an overwhelming majority of the 

risk capital is provided by the 

employer.291 And the Sixth Circuit has 

described this factor as the ‘‘capital 

investment factor.’’ 292

Moreover, CWI’s efforts to use Silk 

and Rutherford to undercut the 

Department’s approach are 

unpersuasive. In Silk, the unloaders 

‘‘provided only picks and shovels,’’ and 

there was nothing to suggest that their 

‘‘simple tools’’ were capital or 

entrepreneurial in nature.293 On the 

other hand, the ‘‘driver-owners’’ at issue 

in Silk ‘‘own[ed] their own trucks’’ and 

‘‘hire[d] their own helpers,’’ and at least 

some worked ‘‘for any customer.’’ 294

The circumstances of the driver-owners, 

and particularly the indication that their 

owned trucks and hired helpers allowed 

them to manage their businesses, 

operate independently, and work for 

multiple customers, suggest that their 

investments were capital or 

entrepreneurial in nature. And 

Rutherford is not instructive because the 

workers merely owned some tools 

specific to their boning work—nothing 

that suggested any type of investment to 

the Court indicating that they were 

independent contractors.295 Focusing on 

whether the worker’s investments are 

capital or entrepreneurial nature is thus 

consistent with Silk and Rutherford and 

is not a narrowing of those decisions. 

Appraisal Institute and Real Estate 

Evaluation Advocacy Association asked 

whether ‘‘an appraiser seeking out 

specialized education, training, and 

certification’’ is making a capital or 

entrepreneurial investment ‘‘even when 

those trainings or certifications are 

industry requirements for certain 

categories of work.’’ As a general matter 

and as opposed to costs that a potential 

employer unilaterally imposes on a 

worker, a worker’s efforts to obtain 

specialized education, training, and 

certification that are required by an 

industry can be capital or 

entrepreneurial in nature if (for example 

and as explained in the regulatory text) 

they increase the worker’s ability to do 

different types of or more work or 

extend market reach. 

CLDA asserted that the ‘‘rule 

commentary also states the investment 

must be large, must be a capital 

expenditure, and must be 

entrepreneurial in nature.’’ It added: 

‘‘This ignores the practical realities of 

starting a business. Few entrepreneurs 

can start a business with multi-milliondollar investments in equipment, 

technology, and real estate.’’ Direct 

Selling Association (‘‘DSA’’) similarly 

commented that focusing on whether 

the investment is capital or 

entrepreneurial in nature ‘‘would 

disproportionately impact underserved 

communities that direct selling serves 

such as Hispanics.’’ Stating that 

‘‘practically any individual can start [a 

direct selling business] for an average of 

$82.50,’’ it added that the Department 

proposed ‘‘a rule that would penalize 

this low-cost business by requiring a 

large investment to point towards being 

an independent contractor.’’ 

TheDream.US commented that 

‘‘Dreamers certainly have skills and 

initiative, but not the resources to make 

the level of capital investment that the 

DOL seems to be proposing.’’ Although 

the NPRM cited cases discussing ‘‘large’’ 

expenditures,296 the NPRM focused on 

the nature of the investments, did not 

propose any minimum-dollar threshold, 

and absolutely did not suggest that 

‘‘multi-million-dollar’’ or even ‘‘large’’ 

investments are required for this factor 

to indicate independent contractor 

status. As explained above, focusing on 

the nature of the investments and 

whether they are capital or 

entrepreneurial in nature is most 

probative of whether the worker is 

economically dependent on the 

employer for work or in business for 

themself. Consistent with that focus, 

there is no minimum-dollar threshold or 

requirement that the investment be 

‘‘large’’ or of a certain level for a 

worker’s investment to be capital or 

entrepreneurial in nature. 

MEP stated that the examples of 

capital or entrepreneurial investments 

in the proposed regulatory text 

‘‘unnecessarily limit the personal 

investments that should be considered 

in the analysis and seem to suggest that 

independent contractors can only be 

those individuals who want to expand 

their business, increase their workload, 

or extend the business’ market reach.’’ 

These examples, however, are preceded 

in the regulatory text by the words 

‘‘such as’’ and are plainly a 

nonexhaustive set of examples—none of 

which have to be satisfied.297 A 

worker’s investments are most likely to 

be capital or entrepreneurial in nature if 

they create or further the worker’s 

ability to work for multiple employers 

(as these examples suggest), but the 

examples are not limiting as MEP 

asserted. Likewise, in response to 

comments discussed below about 

particular types of investments, such as 

computers, phones, and specialized 

software, the Department is not 

suggesting that certain types of 

investments are always or can never be 

capital or entrepreneurial. Instead, the 

focus should be on the nature of the 

investment in the circumstances. 

Numerous commenters raised 

concerns with the statement in the 

proposed regulatory text that: ‘‘Costs 

borne by a worker to perform their job 

(e.g., tools and equipment to perform 

specific jobs and the workers’ labor) are 

not evidence of capital or 

entrepreneurial investment and indicate 

employee status.’’ 298 For example, 

Coalition of Business Stakeholders 

stated that the proposed provision ‘‘is 

far too broad of a directive to be of any 

use in conducting an independent 

contractor analysis’’ and that it would 

require factfinders to ‘‘ignore any 

amount of investment a worker made in 

his or her tools and equipment, even if 

those tools and equipment were—as in 

the case of a software security auditor 

who provides his own specially 

designed laptop—highly specialized 

and expensive.’’ CWI stated that, 

contrary to the proposed regulatory text, 

‘‘such investments are plainly a 

function of the business-like decisions 

that contractors must make in choosing 

between the projects available to them’’ 

because ‘‘[t]hey may purchase 

equipment that allows them to complete 

a particular job more quickly—and thus 

more profitably—or may bypass projects 

requiring discrete expenditures that 

would lower profitability.’’ ABC added 

‘‘independent contractors in the 

construction industry who invest in 

their own tools and equipment are in 

fact acting as entrepreneurs, and such 

investment should continue to be 

recognized as indicative of independent 

contractor status.’’ The U.S. Chamber 


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299 Id. at 62241. 

300 Id. 

301N/MA, while commenting on this statement 

regarding personal vehicles, gave as an example a 

‘‘photographer who purchases more sophisticated 

special camera equipment expecting that he or she 

will use it in their work.’’ Again, purchasing 

specialized equipment for use in work can be an 

investment that is capital or entrepreneurial in 

nature. 

stated this provision ‘‘contradicts the 

weight of case law, which has held that 

a worker’s investment in the equipment 

necessary to perform a discrete job is 

evidence of independent contractor 

status’’ and that ‘‘[e]ven the Fifth 

Circuit, which utilizes a ‘relative 

investment’ inquiry, has found this to be 

true’’). The U.S. Chamber added that 

‘‘workers can be in business for 

themselves without having to expend 

huge sums of money,’’ and that ‘‘[a] 

‘knowledge-based’ worker, such as an IT 

worker, may be able to perform 

independent work with only a laptop or 

tablet, which are seemingly ubiquitous 

and relatively inexpensive.’’ Relatedly, 

Fight for Freelancers asked whether 

‘‘the investment in a computer, a cell 

phone and some specialized software 

constitute a meaningful enough 

investment to indicate independent 

contractor status under [the investments 

factor]?’’ Moreover, although WFCA 

agreed with evaluating the worker’s 

‘‘capital expenditures,’’ it expressed 

concern that the NPRM ‘‘eliminates one 

of the major capital expenses of many 

independent contractors—tools and 

equipment.’’ WFCA identified 

‘‘specialty tools’’ such as a ‘‘floor 

scrapper’’ and ‘‘power stretchers,’’ and 

stated that ‘[t]hese tools and equipment 

are major investments and should be 

recognized in evaluating whether the 

installer is an independent contractor or 

an employee.’’ WFCA suggested 

modifying this provision in the 

regulatory text so that it provides that 

‘‘investment in tools and equipment to 

perform specific jobs (other than 

common household tools or equipment) 

are evidence of capital or 

entrepreneurial investment and indicate 

independent contractor status.’’ Flex 

commented: ‘‘When a worker’s 

investment in tools and equipment 

allows the worker to move from client 

to client, the worker’s investment in 

those tools and equipment makes the 

worker less economically reliant on any 

one client.’’ CPIE, noting that ‘‘the 

Tenth Circuit reasoned that ‘[t]he mere 

fact that workers supply their own tools 

or equipment does not establish status 

as independent contractors’ ’’ (citing 

Paragon, 884 F.3d at 1236), commented 

that ‘‘not establishing status as 

independent contractors is vastly 

different from establishing status as 

employees,’’ and that ‘‘[a]t most, a 

finding that an individual bears that 

costs of performing a service would be 

neutral.’’ OOIDA expressed concern that 

this provision ‘‘might be construed as 

saying that the purchase or financing of 

equipment like a truck or trailer does 

not weigh in favor of independent 

contractor status since this equipment is 

used to complete a job.’’ It asked the 

Department to ‘‘better clarify between 

the ‘tools and equipment’ that are used 

by a worker to perform specific jobs and 

may not indicate independent 

contractor status with the ‘capital and 

entrepreneurial’ investments that do.’’ 

NHDA expressed concern that a 

‘‘medium duty Class 6 box truck, which 

costs between $50,000—$90,000 on 

average . . . may not indicate 

independence under the Proposed Rule, 

because . . . a medium duty truck is 

arguably expedient to perform the 

business of home delivery 

transportation.’’ 

Having considered these comments, 

the Department continues to believe that 

it is helpful to provide guidance 

regarding workers who provide tools 

and equipment to perform a specific job, 

but acknowledges that the ‘‘to perform 

their job’’ language in the proposed 

regulatory text can be made more 

precise. Applying the general principle 

from the regulatory text that the focus 

should be on whether the investment is 

capital or entrepreneurial in nature and 

that capital or entrepreneurial 

investments tend to increase the 

worker’s ability to do different types of 

or more work, reduce costs, or extend 

market reach, investment in tools or 

equipment to perform a specific job 

would not qualify as capital or 

entrepreneurial. As the Department 

explained in the NPRM, ‘‘an investment 

that is expedient to perform a particular 

job (such as tools or equipment 

purchased to perform the job and that 

have no broader use for the worker) 

does not indicate independence.’’ 299 On 

the other hand, a worker may invest in 

tools and equipment for reasons beyond 

performing a particular job, such as to 

increase the worker’s ability to do 

different types of or more work, reduce 

costs, or extend market reach. Such 

investments can be capital or 

entrepreneurial in nature. To the extent 

that the ‘‘to perform their job’’ language 

in the proposed regulatory text 

suggested otherwise, the Department is 

removing that language. Accordingly, 

the Department is further modifying the 

regulatory text so that this provision 

reads: ‘‘Costs to a worker of tools and 

equipment to perform a specific job, 

costs of workers’ labor, and costs that 

the potential employer imposes 

unilaterally on the worker, for example, 

are not evidence of capital or 

entrepreneurial investment and indicate 

employee status.’’ A worker may have 

expenses to perform a specific job and 

also make investments that generally 

support, expand, or extend the work 

performed which may be of a capital or 

entrepreneurial nature. Thus, the 

existence of expenses to perform a 

specific job will not prevent this factor 

from indicating independent contractor 

status so long as there are also 

investments that are capital or 

entrepreneurial in nature. 

A number of commenters expressed 

concerns with the statement in the 

NPRM’s preamble that ‘‘the use of a 

personal vehicle that the worker already 

owns to perform work—or that the 

worker leases as required by the 

employer to perform work—is generally 

not an investment that is capital or 

entrepreneurial in nature.’’ 300 Several of 

those commenters, however, gave 

examples of vehicles that are plainly not 

the type of vehicles identified in this 

statement. See, e.g., NHDA (purchasing 

or leasing ‘‘personal vehicles for the 

primary purpose of starting a 

transportation business, whether fulltime or part-time’’); U.S. Chamber 

(purchasing ‘‘a car to use as a driver for 

a ride-sharing application’’); WFCA 

(purchasing ‘‘a vehicle that is capable of 

carrying the weight of flooring materials 

and tools’’). The NPRM’s statement does 

not cover vehicles of the types in these 

examples that a worker purchased for a 

business purpose—vehicles which can 

be investments of a capital or 

entrepreneurial nature.301

CLDA commented that ‘‘most 

entrepreneurs start their businesses with 

what they already have,’’ stating that 

‘‘[t]hey start with using . . . their car as 

their delivery vehicle.’’ CLDA added 

that ‘‘[t]hose items may have started as 

personal items, but they become critical 

business tools and critical business 

investments when the entrepreneur 

starts using them to build a business.’’ 

The U.S. Chamber commented that the 

NPRM’s ‘‘absolutist statement ignores 

the fact that contractors may utilize 

their personal vehicles in a way that 

shows entrepreneurial activity. For 

example, if workers forgo selling their 

personal vehicle and, instead, choose to 

use their vehicle to drive for a 

ridesharing platform, that is 

quintessentially entrepreneurial 

activity. The fact that they had already 

owned their vehicle is immaterial.’’ 

Uber commented that ‘‘[w]hile it is true 

that drivers on platforms like Uber’s 


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302 781 F.2d at 1318. 

303Off Duty Police, 915 F.3d at 1056. 

304 814 F.2d at 1052. 

305Express Sixty-Minutes, 161 F.3d at 304; see 

also Keller, 781 F.3d at 810–11 (fact that equipment 

could be used ‘‘for both personal and professional 

tasks’’ weakens the indication of independent 

contractor status). 

306WPI stated that ‘‘the NPRM posits that a 

worker buying a car is an immaterial investment for 

purposes of independent contractor classification if 

they also use the car for personal reasons.’’ The 

commenter, however, mischaracterized the NPRM’s 

statement, which addressed a personal vehicle that 

the worker already owns (and thus invested in for 

reasons other than a business purpose) and then 

uses to perform work. In the different scenario 

posited by the commenter, a car purchased by a 

worker may be an investment of a capital or 

entrepreneurial nature if purchased for a business 

purpose even if the worker also uses the car for 

personal reasons. Coalition of Business 

Stakeholders similarly mischaracterized the 

NPRM’s statement, saying that the NPRM 

‘‘presumptively declares that a vehicle, should be 

considered ‘generally not an investment that is 

capital or entrepreneurial in nature’ ’’ (quoting the 

NPRM). The NPRM’s statement, however, 

addressed only a vehicle already owned by a 

worker that the worker then uses to perform work. 

307 87 FR 62275 (proposed § 795.110(b)(2)). 

308 Id. 

may be using vehicles they owned 

before they started driving, drivers can, 

and some do, choose to invest in, for 

example, a luxury vehicle in order to 

earn more by way of higher-end 

engagements . . . [or] a hybrid or 

electric vehicle specifically to increase 

their fuel economy.’’ MEP stated that 

‘‘[i]ndividuals may not make . . . 

investments [in things such as personal 

vehicles] for the purpose of performing 

work, but individuals can choose to 

monetize those investments through 

independent work arrangements, such 

as via the gig economy.’’ It added that 

‘‘[u]sing these pre-owned investments to 

engage in independent work should 

reflect economic independence, which 

is the ultimate inquiry in the worker 

classification analysis.’’ CWI suggested 

that the NPRM’s ‘‘discussion of vehicle 

investments should be withdrawn, and 

that the weight that each investment is 

afforded should instead be evaluated 

under the totality of the circumstances 

in which each such investment 

occurred.’’ 

Having considered the comments, the 

Department agrees with the comments 

discussed above from commenters that 

supported the NPRM’s statement 

regarding personal vehicles, including 

AFL–CIO, LA Fed & Teamsters Locals, 

and ROC United, and reaffirms this 

statement. Whether a vehicle owned or 

leased by a worker and used to perform 

work is a capital or entrepreneurial 

investment does depend on the totality 

of the circumstances. In the scenario 

where a worker already owns a vehicle 

and happens to then use it to perform 

work, the acquisition of that vehicle was 

not for a business purpose and generally 

cannot be a capital or entrepreneurial 

investment. As the Eleventh Circuit 

explained in Scantland, the ‘‘fact that 

most technicians will already own a 

vehicle suitable for the work’’ suggests 

that there is ‘‘little need for significant 

independent capital.’’ 302 If a worker 

already owns a vehicle for personal use 

and then modifies, upgrades, or 

customizes the vehicle to perform work, 

the worker’s investment in modifying, 

upgrading, or customizing the vehicle 

could be a capital or entrepreneurial 

investment. In other scenarios, whether 

the vehicle is a capital or 

entrepreneurial investment often 

depends on whether the vehicle was 

purchased for a personal or business 

purpose. Where any vehicle is suitable 

to perform the work, purchase of the 

vehicle is generally not a capital or 

entrepreneurial investment. When the 

worker owns a vehicle with certain 

specifications (such as a van or truck) to 

perform the work and the worker also 

uses the vehicle for personal reasons, 

that personal use is relevant, but the 

vehicle may still be a capital or 

entrepreneurial investment. For 

example, the Sixth Circuit has found 

that, where the workers’ vehicles ‘‘could 

be used for any purpose, not just on the 

job,’’ they did not indicate independent 

contractor status.303 The Fifth Circuit 

has considered the purpose of the 

vehicle and how the worker uses it, and 

in Mr. W Fireworks, it noted that most 

of the workers in that case purchased 

vehicles for personal and family 

reasons, not business reasons, in 

concluding that the investment factor 

indicated employee status.304 The Fifth 

Circuit has also noted that, ‘‘[a]lthough 

the driver’s investment of a vehicle is no 

small matter, that investment is 

somewhat diluted when one considers 

that the vehicle is also used by most 

drivers for personal purposes.’’ 305 In 

sum, focusing on the purpose of the 

vehicle and how it is used is consistent 

with the overarching inquiry of 

examining the economic realities of the 

worker’s relationship with the 

employer. And the reality for a worker 

who already owns a vehicle for personal 

use and then uses it (without any 

modifications) to perform work is that 

the vehicle was not purchased for a 

business purpose and generally is not a 

capital or entrepreneurial investment.306

Even where a personal vehicle is not a 

capital investment indicating 

independent contractor status, there 

may be other facts relevant to the 

investment factor, and the worker’s 

ultimate status will be determined by 

application of all of the factors, 

consistent with the totality-of-thecircumstances analysis. 

Finally, numerous commenters 

opposed the NPRM’s proposal to 

consider the worker’s investments ‘‘on a 

relative basis with the employer’s 

investments in its overall business.’’ 307

That proposed regulatory text further 

provided that ‘‘[t]he worker’s 

investments need not be equal to the 

employer’s investments, but the 

worker’s investments should support an 

independent business or serve a 

business-like function for this factor to 

indicate independent contractor 

status.’’ 308

For example, CWI expressed ‘‘grave 

concerns’’ with comparing investments, 

stating that this approach ‘‘is 

inconsistent with law, uninformative to 

the economic realities test, and 

ultimately injects nothing but further 

uncertainty into the analysis.’’ CWI 

added that the Supreme Court in Silk 

addressed only the workers’ 

investments and not the employer’s 

investments, and that an ‘‘employer 

investing in its own business provides 

absolutely no insight into whether the 

worker is economically dependent on 

that business.’’ CWI further stated that 

‘‘[i]t is hardly surprising that virtually 

all workers—employees and 

independent contractors alike—have 

fewer resources than businesses,’’ but 

‘‘[t]hat fact, however, does not influence 

the question of economic dependence 

for either group.’’ NRF & NCCR 

requested that any consideration of 

relative investments ‘‘be stricken 

entirely,’’ raising similar concerns to 

CWI. NRF & NCCR added that 

consideration of relative investments 

would create barriers to entry in 

businesses because workers ‘‘would 

effectively be excluded from contracting 

with any but the smallest of 

companies.’’ The IFA requested 

clarification in the franchise context, 

noting that franchise opportunities 

require varying upfront investments, but 

‘‘[t]his does not mean that someone who 

invests in a lower-cost franchise 

opportunity is any less an independent 

business person than someone with the 

means to invest a million dollars in a 

franchise.’’ N/MA argued that 

considering relative investments is 

inconsistent with Silk because the 

Supreme Court in that case ‘‘addressed 

the investment of the worker as part of 

the economic realities test only by 

reference to the worker’s investment.’’ 

The commenter added: ‘‘A putative 

employer’s level of investment in its 

own business provides no insight into 


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309Hobbs, 946 F.3d at 831–32 (quoting 

Cornerstone Am., 545 F.3d at 344). In Parrish, the 

Fifth Circuit compared the relative investments as 

part of its analysis but accorded the relative 

investment factor ‘‘little weight in the light of the 

other summary-judgment-record evidence 

supporting IC-status.’’ 917 F.3d at 382–83. This 

does not support the conclusion that this factor is 

not useful; instead, it simply reflects the Fifth 

Circuit’s faithful application in that case of a 

totality-of-the-circumstances approach considering 

many factors, no one of which was dispositive. 310Off Duty Police, 915 F.3d at 1056 (quoting 

Keller, 781 F.3d at 810). 311 McFeeley, 825 F.3d at 243. 312 Verma, 937 F.3d at 231 (summarizing how 

courts have viewed this factor in cases examining 

the employment status of exotic dancers: ‘‘all 

concluded that ‘a dancer’s investment is minor 

when compared to the club’s investment’ ’’) 

(quoting the district court’s decision). 

313 Driscoll, 603 F.2d at 755 (strawberry growers’ 

investment in light equipment, including hoes, 

shovels, and picking carts was ‘‘minimal in 

comparison’’ with employer’s total investment in 

land and heavy machinery). 

314Paragon, 884 F.3d at 1236 (‘‘To analyze this 

factor, we compare the investments of the worker 

and the alleged employer.’’); Flint Eng’g, 137 F.3d 

at 1442 (‘‘In making a finding on this factor, it is 

appropriate to compare the worker’s individual 

investment to the employer’s investment in the 

overall operation.’’). 

315 2015 WL 4449086, at *8 (withdrawn June 7, 

2017). 

316 Id. 

317See WHD Op. Ltr., 2002 WL 32406602, at *1– 

2 (Sept. 5, 2002) (workers’ ‘‘hand tools, which can 

cost between $5,000 and $10,000,’’ were ‘‘small in 

comparison to [the employer’s] investment,’’ but the 

‘‘amount is none the less substantial’’ and ‘‘thus 

indicative of an independent contractor 

relationship’’); WHD Op. Ltr., 2000 WL 34444342, 

at *4 (Dec. 7, 2000) (comparing ‘‘the relative 

investments’’ of the worker and the employer is the 

correct approach). 

318Flex stated that the Department’s proposal to 

compare the worker’s and the employer’s relative 

investments ‘‘directly contradicts the Department’s 

subregulatory guidance in Fact Sheet #13, which for 

decades has advised that ‘the amount of the alleged 

contractor’s investment in facilities and equipment’ 

is not only relevant to a worker’s status but tends 

to support classification as an independent 

contractor.’’ Fact Sheet #13 has been revised several 

times over the past years and will be revised to 

reflect this final rule. Regardless, there is no basis 

for Flex’s characterization that the version of Fact 

Sheet #13 available at the time of the NPRM 

advised that this factor ‘‘tends to support 

classification as an independent contractor’’ as that 

language is not in the Fact Sheet. 

319Comparing the investments qualitatively also 

addresses the Eighth Circuit’s ruling in Karlson that 

the district court was correct to allow evidence of 

the worker’s and the employer’s relative 

investments, but also correct to not allow the 

worker to ask the employer about the dollar amount 

whether the worker is economically 

dependent on that business, as the work 

and investment made by the worker 

may be in an entirely different area of 

services than that even performed by the 

putative employer.’’ FSI stated that the 

Department ‘‘offers no reasoned 

explanation why that relative inquiry is 

probative of independent contractor 

status, contrary to the 2021 Rule’s 

conclusion that it measures an 

irrelevant comparison of respective 

organizational size.’’ 

Club for Growth Foundation 

commented that the 2021 IC Rule was 

correct to reject a relative investments 

analysis. It added: ‘‘The size of the 

hiring business has no relevance to 

whether the worker is a contractor or an 

employee. Consider a talented translator 

who translates a book, on the same 

terms and for the same fee, into French 

for a local college press and into 

Spanish for a major commercial 

publishing house. Why should she be 

considered more likely to be an 

employee when doing the Spanish 

work?’’ OOIDA similarly commented 

that ‘‘it doesn’t make sense that an 

owner-operator would be an 

independent contractor if they are 

working with a three-truck carrier but 

then be judged differently if they go to 

work for a carrier with hundreds or 

thousands of trucks.’’ The CA Chamber, 

CLDA, Flex, NACS, NHDA, and 

Scopelitis, made similar points. See also 

ABC; CPIE; WFCA. 

Having considered these comments, 

the Department continues to believe that 

comparing the worker’s investments to 

the employer’s investment is wellgrounded in the case law and the 

Department’s prior guidance. The 

Department further believes that 

comparing types of investments is 

indicative of whether a worker is 

economically dependent on the 

employer for work or is in business for 

themself. 

Although the Supreme Court in Silk 

did not make such a comparison, federal 

courts of appeals applying the factors 

from Silk routinely make that 

comparison. For example, the Fifth 

Circuit ‘‘consider[s] the relative 

investments’’ and has explained that, 

‘‘[i]n considering this factor, ‘we 

compare each worker’s individual 

investment to that of the alleged 

employer.’ ’’ 309 The Sixth Circuit has 

explained that ‘‘[t]his factor requires 

comparison of the worker’s total 

investment to the ‘company’s total 

investment, including office rental 

space, advertising, software, phone 

systems, or insurance.’ ’’ 310 The Fourth 

Circuit has similarly compared the 

employers’ payment of rent, bills, 

insurance, and advertising expenses to 

the workers’ ‘‘limited’’ investment in 

their work.311 In addition, the Third,312

Ninth,313 and Tenth 314 Circuits have 

compared the worker’s investments to 

the employer’s investments. Moreover, 

the Department has previously provided 

guidance that the worker’s investments 

and the employer’s investments should 

be compared. In AI 2015–1, the 

Department explained that a worker’s 

investment ‘‘should not be considered 

in isolation’’ because ‘‘it is the relative 

investments that matter.’’ 315 AI 2015–1 

further explained that, in addition to 

‘‘the nature of the investment,’’ 

‘‘comparing the worker’s investment to 

the employer’s investment helps 

determine whether the worker is an 

independent business.’’ 316 The 

Department has also compared the 

worker’s and the employer’s relative 

investments in opinion letters issued by 

WHD.317 In sum, the relative 

investments approach is firmly 

supported by the case law and the 

Department’s precedent.318

That said, the Department 

understands the concerns raised by 

many commenters with merely 

comparing the size of and dollar 

expenditures by the worker to those of 

the employer, especially for workers 

who are sole proprietors. Accordingly, 

as explained above in response to 

comments from NELA and others that 

suggested that the comparison of the 

worker’s and the employer’s 

investments should focus on the 

‘‘qualitative’’ nature of their respective 

investments, the Department is 

modifying the last sentence of the 

proposed regulatory text for the 

investments factor to be two sentences 

and to read: ‘‘The worker’s investments 

need not be equal to the potential 

employer’s investments and should not 

be compared only in terms of the dollar 

values of investments or the sizes of the 

worker and the potential employer. 

Instead, the focus should be on 

comparing the investments to determine 

whether the worker is making similar 

types of investments as the potential 

employer (even if on a smaller scale) to 

suggest that the worker is operating 

independently, which would indicate 

independent contractor status.’’ This 

modification should address 

commenters’ concerns that the size of 

and/or dollar investments of the 

employer will determine the outcome 

when comparing the investments. As 

explained above, comparing the 

qualitative (rather than primarily the 

quantitative) value of the investments is 

a better indicator of whether the worker 

is economically dependent on the 

employer for work or is in business for 

themself. That is because, regardless of 

the amount or size of their investments, 

if the worker is making similar types of 

investments as the employer or 

investments of the type that allow the 

worker to operate independently in the 

worker’s industry or field, then that fact 

suggests that the worker is in business 

for themself.319


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of its investment in order to simply compare the 

dollar value of the employer’s investment to the 

worker’s investment. See 860 F.3d at 1096. 

320This hypothetical and the hypotheticals 

offered by Club for Growth Foundation, Flex, and 

other commenters overlook the totality-of-thecircumstances nature of the economic realities 

analysis. No one fact or factor (including comparing 

the worker’s investments to the employer’s 

investments) will necessarily determine a worker’s 

status as an employee or independent contractor. 

321ACLI commented that ‘‘[n]othing in the 

Proposed Rule explains whether the [relative 

investments] analysis is focused on investments 

that the company made in the specific worker’s 

business (i.e., paying for the worker’s staff, rent, 

tools or equipment) or whether the analysis focuses 

on the overall investment of the company in the 

entirety of its separate business operations (i.e., 

advertisements, branding, overhead for 

headquarters, etc.).’’ See also American Securities 

Association (‘‘It is unclear whether the analysis is 

focused on investments that the company made in 

the specific worker’s business (i.e., purchasing tools 

or equipment for the individual worker) or whether 

the analysis focuses on the overall investment of the 

company in its business operations (i.e., branding, 

marketing campaigns, etc.).’’). The proposed and 

final regulatory text, however, clearly indicate that 

the worker’s investments should be considered on 

a relative basis with ‘‘the employer’s investments in 

its overall business.’’ 29 CFR 795.110(b)(2). The 

ACLI also requested that the Department ‘‘clarify 

how the relative investments of the worker and the 

employer would be measured.’’ See also CPIE (‘‘The 

NPRM offers no guidance on how to distinguish 

between those arrangements for which its proposed 

comparison of an individual’s investment with a 

company’s investment in its overall businesses 

would be relevant and those arrangements for 

which its proposed comparison should be 

disregarded.’’). The Department has provided 

additional guidance in the discussion above and by 

modifying the regulatory text to convey that ‘‘the 

focus should be on comparing the investments 

qualitatively’’ more than by ‘‘comparing dollar 

values of investments or the sizes of the worker and 

the employer.’’ 29 CFR 795.110(b)(2). CPIE and IBA 

suggested modifying the relative investments 

analysis to ‘‘measure an individual’s investment in 

the specific items the individual requires to perform 

the individual’s services, or compare the relative 

investment in those specific items by an individual 

and the company.’’ These commenters state that 

such a modification would avoid the need to 

address the relative size and magnitude of the 

worker and the employer and would be consistent 

with the ultimate inquiry of economic dependence. 

For all of the reasons explained above, however, the 

Department believes that those goals are better 

accomplished by focusing relative investments on 

a qualitative comparison. 

322See generally 87 FR 62243–45, 62275 

(proposed § 795.110(b)(3)). 

Applying this qualitative approach to, 

for example, the hypothetical truck 

driver described by OOIDA is 

instructive. The hypothetical suggests 

that a driver ‘‘would be an independent 

contractor if [the driver is] working with 

a three-truck carrier,’’ but the same 

driver would be an employee if the 

driver goes ‘‘to work for a carrier with 

hundreds or thousands of trucks.’’ 320

Comparing the driver’s investment 

qualitatively with each carrier, however, 

should produce the same indicator of 

employee or independent contractor 

status. With respect to either carrier, the 

focus should be on whether the driver 

is making similar types of investments 

as the carrier (even if on a smaller scale) 

so that the driver (like the carrier) can 

operate independently in the industry. 

As the application of a qualitative 

comparison to this hypothetical shows, 

this focus better aligns the relative 

investment analysis with the ultimate 

inquiry of whether the worker is 

dependent on the employer for work or 

in business for themself.321

ACLI commented that the proposed 

‘‘Relative Investment factor conflicts 

with . . . the Ability to Profit or Loss 

Based On Managerial Skill factor’’ 

because the Department is ‘‘saying that 

a worker’s effectiveness in managing 

their overhead and expenses to 

maximize profit suggests independent 

contractor status, but that a worker’s 

failure to invest sizeable sums to offset 

the company’s investment suggests 

employment status.’’ It added that the 

opportunity for profit or loss factor 

‘‘should be given greater weight than the 

relative investment factor so that 

workers who are skilled in managing 

their own overhead expenses are not 

penalized and deemed employees 

simply because they are better 

businesspeople and need to invest less 

and less over time as their businesses 

mature.’’ American Securities 

Association made a similar point. As an 

initial matter, the Department is not 

giving any factor any greater 

predetermined weight than any of the 

other factors for all of the reasons 

explained in this final rule. And as 

reiterated in this final rule, workers will 

not be ‘‘deemed employees’’ when 

applying the economic realities analysis 

based on one fact or factor because the 

analysis considers the totality of the 

circumstances. The Department’s 

modifications to the investments factor, 

and particularly the emphasis on 

comparing the worker’s investments and 

the employer’s investments qualitatively 

more than quantitatively, should 

address any concern that ‘‘a worker’s 

failure to invest sizeable sums to offset 

the company’s investment suggests 

employment status.’’ 

The Department is finalizing the 

investments factor (§ 795.110(b)(2)) with 

the revisions discussed herein. 

Example Investments by the Worker and 

the Potential Employer 

A graphic designer provides design 

services for a commercial design firm. 

The firm provides software, a computer, 

office space, and all the equipment and 

supplies for the worker. The company 

invests in marketing and finding clients 

and maintains a central office from 

which to manage services. The worker 

occasionally uses their own preferred 

drafting tools for certain jobs. In this 

scenario, the worker’s relatively minor 

investment in supplies is not capital in 

nature and does little to further a 

business beyond completing specific 

jobs. Thus, these facts indicate 

employee status under the investment 

factor. 

A graphic designer occasionally 

completes specialty design projects for 

the same commercial design firm. The 

graphic designer purchases their own 

design software, computer, drafting 

tools, and rents an office in a shared 

workspace. The graphic designer also 

spends money to market their services. 

These types of investments support an 

independent business and are capital in 

nature (e.g., they allow the worker to do 

more work and extend their market 

reach). Thus, these facts indicate 

independent contractor status under the 

investment factor. 

3. Degree of Permanence of the Work 

Relationship (§ 795.110(b)(3)) 

For this factor, the Department 

proposed that the degree of permanence 

of the work relationship would 

‘‘weigh[ ] in favor of the worker being an 

employee when the work relationship is 

indefinite in duration or continuous, 

which is often the case in exclusive 

working relationships,’’ and that this 

factor would ‘‘weigh[ ] in favor of the 

worker being an independent contractor 

when the work relationship is definite 

in duration, non-exclusive, projectbased, or sporadic based on the worker 

being in business for themself and 

marketing their services or labor to 

multiple entities.’’ The Department 

noted that independent contractors may 

have ‘‘regularly occurring fixed periods 

of work,’’ but that ‘‘the seasonal or 

temporary nature of work by itself 

would not necessarily indicate 

independent contractor classification.’’ 

To further clarify, the Department 

proposed that ‘‘[w]here a lack of 

permanence is due to operational 

characteristics that are unique or 

intrinsic to particular businesses or 

industries and the workers they employ, 

rather than the workers’ own 

independent business initiative,’’ this 

would not indicate that the workers are 

independent contractors.322

As the Department noted in the 

NPRM and in the 2021 IC Rule, courts 

and the Department routinely consider 

the permanence of the work relationship 

as part of the economic reality analysis 

under the FLSA to determine employee 


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323See 87 FR 62243; 86 FR 1192 (citing a variety 

of federal appellate case law: Razak, 951 F.3d at 

142; Hobbs, 946 F.3d at 829; Karlson, 860 F.3d at 

1092–93; McFeeley, 825 F.3d at 241; Keller, 781 

F.3d at 807; Scantland, 721 F.3d at 1312); see also 

WHD Op. Ltr., 2002 WL 32406602, at *3 (Sept. 5, 

2002); WHD Op. Ltr., 2000 WL 34444342, at *5 

(Dec. 7, 2000) ; WHD Fact Sheet #13. 324Snell, 875 F.2d at 811 (citing Donovan v. 

Sureway Cleaners, 656 F.2d 1368, 1372 (9th Cir. 

1981)); see also Keller, 781 F.3d at 807 (same); WHD 

Op. Ltr., 2002 WL 32406602, at *3 (Sept. 5, 2002) 

(same). 325See, e.g., Parrish, 917 F.3d at 386–87 (noting 

that one of the relevant considerations under the 

permanency factor is the total length of the working 

relationship between the parties); Capital Int’l, 466 

F.3d at 308–09 (in analyzing the degree of 

permanency of the working relationship, the ‘‘more 

permanent the relationship, the more likely the 

worker is to be an employee’’); DialAmerica, 757 

F.2d at 1385 (finding that ‘‘the permanence-ofworking-relationship factor indicates that the home 

researchers were ‘employees’ ’’ because they 

‘‘worked continuously for the defendant, and many 

did so for long periods of time’’); Pilgrim Equip., 

527 F.2d at 1314 (‘‘the permanent nature of the 

relations between [the employer] and these 

operators indicates dependence’’); see also Reyes v. 

Remington Hybrid Seed Co., 495 F.3d 403, 408 (7th 

Cir. 2007) (describing an independent contractor as 

an individual who ‘‘appears, does a discrete job, 

and leaves again’’); Reich v. Circle C. Invs., Inc., 998 

F.2d 324, 328 (5th Cir. 1993) (‘‘[a]lthough not 

determinative, the impermanent relationship 

between the dancers and the [employer] indicates 

non-employee status’’). 

326See, e.g., Superior Care, 840 F.2d at 1060–61; 

see also AI 2015–1, 2015 WL 4449086, at *10 

(withdrawn June 7, 2017). 

327Superior Care, 840 F.2d at 1060–61 (citing Mr. 

W Fireworks, 814 F.2d at 1053–54); see also Flint 

Eng’g, 137 F.3d at 1442 (finding short duration of 

work relationships in oil and gas pipeline 

construction work to be intrinsic to the industry 

rather than a ‘‘choice or decision’’ on the part of the 

workers). 

328As noted in the NPRM, agriculture is an 

industry where courts often view permanency as 

working continuously for the duration of a harvest 

season or returning in multiple years. See, e.g., 

Paragon, 884 F.3d at 1237 (permanence factor 

favored employee status because the worker was 

hired temporarily for the harvest season ‘‘[b]ut his 

employment was permanent for the duration of 

each harvest season’’); Lauritzen, 835 F.2d at 1537 

(agricultural harvesters’ relationship with employer 

was ‘‘permanent and exclusive for the duration of 

that harvest season’’ and permanency was also 

indicated by the fact that many of the same migrant 

workers returned for the harvest each year; the 

court noted that ‘‘[m]any seasonal businesses 

necessarily hire only seasonal employees, but that 

fact alone does not convert seasonal employees into 

seasonal independent contractors’’). 

329One of the cases relied on by these 

commenters is Donovan v. Brandel, 736 F.2d 1114, 

1117 (6th Cir. 1984), where the court determined 

that migrant farmworker families who sometimes 

returned annually to harvest pickles during a 30– 

40 day harvest season and ‘‘considered their jobs as 

migrant farm laborers to be opportunities for 

supplementing their income if their family situation 

allowed’’ were engaged in a ‘‘mutually satisfactory 

arrangement’’ that was ‘‘no more indicative of the 

employment relationship than when a businessman 

repeatedly uses the same subcontractors due to 

satisfaction with past performance.’’ The 

Department is careful to note that Brandel is not 

necessarily representative of the way courts have 

viewed the permanence factor or employment 

status of agricultural workers who perform seasonal 

work, nor were these commenters specifically 

criticizing the regulatory language proposed by the 

or independent contractor status.323

Courts typically describe this factor’s 

relevance as follows: ‘‘ ‘Independent 

contractors’ often have fixed 

employment periods and transfer from 

place to place as particular work is 

offered to them, whereas ‘employees’ 

usually work for only one employer and 

such relationship is continuous and of 

indefinite duration.’’ 324 For example, a 

typical employee often has an at-will 

work relationship with the employer 

and works indefinitely until either party 

decides to end that work relationship. 

Conversely, an independent contractor 

does not usually seek such a permanent 

or indefinite engagement with one 

entity. Because of these general 

characteristics of work relationships, the 

length of time or duration of the work 

relationship has long been considered 

under the ‘‘permanence’’ factor as an 

indicator of employee or independent 

contractor status.325

Consistent with case law analyzing 

this factor, the Department proposed to 

provide further specificity by noting 

that an indefinite or continuous 

relationship is often consistent with an 

employment relationship, but that a 

worker’s lack of a permanent or 

indefinite relationship with an 

employer is not necessarily indicative of 

independent contractor status if it does 

not result from the worker’s own 

independent business initiative.326 The 

Department also proposed to continue 

to recognize that a lack of permanence 

may be inherent in certain jobs—such as 

temporary and seasonal work—and that 

this lack of permanence does not 

necessarily mean that the worker is in 

business for themself instead of being 

economically dependent on the 

employer for work. For example, courts 

have also recognized that the temporary 

or seasonal nature of some jobs may 

result in a ‘‘lack of permanence . . . due 

to operational characteristics intrinsic to 

the industry rather than to the workers’ 

own business initiative.’’ 327 In such 

instances, a lack of permanence alone is 

not an indicator of independent 

contractor status. 

Many commenters agreed with the 

Department’s overall proposal for this 

factor. See, e.g., AFL–CIO; IBT, LA Fed 

& Teamsters Locals; NDWA; NELP; 

NWLC; REAL Women in Trucking; 

UFCW. The LA Fed & Teamsters Locals 

noted in particular that by relegating the 

permanence factor to ‘‘secondary 

status,’’ the 2021 IC Rule had negated 

the significance of ‘‘effectively 

indefinite working relationships’’ and 

that the Department’s proposal ‘‘corrects 

this issue’’ by returning the factor to ‘‘an 

equal basis with all other factors.’’ NELP 

concurred that ‘‘[a] worker whose work 

relationship is indefinite or continuous 

or who is performing a job that is 

regularly required by the business is 

more likely to be an employee than a 

worker who performs work that is 

definite in duration, project-based, or 

sporadic.’’ 

Many commenters also agreed with 

the portion of the Department’s proposal 

that addressed situations in which a 

lack of permanency is inherent in the 

work, such as temporary or seasonal 

positions, which the Department had 

proposed as not necessarily indicating 

independent contractor status if it is not 

the result of the worker’s own business 

initiative. See, e.g., Gale Healthcare 

Solutions; LA Fed & Teamsters Locals; 

LIUNA; NABTU; NELP. Gale Healthcare 

Solutions agreed that a lack of 

permanence may be due to operational 

characteristics intrinsic to the industry 

rather than the workers’ own business 

initiative, and it provided the example 

of temporary or seasonal forces such as 

‘‘flu season’’ that can drive temporary 

nursing demand in the healthcare 

industry. It analogized this to the 

Second Circuit’s decision in Superior 

Care, where temporary nurses’ lack of 

permanence did not preclude them from 

being employees because ‘‘this reflected 

‘the nature of their profession and not 

their success in marketing their skills 

independently.’ ’’ And commenters such 

as Farmworker Justice and the New 

Mexico Center on Law and Poverty 

affirmed the importance of recognizing 

that farmwork can be seasonal and/or 

temporary, but that this does not weigh 

against employee status for 

farmworkers, as many courts have 

recognized.328

The primary concern commenters 

raised about the Department’s proposal 

to consider the degree of permanence of 

the work relationship as an indicator of 

employee or independent contractor 

status is that a long-term pattern of 

interaction is valued in business 

relationships, and that it can indicate 

the vitality and stability of a business 

where, for example, satisfied long-term 

clients or customers continue to use 

their services or contract for particular 

work. See, e.g., CPIE; Fight for 

Freelancers; N/MA; NRF & NCCR; 

OOIDA; SIFMA; SHRM; U.S. Chamber. 

Similarly, commenters such as CWI and 

the U.S. Chamber noted that 

independent contractors may have 

mutually beneficial business 

relationships for a long or indefinite 

time period, which brings into question 

whether an ‘‘indefinite’’ work 

relationship is probative of employee 

status.329 Commenters raising such 


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Department that was almost identical to the 

language in the 2021 IC Rule recognizing that the 

short duration of seasonal work such as in 

agriculture would not necessarily indicate 

independent contractor classification. See 86 FR 

1247 (§ 795.105(d)(2)(ii)); see also, e.g., Lauritzen, 

835 F.2d at 1536–37 (noting that Brandel has been 

‘‘narrowed and distinguished’’); Cavazos v. Foster, 

822 F. Supp. 438, 441–42 (W.D. Mich. 1993) 

(collecting decisions issued after Brandel holding 

that migrant farmworkers are employees). 

concerns did not want the fact that an 

independent contractor had fostered 

successful, long-term business 

relationships to indicate that these 

economically-independent businesses 

were actually employees of the entities 

that continued to use their services. 

They contended that the analysis should 

be more nuanced, including CWI’s 

comment that ‘‘as is the case with most 

aspects of the economic realities 

analysis, ‘[t]he inferences gained from 

the length of time of the relationship 

depend on the surrounding 

circumstances.’ ’’ 

The Department agrees that the 

permanence factor, like other factors in 

the economic reality test, is best 

understood in the overall context of the 

relationship between the parties where 

all relevant aspects are considered. The 

Department also clearly recognizes and 

appreciates that people who are in 

business for themselves often rely on 

repeat business and long-term clients or 

customers in order for their business to 

remain economically viable or 

successful. Thus, the Department notes 

that the proposed regulatory text does 

not reduce the permanence analysis to 

a simple long-term/short-term question. 

Instead, it looks to the general 

characteristics historically identified by 

courts and the Department regarding the 

permanency factor, which indicate 

employee status where there is a longerterm, continuous, or indefinite work 

relationship, and independent 

contractor status where the work is 

definite in duration, nonexclusive, 

project-based, or sporadic due to the 

worker being in business for themself. It 

explicitly recognizes that an 

independent contractor may have 

‘‘regularly-occurring fixed periods of 

work.’’ As shown in the example, a 3- 

year relationship between a cook who 

provides specialty meals and an 

entertainment venue does not 

automatically result in the cook being 

an employee of the venue, particularly 

where the cook acts as a ‘‘freelancer’’ by 

providing meals intermittently to the 

venue while marketing their meal 

preparation services to multiple 

customers and the cook can determine 

whether to provide meals for specific 

events at the venue based on any reason, 

including because the cook is too busy 

with other work. 

Several commenters expressed a 

mistaken belief that having a degree of 

permanence in a work relationship 

would automatically make workers 

employees, see, e.g., N/MA; SBA Office 

of Advocacy, or that the Department 

was creating a ‘‘per se’’ rule that work 

of continuous or indefinite duration 

equates to employee status, see, e.g., 

CWI; NRF & NCCR. Commenters who 

raised this concern generally asked the 

Department to either modify the 

regulatory text or eliminate this factor 

from consideration. However, as the 

Department has repeatedly explained, 

the economic reality test is a totality-ofthe-circumstances test where no one 

factor is dispositive. Even if the degree 

of permanence in a work relationship 

indicates employee status, this is just 

one factor that would be considered 

along with other factors such as control, 

opportunity for profit or loss, 

investment, integral, and skill and 

initiative. The Department does not 

believe there is a scenario in which, for 

example, a worker who controls 

conditions of employment, sets their 

own fees, hires helpers, and markets 

their business is converted from an 

independent contractor to an employee 

solely because they have long-lasting 

relationships with some clients. 

Some commenters suggested 

clarifications to better capture the 

permanency factor, in their view. For 

example, IBT and NELP suggested that 

the Department focus on whether the 

worker’s role or position in a business 

is long-term, regular, or indefinite, 

rather than focusing on the individual’s 

tenure, because high turnover of 

individuals in a particular position does 

not mean that the position or role 

within a business is not long-term, but 

that the job may be economically 

unsustainable or too dangerous for the 

worker. The Department agrees that a 

short-term duration of work may not be 

indicative of independent contractor 

status for these and other reasons. 

However, the Department notes that 

while this factor is known as the 

‘‘permanency’’ factor, which could be 

observed literally by the length of an 

individual worker’s tenure, the 

regulatory text also provides guidance 

regarding whether the work was on an 

indefinite or continuous basis. The 

Department believes that this captures 

situations where a position began as an 

indefinite or continuous one but was cut 

short—without the need to focus on the 

nature of the position or role within a 

business. Further, the commenters’ 

suggestion is not, to the Department’s 

knowledge, an analysis that has been 

adopted for this factor by the courts. 

NELP also suggested that the 

Department note that an employer may 

manipulate the permanence of a work 

relationship by firing or terminating a 

worker, and that if a worker lacks the 

power to influence their own 

permanence, this should weigh in favor 

of employee status. The Department 

notes that consideration of whether this 

type of manipulation to evade the 

obligations of the FLSA has occurred 

would seem to be more appropriate in 

an enforcement situation than in the 

regulatory text. 

One commenter, CWI, objected to the 

Department’s inclusion of ‘‘[w]here a 

lack of permanence is due to operational 

characteristics that are unique or 

intrinsic to particular businesses or 

industries and the workers they employ, 

rather than the workers’ own business 

initiative, this factor is not indicative of 

independent contractor status’’ because 

it felt this language fails to account for 

the fact that ‘‘many types of 

independent contractor work are often 

limited or sporadic in duration precisely 

because such work is only needed for a 

discrete period of time’’ and that ‘‘the 

critical question is whether the worker 

acted like a business.’’ The U.S. 

Chamber also contended that it ‘‘makes 

no difference whether . . . project-toproject work occurs as a result of 

‘operational characteristics,’ ’’ urging the 

Department to more clearly identify that 

whether a worker is acting 

independently is better viewed through 

the lens of whether the worker chooses 

‘‘how, when, and the volume of services 

to provide.’’ The Department agrees 

with these commenters that the critical 

question is whether the worker is in 

business for themself, which is why the 

proposed regulatory language would 

require consideration of whether a lack 

of permanence is due to the workers’ 

own business initiative. Commenters 

such as NABTU and the NDWA 

supported the Department’s proposal in 

this respect, noting that in industries 

like construction and home care, 

employment can be temporary and 

sporadic, and that consideration of 

whether the worker exercised 

independent business initiative was 

important. 

The Department continues to believe 

that it is consistent with the case law 

and relevant to the overall question of 

economic reality to consider whether 

short periods of work are due to workers 

acting independently to obtain business 

opportunities or to the operational 

characteristics of particular industries 


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330See, e.g., Flint Eng’g, 137 F.3d at 1442 

(temporary rig welders exhibited sufficient 

permanency because such temporary work was 

intrinsic in the industry rather than a ‘‘choice or 

decision’’ by the workers); Superior Care, 840 F.2d 

at 1061 (lack of permanence did not preclude 

temporary nurses from being employees because 

this reflected ‘‘the nature of their profession and not 

their success in marketing their skills 

independently’’), Mr. W Fireworks, 814 F.2d at 1054 

(‘‘in applying the Silk factors courts must make 

allowances for those operational characteristics that 

are unique or intrinsic to the particular business or 

industry, and to the workers they employ’’). 

331See 87 FR 62244–45; see, e.g., Parrish, 917 

F.3d at 386–87 (noting that one of the relevant 

considerations under the permanency factor is 

whether any plaintiff worked exclusively for the 

potential employer); Keller, 781 F.3d at 807 (noting 

that ‘‘even short, exclusive relationships between 

the worker and the company may be indicative of 

an employee-employer relationship’’); Scantland, 

721 F.3d at 1319 (noting that ‘‘[e]xclusivity is 

relevant’’ to the permanency of the work 

relationship); see also WHD Op. Ltr., 2002 WL 

32406602, at *3 (Sept. 5, 2002) (considering 

exclusivity under permanence factor); WHD Op. 

Ltr., 2000 WL 34444342, at *5 (Dec. 7, 2000) (same). 

332See, e.g., Lauritzen, 835 F.2d at 1537 

(agricultural harvesters’ relationship with employer 

was ‘‘permanent and exclusive for the duration of 

that harvest season’’); Mr. W Fireworks, 814 F.2d at 

1054 (the ‘‘proper test for determining the 

permanency of the relationship’’ in a seasonal 

industry is ‘‘whether the alleged employees worked 

for the entire operative period of a particular 

season’’); see also Flint Eng’g, 137 F.3d at 1442 

(temporary rig welders’ relationship with employer 

was ‘‘ ‘permanent and exclusive for the duration of’ 

the particular job for which they [were] hired’’) 

(quoting Lauritzen, 835 F.2d at 1537). 

333See 87 FR 62244–45. 

334See, e.g., Hobbs, 946 F.3d at 835; Henderson 

v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th 

Cir. 1994); Carrell v. Sunland Constr., Inc., 998 F.2d 

330, 332, 334 (5th Cir. 1993); Superior Care, 840 

F.2d at 1060–61; Lauritzen, 835 F.2d at 1537; 

DialAmerica, 757 F.2d at 1384. 

335See, e.g., Parrish, 917 F.3d at 382, 386–87; 

Keller, 781 F.3d at 807–09, 814; Scantland, 721 F.3d 

at 1314, 1319; Cornerstone Am., 545 F.3d at 344, 

346. 

336See, e.g., Razak, 951 F.3d at 145–46; Saleem, 

854 F.3d at 141. 

337See, e.g., WHD Op. Ltr., 2002 WL 32406602, 

at *3 (Sept. 5, 2002); WHD Op. Ltr., 2000 WL 

34444342, at *5 (Dec. 7, 2000). 

338The 2021 IC Rule also recognized that some 

courts analyze the exclusivity of the work 

relationship as part of the permanence factor, 86 FR 

1192, and the Department considered in its NPRM 

for that rule whether to include exclusivity under 

the permanence factor and change the articulation 

to ‘‘permanence and exclusivity of the working 

relationship’’ in order ‘‘to be more accurate,’’ 85 FR 

60616, ultimately rejecting an approach that would 

‘‘blur[ ] the lines’’ between the factors, 86 FR 1193. 

As explained, upon further consideration of the 

importance of a totality-of-the-circumstances test 

where all relevant facts inform the economic 

dependence determination, the Department believes 

it is more accurate to consider the exclusivity of the 

work relationship under both permanence and 

control factors, especially as it may contribute to a 

fuller understanding of the parties’ work 

relationship. See Keller, 781 F.3d at 807–09, 814 

(explaining that consideration of the control 

exercised by the business that precluded the 

worker’s ability to work for others ‘‘informs our 

analysis of the permanency and exclusivity of the 

relationship’’); Scantland, 721 F.3d at 1319 

(‘‘looking through the lens of economic dependence 

vel non, long tenure, along with control, and lack 

of opportunity for profit, point strongly toward 

economic dependence’’). Courts may find 

exclusivity to be relevant under other factors as 

well, consistent with the totality-of-the 

circumstances approach. See, e.g., Hobbs, 946 F.3d 

at 833, 835 (finding that the work schedule imposed 

by the employer prevented workers from engaging 

and the workers they employ.330

However, after considering the 

comments received, the Department 

finds that a clearer articulation of the 

final sentence in the proposed 

regulatory text would be beneficial to 

employees, employers, independent 

contractors, and the Department’s 

enforcement staff. Therefore, the last 

sentence of § 795.110(b)(3) has been 

rephrased to emphasize whether the 

worker is exercising their own business 

initiative: ‘‘Where a lack of permanence 

is due to operational characteristics that 

are unique or intrinsic to particular 

businesses or industries and the workers 

they employ, this factor is not 

necessarily indicative of independent 

contractor status unless the worker is 

exercising their own independent 

business initiative.’’ (Emphasis added.) 

The Department believes this 

formulation makes it clearer that the 

proper analysis is not categorically 

based on operational characteristics of 

particular industries, as some 

commenters seemed to have read into 

the proposal, and that it is important to 

consider whether the worker is 

exercising independent business 

initiative with respect to these periods 

of work. 

Many commenters suggested 

industry-specific analyses for the 

permanence factor. See, e.g., ACLI 

(insurance agents); AFL–CIO (platformbased companies); American Securities 

Association and LPL Financial 

(financial advisors); MEP (applications 

on smart phones); NABTU 

(construction); NAFO (forestry); 

National Association of Realtors 

(‘‘NAR’’) (real estate brokers). Because 

the Department is promulgating a 

general rule, it believes that this type of 

industry-specific guidance would be 

better suited to potential subregulatory 

guidance. The Department agrees that 

these types of factual analyses would, 

however, be highly relevant when 

applying the factors to particular 

situations and should certainly be 

considered by parties and factfinders. 

As some commenters noted, however, 

see, e.g., CWI and U.S. Chamber, the 

operational characteristics of a 

particular business or industry would 

not take precedence over the overall 

inquiry as to whether, as a matter of 

economic reality, the worker is in 

business for themself. 

A smaller number of commenters 

addressed the Department’s proposal to 

recognize that the exclusivity of a work 

relationship is appropriately considered 

under the permanency factor and to 

reject the 2021 IC Rule’s approach of 

considering exclusivity just under the 

control factor based on whether the 

worker has the ability to work for 

others.331 IBT strongly supported the 

inclusion of this consideration ‘‘because 

working exclusively for a particular 

employer clearly speaks to the 

permanence of the work relationship.’’ 

Farmworker Justice, LIUNA, and 

NABTU highlighted the case law 

discussed in the NPRM where courts 

found that working exclusively for a 

particular employer for the duration of 

a seasonal or temporary job was 

indicative of employee status, agreeing 

that this was the appropriate 

analysis.332

The Coalition of Business 

Stakeholders, NHDA, and NRF & NCCR 

commented that they preferred to have 

exclusivity considered only under the 

control factor, as in the 2021 IC Rule. 

Similarly, the American Trucking 

Association contended that the 

permanence factor was redundant with 

the control factor because the only 

relevant aspect of the tenure of the 

parties’ relationship is whether the 

entity contracting with the worker 

exercised coercion to prevent them from 

pursuing other business. Another 

commenter, FSI, objected that the 

Department had proposed to include 

exclusivity under the permanence factor 

based in part on the weight of the 

federal appellate case law rather than 

applying its own independent 

reasoning. 

The Department continues to believe, 

as discussed in the NPRM, that when 

analyzing worker classification under 

the FLSA, all facts that may be relevant 

to a particular factor should be 

considered, consistent with the totalityof-the-circumstances approach taken by 

courts.333 The case law clearly indicates 

that facts regarding the exclusivity of a 

work relationship are salient under both 

the permanence and control factors. In 

many cases courts considered this under 

permanence,334 and in many cases 

courts consider this under both 

permanence and control,335 while a 

smaller number of cases considered this 

only as part of a control analysis.336

Because the weight of federal appellate 

authority does not confine consideration 

of exclusivity to the control factor, and 

because the Department has historically 

viewed exclusivity as relevant to 

permanence,337 the Department does 

not believe it is appropriate to silo these 

facts under the control factor.338 For 


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in outside work, which was relevant under the 

opportunity for profit or loss factor as well as the 

permanence factor). 

339Keller, 781 F.3d at 807–09, 814–15. 

340LIUNA recognized that the Department might 

be concerned that ‘‘more emphatically stating the 

relationship between permanency and exclusivity 

would risk suggesting that a non-exclusive working 

relationship never supports employee status,’’ 

which it noted would be inaccurate, as the 

Department discussed in the NPRM. The 

Department concurs that this would be inaccurate 

for the reasons discussed in the NPRM and herein, 

and that clarifying this aspect should not be 

understood to require an exclusive relationship in 

order to establish employee status. 

341Nichols Kaster also requested that the 

Department include additional language from the 

preamble in the final regulatory text. The 

Department declines this suggestion in the interest 

of providing succinct statements regarding each 

factor of the economic reality test in this final rule. 

The Department notes, however, that the preamble 

will be accessible for additional information 

regarding the rule. 

342See, e.g., Henderson, 41 F.3d at 570 (facts that 

supported an inference that a mechanic was 

economically dependent on the employer included 

that he ‘‘primarily, if not exclusively’’ worked for 

the employer for over three years rather than being 

hired for a specific repair project); Carrell, 998 F.2d 

at 332, 334 (finding welders to be independent 

contractors where they worked for multiple 

employers on a project-by-project basis rather than 

exclusively for one employer); AI 2015–1, 2015 WL 

4449086, at *10 (withdrawn June 7, 2017). 

343 331 U.S. at 706. 

344 Id. at 718. 

example, in Keller the court considered 

the exclusivity of the work relationship 

under the permanence factor because an 

exclusive work relationship is a 

hallmark of the regularity of many 

employment relationships, and under 

the control factor because an employer’s 

action that directly or indirectly 

prevents workers from working for 

others (thereby imposing an exclusive 

relationship) is a relevant mechanism of 

control.339 The Department believes it is 

appropriate to consider the weight of 

the case law when providing guidance, 

as the Department is doing consistently 

in this rule. For these reasons, the 

Department concludes that exclusivity 

should remain in the permanence factor 

and that it may also be considered 

under the control factor to the extent it 

speaks to the employer’s control. 

LIUNA suggested certain edits to the 

proposed regulatory text to better 

capture, in its view, the case law 

discussed in the NPRM where courts 

found that working exclusively for a 

particular employer for the duration of 

a seasonal or temporary job was 

indicative of employee status. LIUNA 

commented that the first sentence of the 

proposed regulatory text did not 

properly reflect this case law because it 

could be read solely as a 

characterization of work relationships 

that are indefinite or continuous: ‘‘This 

factor weighs in favor of the worker 

being an employee when the work 

relationship is indefinite in duration or 

continuous, which is often the case in 

exclusive working relationships.’’ It 

suggested that the Department better 

align the regulatory text with the case 

law by substituting the language 

regarding exclusivity in that sentence 

with the phrase ‘‘or exclusive of work 

for other employers.’’ The Department 

agrees that the concept of exclusivity 

should not be limited to work 

relationships that are indefinite or 

continuous, and that it is more precise 

and aligned with the case law to 

substitute the language suggested, 

which the Department is adopting in 

this final rule. The Department wishes 

to emphasize, however, that the 

disjunctive word ‘‘or’’ is used in the 

regulatory text, and that it is intended 

to mean that exclusivity is not required 

in order for this factor to weigh in favor 

of employee status.340

LIUNA requested further clarifying 

edits that would remove ‘‘project-based’’ 

from the general description of work 

relationships that weigh in favor of 

independent contractor status in order 

to add a more specific sentence stating 

that exclusivity in definite-term, projectbased working relationships in 

industries that require project-based 

work ‘‘such as certain segments of the 

agricultural or construction industries’’ 

is probative of employee status. 

Similarly, Outten & Golden noted that 

project-based work can be indicative of 

employment when it is ‘‘regular, 

repeated, or when it is project-based, 

but still long-term’’ and it recommended 

including in the regulatory text the 

examples of seasonal or temporary work 

that were discussed in the NPRM as 

being consistent with an employment 

relationship, such as seasonal 

construction, agriculture, and retail 

work and temporary staffing agencies. 

See also NELA; Nichols Kaster PLLP.341

The Department declines to remove 

‘‘project-based’’ from the general 

description of work relationships that 

weigh in favor of independent 

contractor status because courts and the 

Department have associated projectbased work with independent contractor 

status,342 but it notes that ‘‘projectbased’’ work alone is not dispositive of 

whether this factor weighs in favor of 

independent contractor status because 

all considerations relating to the 

permanence of the work should be 

considered. The Department also 

declines to add a more specific sentence 

or examples as requested because the 

Department has determined that it is not 

appropriate to address particular 

industries in this regulation of general 

applicability. 

NHDA posited that whether a work 

relationship is exclusive is less 

illustrative of whether a worker is in 

business for themself than the reason for 

the exclusivity, and that where a worker 

freely chooses to have an exclusive 

relationship with one transportation 

provider because of a ‘‘satisfying 

selection of routes or loads that permits 

the worker to attain financial goals,’’ 

that worker should ‘‘not be judged as 

less in business for themselves than a 

worker who contracts with multiple 

transportation providers.’’ The 

Department agrees that an exclusive 

relationship alone would not be 

determinative of the economic reality of 

the working relationship, and that it is 

important to look at all relevant factors, 

including factors referenced by the 

comment such as the worker’s 

opportunity for profit or loss, to aid in 

the analysis. The Department notes that 

by recognizing that exclusivity weighs 

in favor of the worker being an 

employee, the Department is not stating 

either that independent contractors can 

never have exclusive relationships with 

other businesses or that employees who 

have nonexclusive relationships with 

employers because they work multiple 

jobs become independent contractors. 

To the contrary, as discussed in the 

NPRM, although an exclusive 

relationship is often associated with an 

employment relationship and a sporadic 

or project-based, nonexclusive 

relationship is more frequently 

associated with independent contractor 

classification, courts have explained 

that simply having more than one job or 

working irregularly for a particular 

employer does not remove a worker 

from employee status and the 

protections of the FLSA. For example, 

in Silk, the ‘‘unloaders’’ came to the coal 

yard ‘‘when and as they please[d] . . . 

work[ing] when they wish and 

work[ing] for others at will.’’ 343 The 

Court nevertheless determined that the 

unloaders were employees: ‘‘That the 

unloaders did not work regularly is not 

significant. They did work in the course 

of the employer’s trade or business. This 

brings them under the coverage of the 

Act.’’ 344 Similarly, as the Second 

Circuit explained in Superior Care, the 

fact that the temporary nurses ‘‘typically 

work[ed] for several employers,’’ was 

‘‘not dispositive of independent 

contractor status’’ as ‘‘employees may 

work for more than one employer 


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345Superior Care, 814 F.2d at 1060; see also 

Saleem, 854 F.3d at 142 n.24 (‘‘It is certainly not 

unheard of for an individual to maintain two jobs 

at the same time, and to be an ‘employee’ in each 

capacity.’’); Keller, 781 F.3d at 808 (agreeing with 

the Second Circuit that ‘‘employees may work for 

more than one employer without losing their 

benefits under the FLSA’’); Circle C Invs., 998 F.2d 

at 328–29 (noting that ‘‘[t]he transient nature of the 

work force is not enough here to remove the 

dancers from the protections of the FLSA’’); 

McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th 

Cir. 1989) (per curiam) (‘‘The only question, 

therefore, is whether the fact that the workers 

moved frequently from plant to plant and from 

employer to employer removed them from the 

protections of the FLSA. We hold that it did not.’’); 

Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 

901, 921 (S.D.N.Y. 2013) (noting that ‘‘countless 

workers . . . who are undeniably employees under 

the FLSA—for example, waiters, ushers, and 

bartenders’’—work for multiple employers). 

346Superior Care, 814 F.2d at 1060; see also 

Halferty, 821 F.2d at 267–68 (‘‘it is not dependence 

in the sense that one could not survive without the 

income from the job that we examine, but 

dependence for continued employment’’); 

DialAmerica, 757 F.2d at 1385 (noting that ‘‘[t]here 

is no legal basis’’ to say that work that constitutes 

a second source of income indicates a worker’s lack 

of economic dependence on a job because the 

proper analysis is ‘‘whether the workers are 

dependent on a particular business or organization 

for their continued employment’’). 

347Off Duty Police, 915 F.3d at 1058. The 2021 

IC Rule correctly noted that a handful of cases 

improperly conflate having multiple sources of 

income with a lack of economic dependence on the 

potential employer. See 86 FR 1173, 1178. The 2021 

IC Rule characterized such a ‘‘dependence-forincome’’ analysis as incorrect and a ‘‘dependencefor-work’’ analysis as correct. Id. at 1173. This 

critique continues to be valid, as is the observation 

that ‘‘[i]t is possible for a worker to be an employee 

in one line of business and an independent 

contractor in another.’’ Id. at 1178 n.19. 

348See, e.g., Brant, 43 F.4th at 672 (stating that 

‘‘[a]utomatic [contract] renewal would weigh more 

heavily in favor of employee status’’); Scantland, 

721 F.3d at 1318 (finding one-year contracts that 

were automatically renewed to ‘‘suggest substantial 

permanence of relationship’’); Pilgrim Equip., 527 

F.2d at 1314 (finding laundry operators’ one-year 

contracts that were routinely renewed indicated 

employee status); Acosta v. Senvoy, LLC, No. 3:16– 

CV–2293–PK, 2018 WL 3722210, at *9 (D. Or. July 

31, 2018) (noting that one-year contracts that 

automatically renew are ‘‘evidence that a worker is 

an employee’’); Solis v. Velocity Exp., Inc., No. CV 

09–864–MO, 2010 WL 3259917, at *9 (D. Or. Aug. 

12, 2010) (the fact that package delivery drivers 

understood their contracts to be of indefinite 

duration and that contracts were routinely renewed 

without renegotiation indicated employee status). 

349See 86 FR 1246–47 (§ 795.105(d)(1)(i)). 

350 Id. at 1247 (§ 795.105(d)(1)(i)). 

351See supra section III.A. 

without losing their benefits under the 

FLSA.’’ 345

Courts have also determined that the 

fact that a worker does not rely on the 

employer as their exclusive or primary 

source of income is not indicative of 

whether an employment relationship 

exists.346 For example, the Sixth Circuit 

explained: ‘‘[W]hether a worker has 

more than one source of income says 

little about that worker’s employment 

status. Many workers in the modern 

economy, including employees and 

independent contractors alike, must 

routinely seek out more than one source 

of income to make ends meet.’’ 347

Commenters supported the 

Department’s clarification in the NPRM, 

which the Department reiterates here, 

that exclusivity is not required in order 

to find a degree of permanence and that 

working multiple jobs does not 

necessarily favor independent 

contractor status—particularly because, 

as the Sixth Circuit noted, many 

workers’ financial needs require them to 

have multiple sources of income. See, 

e.g., IBT; LCCRUL & WLC; NELP. 

LCCRUL & WLC described a current 

client who ‘‘often has to work for a 

variety of gig economy jobs 

simultaneously, such as Uber Eats, 

GoPuff, Instacart, and Caviar, to keep 

her finances afloat.’’ And NELP 

observed that in ‘‘low-wage industries, 

particularly in services such as 

transportation, delivery, or home care, 

many workers juggle multiple jobs with 

multiple entities not as an exercise of 

their own business judgment but as a 

necessity to cobble together a living 

wage in an underpaying economy.’’ 

Finally, the Department noted in the 

NPRM that where workers provide 

services under a contract that is 

routinely or automatically renewed, 

courts have determined that this 

indicates permanence and an indefinite 

working arrangement associated with 

employment.348 The proposed 

regulation noting that work 

relationships that are indefinite in 

duration or continuous weigh in favor of 

employee status is consistent with this 

case law. Some commenters mistakenly 

believed that the regulatory text 

explicitly stated that contractual 

renewals equate to employee status and 

objected for largely the same reasons 

commenters objected to their reading of 

the proposed regulatory text to imply 

that businesses could not have longterm relationships with clients without 

being considered employees of their 

clients, to which the Department 

responded above. See Fight for 

Freelancers; NRF & NCCR. 

The Department is finalizing the 

permanence factor (§ 795.105(b)(3)) with 

the modifications discussed herein. 

Example: Degree of Permanence of the 

Work Relationship 

A cook has prepared meals for an 

entertainment venue continuously for 

several years. The cook prepares meals 

as directed by the venue, depending on 

the size and specifics of the event. The 

cook only prepares food for the 

entertainment venue, which has 

regularly scheduled events each week. 

The relationship between the cook and 

the venue is characterized by a high 

degree of permanence and exclusivity. 

These facts indicate employee status 

under the permanence factor. 

A cook has prepared specialty meals 

intermittently for an entertainment 

venue over the past 3 years for certain 

events. The cook markets their meal 

preparation services to multiple venues 

and private individuals and turns down 

work for any reason, including because 

the cook is too busy with other meal 

preparation jobs. The cook has a 

sporadic or project-based nonexclusive 

relationship with the entertainment 

venue. These facts indicate independent 

contractor status under the permanence 

factor. 

4. Nature and Degree of Control 

(§ 795.110(b)(4)) 

In the NPRM, the Department 

proposed to modify § 795.105(d)(1)(i), 

which considered control as a ‘‘core’’ 

factor in the economic reality test. The 

2021 IC Rule assessed the employer’s 

and the worker’s ‘‘substantial control 

over key aspects of the performance of 

the work,’’ which included setting 

schedules, selecting projects, controlling 

workloads, and affecting the worker’s 

ability to work for others.349 The 2021 

IC Rule also stated that ‘‘[r]equiring the 

individual to comply with specific legal 

obligations, satisfy health and safety 

standards, carry insurance, meet 

contractually agreed-upon deadlines or 

quality control standards, or satisfy 

other similar terms that are typical of 

contractual relationships between 

businesses . . . does not constitute 

control’’ for purposes of the economic 

reality test.350

In its proposal and consistent with the 

2021 IC Rule, the Department explained 

that it continues to believe that issues 

related to scheduling, supervision over 

the performance of the work (including 

the ability to assign work), and the 

worker’s ability to work for others are 

relevant considerations in evaluating 

the nature and degree of control. The 

Department’s proposal also considered 

additional aspects of control in the 

workplace that have been identified in 

the case law or through the 

Department’s enforcement experience— 

such as control mediated by technology 

or control over the economic aspects of 

the work relationship. However, as 

noted above, the Department’s proposal 

did not elevate control as a ‘‘core’’ factor 

in the analysis.351

In addition, and contrary to the 2021 

IC Rule, the Department’s proposed 

regulation included a sentence stating 

that an employer’s compliance with 


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352 86 FR 1180; 87 FR 62275 (proposed 

§ 795.110(b)(4)). 

353 In its NPRM, the Department explicitly 

addressed this scenario, stating that ‘‘if an employer 

requires all individuals to wear hard hats at a 

construction site for safety reasons, that is less 

probative of control.’’ 87 FR 62248. 

legal obligations, safety or health 

standards, or requirements to meet 

contractual or quality control 

obligations, for example, may indicate 

that the employer is exerting control, 

suggesting that the worker is 

economically dependent on the 

employer. 

a. Overview of Control Factor 

Commenters from across the spectrum 

agreed that control was a highly relevant 

factor to the economic reality analysis. 

See, e.g., Gig Workers Rising; U.S. 

Chamber. Some commenters objected to 

the Department’s proposed text that 

shifted the focus of this factor back to 

the nature and degree of control exerted 

by the potential employer, rather than 

by the worker. The 2021 IC Rule 

described the factor as considering the 

worker’s and the potential employer’s 

nature and degree of control, while the 

NPRM described the factor as 

considering primarily the potential 

employer’s nature and degree of 

control.352 N/MA, for example, 

commented that ‘‘a worker’s right to 

control the manner and means by which 

a worker provides services is, and 

should remain, a primary consideration 

in the Department’s discussion of the 

right to control factor.’’ CWI described 

this aspect of the proposal as 

‘‘misguided’’ because ‘‘[f]ocusing on the 

individual’s control ensures that the 

totality of the worker’s business are 

evaluated, including control the worker 

may have over whether to subcontract, 

how to manage his workforce, whether 

and how to advertise his services, and 

whether to prioritize, stagger, or overlap 

projects.’’ It added that such 

‘‘considerations are largely lost when 

the analysis is unduly narrowed to an 

evaluation of an individual putative 

employer’s alleged control.’’ See also 

NAM (‘‘Instead of focusing on the 

control a worker exercises over their 

work (which would evidence that they 

are in business for themselves), the 

Department would rather determine 

‘employee’ status on the employer’s 

generally considered control over the 

work.’’). In contrast, other commenters 

agreed with the Department’s returned 

focus on the nature and degree of the 

potential employer’s control. For 

instance, the State AGs stated that the 

‘‘case law is clear that the appropriate 

focus for this factor must be on the 

employer’s control over the worker, and 

not the worker’s control over the work.’’ 

Similarly, Farmworker Justice 

commented that the NPRM ‘‘helpfully 

clarifies that a hiring entity/employer 

who has the ability to control key 

aspects of the work is likely an 

employer.’’ 

Regarding the proposed scope of the 

factor, one commenter criticized the 

Department’s proposal for eliminating 

the 2021 IC Rule’s ‘‘express requirement 

of ‘substantial’ control.’’ See Scalia Law 

Clinic. Additionally, business 

commenters generally disagreed with 

the inclusion of reserved control, stating 

that that this broadened the control 

factor and introduced additional 

uncertainty by using this ‘‘undefined, 

vague terminology.’’ U.S. Chamber; see 

also CWI. Other commenters, however, 

such as the State AGs, noted that 

inclusion of reserved control is ‘‘the 

appropriate interpretation of the control 

factor and properly accounts for the 

variety of today’s work arrangements.’’ 

See also AFL–CIO (commenting that 

‘‘discounting contractual or reserved 

control is inconsistent with 

congressional intent to expand the 

coverage of the FLSA beyond the 

narrow confines of common law 

employment’’). 

A very large proportion of the 

comments received regarding the 

control factor addressed the proposal 

that an employer’s compliance with 

legal obligations, safety or health 

standards, or requirements to meet 

contractual or quality control 

obligations may indicate control, 

suggesting that the worker is 

economically dependent on the 

employer. Many commenters objected to 

this proposal. For example, Flex 

commented: ‘‘Legally required control is 

generally disregarded since that is 

control imposed by the government, not 

by the client or hiring party. The client 

or hiring party is not choosing to 

exercise legally required control; it is 

required to do so.’’ See also Richard 

Reibstein, publisher of legal blog. The 

WFCA and others commented that 

‘‘[r]equiring an independent contractor 

to comply with legal obligations, safety 

standards, contractual obligations, or 

industry standards should not be 

indicative of control’’ because ‘‘[t]hese 

requirements are standard in contracts 

and subcontracts.’’ See also Genesis 

Timber; National Association of Home 

Builders (‘‘NAHB’’); NRF & NCCR. 

Other commenters stated that the 

Department’s proposal would 

disincentivize employers to prioritize 

safety and other beneficial policies, 

because employers would not want to 

risk workers being classified as 

employees. See, e.g., Kentucky Trucking 

Association; Southeastern Wood 

Producers Association, Inc. The U.S. 

Chamber commented that workers and 

businesses should not be discouraged 

from incorporating contractual terms 

that ‘‘support sound, lawful, safe work 

practices,’’ as those terms do not 

evidence control over the worker by the 

business under the Act’s economic 

realities test. SHRM stated that this 

aspect of the NPRM ‘‘will deter some 

companies from upholding their 

obligations in this respect by holding 

the specter of a misclassification finding 

over their heads for simply trying to do 

right by the people who make their 

businesses viable.’’ See also CWI 

(commenting that this aspect of the 

NPRM ‘‘would effectively encourage 

businesses to avoid measures 

encouraging legal compliance and the 

safety of both independent workers and 

the public generally, so that they do not 

increase their risk of misclassification 

claims’’). WPI noted that all businesses 

operate against regulatory backdrops 

and posited the following example: ‘‘a 

regulation might require all people on a 

construction site to wear a hard hat. The 

builder might, therefore require site 

visitors, including the eventual tenant, 

to wear hardhats. Is the eventual tenant 

now the builder’s employee based [on] 

the exercise of control over a 

worksite?’’ 353 And multiple financial 

advisors submitted identical comments 

stating that ‘‘[t]he Department should 

recognize that [supervision in order to 

comply with regulatory requirements] 

. . . helps my firm and me stay 

compliant with securities law and 

should not be viewed as a negative 

factor when determining my status 

under the [FLSA].’’ Flex opposed this 

proposed language as well, and further 

commented that the proposed regulatory 

language ‘‘lacks all of the context 

provided in the preamble’’ and that, 

‘‘[i]f the Department’s intent is to make 

clear that there ‘may’ be ‘some cases’ in 

which compliance with legal, safety, or 

quality control obligations ‘may’ be 

relevant, then the rule should say that 

and should provide the full context 

contained in the narrative.’’ 

Some heavily regulated industries in 

particular expressed concern about this 

proposed provision, including the 

trucking, financial services, insurance, 

and real estate industries. Scopelitis 

stated that ‘‘the proposal to consider 

compliance with legal, safety, or quality 

control obligations as employer-like 

control indicative of an employee 

relationship is untenable in the highly 

regulated trucking and logistics 

industries and any rollback of 


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354Several commenters, such as the Pennsylvania 

Motor Truck Association for example, included a 

number of contractual provisions in their comment 

and stated that the Department ‘‘has a duty to 

address each one in the context of any final rule as 

to whether it amounts to control.’’ The Department 

cannot opine on a particular employer’s discrete 

contractual provisions in a final rule. As stated in 

the 2021 IC Rule, ‘‘it is not possible—and would be 

counterproductive—to identify in the regulatory 

text every type of control (especially industryspecific types of control) that can be relevant when 

determining under the FLSA whether a worker is 

an employee or independent contractor.’’ 86 FR 

1182. 

355See, e.g., WHD Op. Ltr. (Aug. 13, 1954) 

(applying six factors, of which control was one, that 

are very similar to the six economic reality factors 

currently used by almost all courts of appeals); 

Shultz v. Hinojosa, 432 F.2d 259, 264–65 (5th Cir. 

1970) (affirming judgment in favor of Secretary of 

Labor that slaughterhouse worker was an employee 

under the FLSA under a multifactor economic 

reality test of which control was one of the factors). 

356Parrish, 917 F.3d at 380 (quotation marks and 

citation omitted). The federal courts of appeals have 

taken this position for decades. See also, e.g., 

Scantland, 721 F.3d at 1312 n.2 (the relative weight 

of each factor ‘‘depends on the facts of the case’’) 

(citation omitted); Selker Bros., 949 F.2d at 1293 (‘‘It 

is a well-established principle that the 

determination of the employment relationship does 

not depend on isolated factors . . . [, and] neither 

the presence nor the absence of any particular factor 

is dispositive.’’). 

357Reid, 490 U.S. at 751. 

358See House Report No. 871, 89TH CONG., 1ST 

SESS., at 43 (1965). It is clear that Congress was 

referring to a potential employer by the use of the 

term ‘‘principal’’ because its articulation of the 

integral factor in the same section stated: ‘‘The 

extent to which the services rendered are an 

integral part of the principal’s business.’’ In 

contrast, its articulation of the initiative factor 

stated: ‘‘The initiative, judgment, or foresight 

exercised by the one who performs the services.’’ Id. 

(emphases added). 

requirements for owner-operators to 

comply with such obligations will 

almost certainly lead to less safe roads 

in our Nation.’’ 354 SIFMA commented 

that ‘‘[i]t is important for the highly 

regulated securities industry that 

independent contractors do not morph 

into employees merely because they 

must remain in compliance with federal 

and state securities, banking, and 

insurance laws.’’ The ACLI stated that 

‘‘[i]t also would place at risk the careful 

balance that the courts and legislatures 

have fashioned in confirming the 

importance and viability of independent 

contractor models while ensuring 

regulatory compliance to protect the 

public.’’ And NAR stated that ‘‘[w]hile 

there may be some degree of control 

over an individuals’ work within 

broker-agent relationship as required by 

state law, the manner in which that 

work is completed—at the individuals’ 

broad discretion, for example—is a 

critical distinction that should not 

weigh in favor of classification as an 

employee.’’ Fight for Freelancers 

similarly explained that there are basic 

legal obligations for anyone involved in 

publishing, such as contract provisions 

that prohibit libel or theft of copyrighted 

material, and that such terms are ‘‘not 

indicative of a business’s control over 

how, when and where an article is 

written.’’ 

Other commenters supported this 

proposed provision. The AFL–CIO 

commented that the very fact that a 

government entity or court ‘‘imposes an 

obligation on an entity to ensure a 

workplace or a set of workers complies 

with law strongly suggests that 

responsible government officials believe 

that the entity stands in a relationship 

with the workers such that it is 

appropriate for it to do so.’’ See also 

NELA (‘‘When the employer, rather than 

the worker, controls compliance with 

legal, safety, or other obligations, it is 

evidence that the worker is not in fact 

in business for themselves because they 

are not doing the risk-management work 

involved in understanding and adhering 

to the legal and other requirements that 

apply to the work they perform and are 

not assuming the risk of 

noncompliance.’’); NELP (‘‘The 

Department should explain that if a 

government agency or other entity looks 

to the hiring entity for compliance, that 

fact alone suggests that the hiring entity 

has the requisite control to demand 

compliance.’’). ROC United commented 

that it was ‘‘an appropriate correction of 

the 2021 Rule’’ because delivery 

companies tend to exert control with 

respect to customer service standards 

and that ‘‘monitoring of drivers’ 

compliance is indicative of the control 

[those companies] has over them.’’ See 

also A Better Balance; Outten & Golden 

(commenting that the regulation should 

state that controls implemented by the 

employer to comply with legal 

obligations, safety standards, or 

contractual or customer service 

standards provides a strong indication 

of employee status). Finally, Intelycare 

supported this provision of the 

proposed regulation and further 

commented that the Department should 

explain that certain industries ‘‘are so 

highly regulated such that it is inherent 

in the nature of the work that the 

company must comply, and exercise 

control to require their workers to 

comply, with legal and safety 

regulations’’ and that in such 

circumstances the use of independent 

contractors is ‘‘likely inappropriate.’’ 

Upon consideration, the Department 

is adopting proposed § 795.110(b)(4) 

with several revisions in response to 

comments received. For decades, courts 

and the Department have taken the view 

that the control factor represents one 

facet of the economic reality test.355 As 

noted in the NPRM, the Department 

continues to believe that control should 

be analyzed in the same manner as 

every other factor, rather than take an 

outsized role when analyzing whether a 

worker is an employee or independent 

contractor. As the Fifth Circuit stated in 

2019, it ‘‘is impossible to assign to each 

of these factors a specific and invariably 

applied weight.’’ 356

Regarding comments critiquing the 

Department’s proposed regulatory text 

shifting the focus of this factor back to 

the nature and degree of control exerted 

by the potential employer rather than by 

the worker, the Department declines to 

make any alterations to this proposed 

text. The control factor has its roots in 

the common law, where the inquiry was 

whether the ‘‘employer’’ had the ‘‘right 

to control the manner and means by 

which [work] is accomplished.’’ 357

Courts have consistently, and for 

decades, considered this factor with the 

focus on the potential employer, not the 

worker. See, e.g., Saleem, 854 F.3d at 

141 (‘‘[A] company relinquishes control 

over its workers when it permits them 

to work for its competitors.’’); Razak, 

951 F.3d at 142 (phrasing the factor as 

‘‘the degree of the alleged employer’s 

right to control the manner in which the 

work is to be performed’’); McFeeley, 

825 F.3d at 241 (phrasing the factor as 

the ‘‘degree of control that the putative 

employer has over the manner in which 

the work is performed’’); Karlson, 860 

F.3d at 1093 (phrasing the factor as ‘‘the 

degree of control exercised by the 

alleged employer over the business 

operations’’); Flint Eng’g, 137 F.3d at 

1440 (stating that, when ‘‘applying the 

economic reality test, courts generally 

look at (1) the degree of control exerted 

by the alleged employer over the 

worker’’); Scantland, 721 F.3d at 1316 

(explaining that ‘‘[t]he economic reality 

inquiry requires us to examine the 

nature and degree of the alleged 

employer’s control’’). Congress and the 

Department have also historically 

focused on the control exerted by the 

potential employer (until the 2021 IC 

Rule). In the House Report 

accompanying the 1966 FLSA 

Amendments, for example, Congress 

described the factor as ‘‘[t]he degree of 

control which the principal [potential 

employer] has in the situation’’ 358 and 

then affirmed that the ‘‘committee fully 

subscribes to these criteria.’’ In a 1968 

Wage and Hour opinion letter, the 

Department described the factor as 

‘‘[t]he nature and degree of control 

retained or exercised by the principal;’’ 

in a 1973 Wage and Hour Publication, 

it described the factor as ‘‘the nature 

and degree of control by the principal;’’ 


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359WHD Op. Ltr. June 25, 1968; ‘‘Employment 

Relationship Under the Fair Labor Standards Act’’, 

WHD Publication 1297, February 1973; WHD Fact 

Sheet #13 (July 2008). 360See, e.g., Cornerstone Am., 545 F.3d at 343– 

44 (finding that control weighs in favor of employee 

status even where the employer disclaims control 

over ‘‘day-to-day affairs’’ of the workers because the 

employer controlled the meaningful economic 

aspects of the work). Other elements may also be 

included in this examination of control, such as 

those identified by the Supreme Court in Whitaker 

House. They include whether the worker could sell 

their products or services ‘‘on the market for 

whatever price they can command;’’ whether the 

worker’s compensation was dictated by the 

employer; and whether management could fire the 

worker for failure to obey its regulations. 366 U.S. 

at 32–33. 

361Cornerstone Am., 545 F.3d at 343–44. 

362 Id. at 343. 

363 Verma, 937 F.3d at 230. 

364See, e.g., Scantland, 721 F.3d at 1314 (finding 

workers to be employees, in part, because they 

‘‘were subject to meaningful supervision and 

monitoring by’’ their employer). 

365See, e.g., Mr. W Fireworks, 814 F.2d at 1049 

(‘‘[T]he lack of supervision over minor regular tasks 

cannot be bootstrapped into an appearance of real 

independence.’’) (citation omitted); Antenor, 88 

F.3d at 934 (noting in FLSA joint employment case 

that the Act reaches even those employers who 

‘‘[do] not directly supervise the activities of 

putative employees’’). This has been the 

Department’s perspective for almost 6 decades. See 

WHD Op. Ltr., FLSA–795, at 3 (Sept. 30, 1964) 

(determining that professional divers were 

employees of a diving corporation, despite the lack 

of control over their work, by noting ‘‘that persons 

may be employees within the meaning of the Act 

even though they are unsupervised in their work, 

are not required to devote any particular amount of 

time to their work, [and] are under no restriction 

not to work for competitors of the employer’’). 

366For example, in Driscoll, the Ninth Circuit 

described the control factor as the ‘‘degree of the 

alleged employer’s right to control the manner in 

which the work is to be performed’’ but then 

concluded that the employer possessed ‘‘substantial 

control over important aspects’’ of the workers’ 

work. 603 F.2d at 755. 

367 29 CFR 795.110(b)(4). 368The Department also received comments 

urging it to delete this sentence of the proposed 

regulatory text. See NELP; Outten & Golden. These 

commenters expressed concern that the concluding 

sentence suggested a relative weighing of facts 

relevant to control in lieu of a ‘‘totality of the 

circumstances’’ analysis, and that this ‘‘implies a 

simple arithmetic tallying of the various listed 

facts’’ that would ‘‘invite an unnecessary contest 

that threatens to overshadow the purpose of the 

factor.’’ The Department declines to delete this 

sentence because it believes that considering the 

various indicia of control and whether they weigh 

in favor of employee or independent contractor 

status can be a helpful analytical tool. However, the 

Department agrees that the correct analysis is an 

overall, qualitative analysis, and that the 

considerations described within the control factor 

should not be used as a checklist or in a ‘‘tallying’’ 

fashion, just as the economic reality factors should 

not be tallied but rather considered based on the 

totality of the circumstances. 

369 86 FR 1247 (§ 795.105(d)(1)(i)). 

370As the Eleventh Circuit explained in 

Scantland, the ‘‘economic reality inquiry requires 

Continued 

and in longstanding Fact Sheet #13, the 

factor is also described as ‘‘[t]he nature 

and degree of control by the 

principal.’’ 359 Accordingly, the 

Department believes that the 

appropriate focus of this factor should 

be on the potential employer. 

Moreover, as explained in the NPRM 

and consistent with the economic 

reality analysis, this factor should 

necessarily focus on whether the 

employer controls meaningful economic 

aspects of the work relationship because 

that focus is probative of whether the 

worker stands apart as their own 

business. Simply assessing whether the 

employer lacks control over discrete 

working conditions (e.g., scheduling) or 

whether the employer exercises 

physical control over the workplace 

does not fully address whether the 

employer controls meaningful economic 

aspects of the work relationship.360

Specifically, the Fifth Circuit applied 

this analytical approach in a case where 

an insurance sales firm not only 

‘‘controlled the hiring, firing, 

assignment, and promotion of the 

[workers’ subordinates],’’ but also 

controlled how the workers priced the 

insurance products, received leads for 

sales, and defined the territory in which 

the agents could sell products.361 These 

actions made it clear that the employer, 

and not the workers, retained 

meaningful control over the ‘‘economic 

aspects of the business,’’ suggesting that 

the workers were employees.362 The 

Third Circuit has similarly held that 

even though dancers had some 

scheduling flexibility, the control factor 

weighed in favor of employee status 

because the employer, and not the 

workers, controlled the economic 

aspects of the dancers’ work, such as the 

price of services, the clientele to be 

served, and the operations of the club in 

which they worked.363

Regarding the comments received 

addressing the scope of the control 

factor such as whether reserved control 

should be included or whether the 

regulation should require ‘‘substantial’’ 

control, the Department declines to 

make the changes requested. First, the 

Department believes that the reference 

to reserved control should remain in the 

regulation as proposed. Control can 

certainly be exerted directly in the 

workplace by an employer, such as 

when it sets a worker’s schedule, 

compels attendance, or directs or 

supervises the work.364 As explained in 

the NPRM and addressed fully in 

section V.D. of this final rule, however, 

the absence of these more apparent 

forms of control does not invariably lead 

to the conclusion that the control factor 

weighs in favor of independent 

contractor status.365 Employers may also 

exercise control in other ways, 

including reserved rights to control, 

because such reserved rights may, in 

some situations, be probative of the 

economic reality of the total situation. 

Second, the Department declines to 

modify the regulation to require 

‘‘substantial control’’ as requested by 

the Scalia Law Clinic. The Department 

does not believe such a modifier is 

appropriate in the regulatory text 

because the totality of the circumstances 

must be considered, and this heightened 

requirement is not supported by case 

law. Of course, substantial control can 

be indicative of employee status as 

several cases have held, but ‘‘substantial 

control’’ is not a predetermined 

requisite under the economic reality 

test.366 Moreover, as the regulatory text 

provides, ‘‘[m]ore indicia of control by 

the potential employer favors employee 

status; more indicia of control by the 

worker favors independent contractor 

status.’’ 367 Thus, substantial control by 

the employer would clearly favor 

employee status, though it is not 

required.368

Finally, current § 795.105(d)(1)(i) 

states that an employer requiring a 

worker to ‘‘comply with specific legal 

obligations, satisfy health and safety 

standards, carry insurance, meet 

contractually agreed-upon deadlines or 

quality control standards, or satisfy 

other similar terms . . . does not 

constitute control that makes the 

[worker] more or less likely to be an 

employee.’’ 369 In the NPRM, the 

Department explained that a blanket 

prohibition on consideration of 

compliance with legal or other 

obligations would not be appropriate, 

and that certain instances of control 

should not be excluded as irrelevant to 

the economic reality analysis only 

because they are required by business 

needs, contractual requirements, quality 

control standards, or legal obligations. 

Moreover, the Department recognized 

that the ‘‘case law is not uniform on this 

issue’’ and undertook a detailed 

discussion explaining why a complete 

bar to ever considering such compliance 

with legal, safety, or health obligations, 

or quality control measures would be 

inappropriate under the economic 

reality test. 

The Department took a more nuanced 

approach in the preamble discussion 

than some commenters recognized in 

their comments, and it continues to find 

cases such as Scantland and others— 

which recognize that compliance with 

legal or contractual obligations or 

quality control may be relevant 

evidence of control—persuasive and 

more consistent with a totality-of-thecircumstances, economic reality 

analysis.370 The NPRM explained 


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us to examine the nature and degree of the alleged 

employer’s control, not why the alleged employer 

exercised such control.’’ 721 F.3d at 1316 (emphasis 

added). The court continued to explain that if ‘‘the 

nature of a business requires a company to exert 

control over workers to the extent that [the 

employer] has allegedly done, then that company 

must hire employees, not independent contractors.’’ 

Id.; see also Schultz v. Mistletoe Express Serv., Inc., 

434 F.2d 1267, 1271 (10th Cir. 1970) (noting that 

‘‘arguments that an independent contractor 

relationship is shown by . . . the need to comply 

with the regulations of federal and state agencies do 

not persuade us’’ before affirming the conclusion 

that workers were employees under the FLSA). 

371For example, in a 2014 Administrator’s 

Interpretation ‘‘Joint employment of home care 

workers in consumer-directed, Medicaid-funded 

programs by public entities under the Fair Labor 

Standards Act’’ (withdrawn in 2020), the 

Department stated that ‘‘under an economic 

realities analysis, all of the facts and circumstances 

of the relationship between a provider and the state 

must be evaluated, and no single factor is 

determinative. Relevant factors that must be 

considered when evaluating whether a state 

administering a consumer-directed program is an 

employer include the various legal requirements 

with which consumer-directed programs must 

comply, and how programs choose to comply with 

those requirements.’’ See Administrator’s 

Interpretation 2014–2, available at 2014 WL 

2816951, at *5; see also Administrator’s 

Interpretation 2015–1, available at 2015 WL 

4449086, at *12 (‘‘Some employers assert that the 

control that they exercise over workers is due to the 

nature of their business, regulatory requirements, or 

the desire to ensure that their customers are 

satisfied. However, control exercised over a worker, 

even for any or all of those reasons, still indicates 

that the worker is an employee.’’). 

explicitly and with detail that 

compliance with legal requirements 

may not always be relevant to control, 

and that such compliance was only one 

facet of control. However, the 

Department takes seriously the many 

comments received from stakeholders 

about the proposed regulatory language, 

the legitimate points they raised, and 

the concerns commenters expressed, 

even though the Department does not 

necessarily agree with all issues raised. 

In the NPRM, the Department was 

cognizant of the challenge of setting 

forth a regulation that would capture all 

of the facts relevant to the nature and 

degree of a potential employer’s control 

while balancing the practical 

considerations of the way businesses, 

particularly in some industries, must 

simultaneously comply with a host of 

legal, regulatory, and business-related 

demands. While the Department sought 

to strike the suitable balance between 

these two concerns in the NPRM, the 

comments have persuaded the 

Department that the provision as 

proposed may lead to unintended 

consequences due to stakeholder 

confusion and uncertainty. The 

Department does not agree, however, 

with commenters who stated that the 

Department’s proposed regulatory text 

would make compliance with the law a 

‘‘negative factor.’’ As noted by 

commenters, businesses already must 

comply with various legal and 

regulatory requirements—for example, 

from the IRS, state licensing boards, and 

city ordinances. Additionally, the 

Department never had a blanket 

prohibition prior to the 2021 IC Rule on 

the consideration of compliance with 

legal obligations, and none of the mass 

uncertainty or noncompliance with 

legal norms suggested by commenters 

were apparent.371 Nevertheless, the 

Department recognizes the confusion 

evident in the comments regarding this 

provision. The Department agrees with 

commenters, for example, that stated 

that a publication’s required compliance 

with libel law for a writer is not 

probative of a worker’s economic 

dependence on that publication but if 

the publication instructed how, when, 

and where the work is performed, that 

is relevant to the control analysis. To 

provide another example, a home care 

agency requiring a criminal background 

check for all individuals with patient 

contact in compliance with a specific 

Medicaid regulation requiring such 

checks would not be indicative of 

control. Accordingly, the Department is 

revising the regulation to state that 

‘‘actions taken by the potential 

employer for the sole purpose of 

complying with a specific, applicable 

Federal, State, Tribal, or local law or 

regulation are not indicative of control.’’ 

The Department is further revising the 

regulation to state that ‘‘actions taken by 

the potential employer that go beyond 

compliance with a specific, applicable 

Federal, State, Tribal, or local law or 

regulation and instead serve the 

potential employer’s own compliance 

methods, safety, quality control, or 

contractual or customer service 

standards may be indicative of control.’’ 

This part of the regulatory text means 

that a potential employer’s control over 

compliance methods, safety, quality 

control, or contractual or customer 

service standards that goes beyond what 

is required by specific, applicable 

Federal, State, Tribal, or local law or 

regulation may in some—but not all— 

cases be relevant to the analysis of a 

potential employer’s control if it is 

probative of a worker’s economic 

dependence. For example, in contrast to 

the background check example in the 

prior paragraph, a home care agency’s 

extensive provider qualifications, such 

as fulfilling comprehensive training 

requirements (beyond training required 

for relevant licenses), may be probative 

of control. The Department continues to 

believe that control exerted by the 

employer to achieve these ends may be 

relevant to the underlying analysis of 

whether the worker is economically 

dependent on the employer, particularly 

where the employer dictates and 

enforces the manner and circumstances 

of compliance. 

These instances of potential control, 

however, are relevant only if probative 

of the worker’s economic dependence, 

as with any other consideration under 

the economic reality factors. For 

example, when an employer, rather than 

a worker, imposes safety or customer 

service obligations beyond what is 

required by specific, applicable Federal, 

State, Tribal, or local law or regulations, 

it may be evidence that the worker is 

not in fact in business for themself. In 

those instances, they are not doing the 

entrepreneurial tasks that suggest that 

they are responsible for understanding 

and adhering to requirements that apply 

to the work or services they are 

performing such that they are assuming 

the risk of noncompliance—a typical 

and expected risk that workers in 

business for themselves regularly 

assume. Moreover, the Department 

understands that parties representing a 

wide array of business relationships 

enter into contracts, and this regulation 

should not inhibit those practices. For 

example, if a potential employer 

requires all workers to sign a contract 

acknowledging that the business’s 

general policy is that invoices for work 

projects must be submitted within a 

particular timeframe, this is not 

indicative of control because such a 

generally applicable contractual term 

does not itself suggest that a worker is 

economically dependent on the 

employer for work. In contrast, if a 

potential employer requires all workers 

to sign a contract outlining specifically 

how, when, and where the work must 

be performed, that specific direction 

would be indicative of control because 

it suggests that the workers are not 

operating independently. The 

Department believes that this revised 

text will be able to encompass control 

that is relevant to the overall analysis of 

economic dependence while providing 

businesses with a clear rule regarding 

compliance with specific legal 

obligations. 

As the Department emphasized in the 

NPRM and again emphasizes here, the 

facts and circumstances of each case 

must be assessed, and the manner in 

which the employer chooses to 

implement such obligations will be 

highly relevant to the analysis. For 

example, under this final regulatory 

text, it is not indicative of control if a 

potential employer requires everyone 

who enters a construction site to wear 

a hard hat as required by city ordinance. 


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372For example, a court can consider control 

exerted over workers to comply with safety 

obligations as not indicative of control and 

nevertheless conclude upon consideration of all of 

the factors that such workers were employees under 

the FLSA. See Rick’s Cabaret, 967 F. Supp. 2d at 

916, 922. 

373 87 FR 62275 (proposed § 795.110(b)(4)). 

374 86 FR 1246–47 (§ 795.105(d)(1)(i)). 

375See, e.g., Franze, 826 F. App’x at 77 (noting 

that schedule flexibility ‘‘weigh[s] in favor of 

independent contractor status’’); Karlson, 860 F.3d 

at 1094–96 (affirming a jury verdict finding a 

process server to be an independent contractor, in 

part, because the worker ‘‘was not required to report 

for work[,] . . . did not punch a time clock,’’ and 

did not have a set schedule, report a daily schedule 

to the employer, or face discipline for not working); 

Express Sixty-Minutes, 161 F.3d at 303 

(determining that the employer ‘‘had minimal 

control’’ over the delivery drivers in part because 

the drivers ‘‘set their own hours and days of work’’ 

and could reject deliveries ‘‘without retaliation,’’ 

which was evidence that the worker was an 

independent contractor). 

376 87 FR 62249 (citing Saleem, 854 F.3d at 146 

(finding drivers who were able to set schedules that 

‘‘were entirely of their making’’ were properly 

found to be independent contractors where, among 

other factors, drivers could select routes, there was 

no incentive structure for them to drive at certain 

times, and they could exercise business-like 

initiative)). 

377See, e.g., Verma, 937 F.3d at 230, 232 (finding 

the ability to set hours, select shifts, stay beyond a 

shift, and accept or reject work to be ‘‘narrow 

choices’’ when evaluated against other types of 

control exerted by the employer and that a ‘‘holistic 

assessment’’ of all factors showed that the workers 

were not, ‘‘as a matter of economic reality, 

operating independent businesses for themselves’’); 

Paragon, 884 F.3d at 1235–38 (finding that even 

though a worker could set his own schedule, he was 

an employee, in part, because his flat rate of pay 

did not allow him profit based on his performance); 

DialAmerica, 757 F.2d at 1384–86 (finding 

telephone survey workers who set their own hours 

and were free from supervision to be employees); 

Sureway, 656 F.2d at 1370–71 (‘‘circumstances of 

the whole activity’’ show that laundry company 

‘‘exercises control over the meaningful aspects of 

the cleaning [work]’’ despite the fact that workers 

could set their own hours). 

378 87 FR 62248 (citing Flint Eng’g, 137 F.3d at 

1441 (‘‘The record indicates rig welders cannot 

perform their work on their own schedule; rather, 

pipeline work has assembly line qualities in that it 

requires orderly and sequential coordination of 

various crafts and workers to construct a 

pipeline.’’); Doty v. Elias, 733 F.2d 720, 723 (10th 

Cir. 1984) (‘‘Since plaintiffs could wait tables only 

during the restaurant’s business hours, [the 

employer] essentially established plaintiffs’ work 

schedules.’’)). 

379See, e.g., Verma, 937 F.3d at 230 (the Third 

Circuit found the ability to set hours, select shifts, 

stay beyond a shift, and accept or reject work to be 

‘‘narrow choices’’ when evaluated against other 

types of control by the employer, such as setting the 

price for services); Hill v. Cobb, No. 3:13–CV–045– 

SA–SAA, 2014 WL 3810226, at *4–5 (N.D. Miss. 

Aug. 1, 2014) (finding that even though workers had 

no specific hours or schedule and could ‘‘come and 

go as [they] pleased’’ the employer ‘‘maintained 

extensive control over the remaining aspects’’ of the 

business such that the control factor weighed in 

favor of employee status); Wilson v. Guardian Angel 

Nursing, Inc., No. 3:07–0069, 2008 WL 2944661, at 

*15–16 (M.D. Tenn. July 31, 2008) (finding that 

although nurses could accept or reject shifts the 

employer exercised substantial control in other 

respects, such as over the manner in which nurses 

conducted their duties). 

380 87 FR 62249 (citing Snell, 875 F.2d at 806) 

(emphasis added); see also Circle C. Invs., 998 F.2d 

at 327 (finding that the employer had ‘‘significant 

control’’ over dancers indicating employee status 

even though they had ‘‘input . . . as to the days 

that they wish to work’’); Doty, 733 F.2d at 723 (‘‘A 

relatively flexible work schedule alone, however, 

does not make an individual an independent 

contractor rather than an employee.’’); Walling v. 

Twyeffort, Inc., 158 F.2d 944, 947 (2d Cir. 1946) 

(holding that workers who ‘‘are at liberty to work 

or not as they choose’’ were employees under 

FLSA). 

However, if a potential employer 

chooses a specific time and location for 

its own weekly safety briefings that are 

not specifically required by law and 

requires all workers to attend, that may 

be probative of control. Similarly, it is 

not probative of control if a potential 

employer requires workers to provide 

proof of insurance required by state law, 

but if a potential employer mandates 

what insurance carrier workers must 

use, that may be probative of control. 

The Department reminds stakeholders 

that this is merely one aspect of one 

factor of a multifactor test. Even if 

compliance with specific safety, 

contractual, customer service, or quality 

control requirements is indicative of 

control in a specific case, this does not 

compel a particular conclusion that the 

control factor favors employee status or 

that the overall analysis requires a 

particular result.372 Thus, the final rule 

does not preclude a finding that a 

worker is an independent contractor 

where an employer obligates workers, 

for example, to comply with its own 

safety standards or quality control 

measures, after also considering other 

relevant factors in the economic reality 

analysis. 

With these general principles in 

mind, the next sections address the 

Department’s proposals regarding 

several aspects of control to be 

considered in determining whether the 

nature and degree of control indicates 

that the worker is an employee or an 

independent contractor. This discussion 

is intended to be an aid in assessing 

common aspects of control—including 

scheduling, supervision, price setting, 

and ability to work for others—but 

should not be considered an exhaustive 

list, given the various ways in which an 

employer may control a worker or the 

economic aspects of the work 

relationship. Additional changes to the 

final regulatory text in response to 

comments are also discussed throughout 

these sections. 

b. Scheduling 

As a consideration under the control 

factor, the Department proposed 

that‘‘[f]acts relevant to the employer’s 

control over the worker include whether 

the employer sets the worker’s 

schedule[.]’’ 373 While the 2021 IC Rule 

similarly recognized that a potential 

employer’s control over ‘‘key aspects of 

the performance of the work, such as by 

controlling the individual’s schedule’’ is 

relevant to determining employee or 

independent contractor status, the 2021 

IC Rule also suggested that the worker’s 

‘‘substantial control over key aspects of 

the performance of the work’’ may be 

demonstrated simply by ‘‘by setting his 

or her own schedule.’’ 374 As explained 

in the NPRM, after further consideration 

and review of the case law, the 

Department considered that framing to 

be too narrow because it shifted focus 

away from the employer’s control— 

potentially allowing a finding of 

independent contractor status under the 

control factor based solely on a worker 

setting their own schedule, irrespective 

of other relevant considerations under 

control—and did not encompass actions 

the employer may take that would limit 

the significance of the worker’s ability 

to set their own schedule. 

The Department recognizes that many 

independent contractor relationships 

include the worker’s ability to start and 

end work as they see fit.375 And the 

Department noted that such scheduling 

freedom may be probative of a worker’s 

independent contractor status.376 Yet, 

multiple courts of appeals have 

determined that workers were 

employees, rather than independent 

contractors, even when they had the 

flexibility to choose their work 

schedule.377 Further, the Department 

noted that employers may still be able 

to limit the number of hours available 

for a worker to choose or arrange the 

sequence or pace of the work in such a 

way that it would not be possible for the 

worker to have a truly flexible schedule, 

thus exhibiting control that could 

indicate that a worker is an 

employee.378

As the Department noted, courts have 

often found that a worker’s ability to set 

their own schedule, by itself, provides 

only minimal evidence that a worker is 

an independent contractor, particularly 

when the hiring entity exerts other types 

of control; therefore, the freedom to set 

one’s schedule should be evaluated 

against other forms of control 

implemented by an employer.379 The 

Department also cited the Tenth 

Circuit’s common-sense observation that 

‘‘flexibility in work schedules is 

common to many businesses and is not 

significant in and of itself.’’ 380 For 

example, in Silk, the ‘‘unloaders’’ who 

came to the coal yard ‘‘when and as they 

please[d]’’ were employees rather than 


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381 331 U.S. at 706, 718. 

382 87 FR 62249; see, e.g., Off Duty Police, 915 

F.3d at 1060–62 (noting that ‘‘[a]lthough workers 

could accept or reject assignments, multiple 

workers testified that [the employer] would 

discipline them if they declined a job,’’ which 

supported a finding that the control factor favored 

employee status for one set of workers; testimony 

that another set of workers may not have been 

punished for declining work did not clearly support 

either employee or independent contractor status 

under the control factor ’); see also Parrish, 917 

F.3d at 382 (ability to turn down projects without 

negative repercussion was among the reasons the 

control factor weighed in favor of independent 

contractor status). 

383See, e.g., Mr. W Fireworks, 814 F.2d at 1048 

(noting that work schedules compelled by the 

employer were, among other considerations within 

control, evidence that, ‘‘[a]s a matter of economic 

reality’’ the employer ‘‘exercise[d] great control’’ 

over the workers and thus, ultimately employee 

status). 

384See 87 FR 62249 (citing Collinge, 2015 WL 

1299369, at *4 (finding that the fact that on-demand 

‘‘[d]rivers are free to wait at home for their first 

delivery of the day, and . . . are free to ‘kill time’ 

on a computer or run personal errands’’ in between 

jobs did not demonstrate lack of control ‘‘because 

[it] merely show[s] that [the employer] is unable to 

control its drivers when they are not working, an 

irrelevant point.’’) (footnotes omitted)). 

385The comment noted specific practices that 

erode the benefit of scheduling flexibility, such as 

app-based platforms offering first access to 

premium deliveries or allowing workers first access 

to select shifts on the condition that they have 

accepted enough jobs in the prior month. 

independent contractors.381 Flexibility 

that allows workers to use time between 

tasks or jobs may also be an inherent 

component of some business models, 

but such flexibility does not preclude a 

finding that the employer has sufficient 

control over a worker in other ways to 

weigh in favor of employee status. For 

instance, the Department noted that 

‘‘the power to decline work, and thus 

maintain a flexible schedule, is not 

alone persuasive evidence of 

independent contractor status when the 

employer can discipline a worker for 

doing so.’’ 382 Moreover, both employees 

and independent contractors may 

possess scheduling flexibility in their 

working relationships. 

As the discussion in the NPRM 

concluded, control over a worker’s 

schedule exhibits just that: one form of 

control.383 Both employees and 

independent contractors can take 

advantage of flexible work 

arrangements, which is why such 

scheduling flexibility, on its own, may 

not clearly indicate that the employer 

lacks control over the worker.384 As the 

Department noted, this approach is 

consistent with the economic realities, 

totality-of-the-circumstances approach, 

where such scheduling flexibility 

should be weighed along with other 

aspects of control the employer may be 

implementing. 

Several commenters expressed 

general support for the NPRM’s 

discussion of scheduling flexibility. For 

example, the AFL–CIO noted that ‘‘[t]he 

NPRM . . . correctly makes clear that 

. . . ‘scheduling flexibility is not 

necessarily indicative of independent 

contractor status where other aspects of 

control are present[.]’ ’’ In their 

comments, ACRE et al. and the 

Washington Center for Equitable Growth 

agreed that flexible work schedules can 

be common to employees and 

independent contractors alike and 

ACRE et al. noted that ‘‘flexible 

schedules alone do not determine a 

worker’s employment status.’’ See also 

NPWF. PowerSwitch Action supported 

the NPRM’s discussion of scheduling 

flexibility, commenting that the 

economic reality inquiry ‘‘is not 

illuminated by whether a worker can 

choose to perform their work at nights 

instead of days (or vice versa), in short 

several-hour increments over a single 

day or several days, or in periods that 

vary seasonally.’’ It contended that 

workers classified as employees have 

historically included workers with great 

scheduling flexibility across various 

industries, indicating that such 

freedoms are not synonymous with 

being an independent contractor. The 

LA Fed & Teamsters Locals agreed, 

noting that scheduling flexibility, alone, 

is a ‘‘poor indicator[ ] of the economic 

realities of the contemporary working 

relationship’’ unless that fact can 

‘‘actually demonstrate the worker’s 

economic independence.’’ NWLC noted 

that ‘‘[t]he Department’s guidance here 

is consistent with court decisions 

finding, for instance, that nurses, 

dancers, and delivery drivers . . . were 

employees even though they had 

substantial control over their work 

hours, because their employers retained 

control over prices for their services 

and/or other important elements of their 

jobs.’’ 

Some commenters addressed industry 

specific practices. For example, ROC 

United noted that their members, who 

are restaurant workers, ‘‘frequently 

decide when and how long to work,’’ 

yet, ‘‘once working, they have very little 

control over how they actually do the 

work,’’ suggesting their economic 

dependence. UFCW similarly 

commented that, in their experience 

working with drivers, app-based 

companies ‘‘threaten to expel workers 

from the platform or reduce the 

availability of work shifts, unless the 

worker continuously accepts jobs;’’ a 

situation that limits the benefit of 

flexibility.385 REAL Women in Trucking 

applauded ‘‘the Department’s decision 

to broaden its framing of the scheduling 

element from the 2021 Rule and to focus 

on whether apparent scheduling 

flexibility actually provides for 

economic independence or whether the 

worker is still functionally dependent.’’ 

It noted that truckers can be constrained 

by other forms of control—such as 

retaliation for declining too many 

offered loads—and stated the proposal’s 

‘‘emphasis on whether apparent 

scheduling flexibility is constrained by 

economic reality is accordingly well 

considered.’’ 

The law firm Nichols Kaster noted 

that, in their experience, ‘‘employers 

who misclassify their workers as 

independent contractors rely on the 

workers’ ability to decline work as 

evidence of lack of control. But there is 

oftentimes no meaningful choice 

because declining work can result in 

discipline or other consequences.’’ It 

suggested including language from the 

preamble in the final rule to emphasize 

this point. NELA agreed with the 

Department’s discussion of scheduling 

flexibility and similarly suggested that 

the Department include more 

information about scheduling flexibility 

in the final rule. Moreover, Gale 

Healthcare Solutions noted that the term 

‘‘scheduling flexibility’’ needs further 

refinement, since workers in the 

healthcare industry may have the 

flexibility to select their preferred shift 

from a job board but do not have the 

flexibility to decide when the shift starts 

and ends, and this ‘‘inherently less 

‘flexibility’ ’’ would indicate employee 

status. The Department declines 

commenters’ suggestions to include 

additional content in the final 

regulatory text for this factor. The 

current proposal was intended to 

provide succinct statements regarding 

each factor of the economic reality test 

with the understanding that the 

preamble will be accessible for 

additional information regarding the 

rule, as will future subregulatory 

guidance. 

Several commenters also expressed 

concern with the Department’s 

approach, asserting that scheduling 

flexibility is a strong indicator of 

independent contractor status. For 

instance, Uber stated that ‘‘a worker’s 

ability to autonomously determine their 

own work schedule (days, hours, time of 

day, and more) is a strong predictor of 

independent status—on Uber, drivers 

and couriers can start and stop work 

whenever and wherever they choose, 

accepting only those offers they want to 

take[.]’’ DoorDash asserted that ‘‘[n]ot 

only is scheduling flexibility a 

significant distinction between 

employment and independent work: it 

gets to the very heart of the economic 


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386See, e.g., Express Sixty-Minutes, 161 F.3d at 

303 (determining that the employer ‘‘had minimal 

control’’ over the delivery drivers in part because 

the drivers ‘‘set their own hours and days of work’’ 

and could reject deliveries ‘‘without retaliation,’’ 

which was evidence that the worker was an 

independent contractor). 387See, e.g., Verma, 937 F.3d at 230 (ability to set 

hours, select shifts, stay beyond a shift, and accept 

or reject work were ‘‘narrow choices’’ when 

evaluated against other types of control by the 

employer, such as setting the price for services); Off 

Duty Police, 915 F.3d at 1060 (‘‘Although workers 

could accept or reject assignments, multiple 

workers testified that [the employer] would 

discipline them if they declined a job,’’ which was 

evidence of the employer’s ultimate control); Flint 

Eng’g, 137 F.3d at 1441 (‘‘The record indicates rig 

welders cannot perform their work on their own 

schedule; rather, pipeline work has assembly line 

qualities in that it requires orderly and sequential 

coordination of various crafts and workers to 

construct a pipeline.’’). 

388 86 FR 1247–48. 

389See, e.g., Pilgrim Equip., 527 F.2d at 1312 (‘‘In 

the total context of the relationship neither the 

[workers’] right to hire employees nor the right to 

set hours indicates such lack of control by [the 

employer] as would show these operators are 

independent from it.’’) (emphasis added). 390 87 FR 62275. 

reality test.’’ See also National Propane 

Gas Association. 

SHRM suggested that the 

Department’s treatment of scheduling 

flexibility is misguided because, for 

example, ‘‘contract work may provide 

[low-wage earners] with control over 

their schedules, providing the ability to 

maximize their earnings and better 

attend to their personal obligations.’’ 

Multiple individuals, like one 

‘‘independent healthcare professional,’’ 

stressed that many people like them 

want ‘‘the freedom to engage in flexible 

work arrangements that best meet our 

needs.’’ 

The Department recognizes that many 

workers need and desire flexibility in 

their work schedules and seek out job 

opportunities that provide that 

flexibility. And, in some cases, control 

over one’s schedule can be probative of 

an employer’s lack of control over a 

worker, indicating that they may be an 

independent contractor.386 However, 

case law has consistently held that 

scheduling flexibility may be a 

relatively minor freedom, especially in 

those cases where a worker is prevented 

from exercising true flexibility because 

of the pace or timing of work or because 

the employer maintains other forms of 

control, such as the ability to punish 

workers who may seek to exercise 

flexibility on the job.387 In this way, the 

2021 IC Rule’s focus on scheduling 

flexibility as a fact that demonstrates 

‘‘substantial control over key aspects of 

the performance of the work’’ 

misapplied relevant cases that suggest 

the opposite conclusion.388 The proper 

lens for the test is the totality-of-thecircumstances analysis, which considers 

scheduling flexibility along with other 

forms of control the employer might 

exert, as well as with other factors in the 

economic reality test.389

Some commenters asserted that 

consideration of scheduling flexibility 

should take into account specific 

industry and/or contractual 

arrangements that limit its availability. 

For example, NRF & NCCR commented 

that the Department’s proposed 

approach ‘‘ignores key realities of 

business relationships common to 

retailers and restaurants.’’ Examples 

include individuals who rent retail 

space but are constrained by limited 

operating hours of the building in which 

they rent, food delivery workers who 

may only be able to deliver food when 

a restaurant is open, or cleaning crews 

who can only do their work at night. 

They asserted that these types of 

limitations do not necessarily indicate 

that the worker lacks control over their 

schedule. The CA Chamber echoed this 

sentiment, noting that ‘‘[a] business 

engaging a contractor to perform 

services is likely to have certain dates or 

times that they would prefer or possibly 

need that work to be performed,’’ 

suggesting the Department did not take 

this reality into account. See also AFPF 

(asserting that the control analysis is 

complicated ‘‘by adding to it such items 

of routine contractual terms’’ like 

scheduling which ‘‘cast no meaningful 

light on employer-employee status.’’). 

The PGA noted, specific to its industry, 

that ‘‘[golf] teaching professionals set 

their own schedules,’’ yet ‘‘their ability 

to teach at a particular space may be 

limited by the space’s operating hours 

or conflicting events that require the use 

of the property.’’ They asserted that this 

limitation ‘‘should not be viewed as an 

example of a lack of control by the 

teaching professional.’’ 

Dart contended that if the 

Department’s perspective is that limited 

scheduling control by the worker 

indicates employee status, then many 

drivers who independently ‘‘elect to 

transport similar loads along the same 

routes over a period of time, risk losing 

their status and independence under 

this factor.’’ They asserted that drivers 

who wish to remain independent would 

thus have to ‘‘arbitrarily switch routes 

and carriers, and . . . bear whatever 

costs or inefficiencies such switches 

may give rise to, simply to preserve 

their independent status under this 

factor’’ and requested that the 

Department adopt ‘‘language which 

specifically incorporates consideration 

of the reality of the industry in 

question.’’ 

In addition, DoorDash suggested that 

the type of flexibility its workers 

possess is fundamentally different from 

the flexibility an employee may obtain 

from an employer. For instance, 

‘‘[h]aving some room to voice a 

preference about shifts or work remotely 

isn’t true scheduling flexibility, because 

the ultimate control still belongs to their 

employers, who dictate things like 

deadlines and meeting schedules that 

can’t be shirked.’’ In contrast, DoorDash 

noted that its platform allows workers to 

work on their own time and walk away, 

potentially for weeks or months at a 

time. 

The Department disagrees that its 

formulation of the control factor must 

explicitly consider unique contractual 

or industry-specific scenarios that might 

affect scheduling flexibility. The 

language of the proposed rule noted that 

‘‘[f]acts relevant to the employer’s 

control over the worker include whether 

the employer sets the worker’s 

schedule,’’ or where the employer 

‘‘places demands on workers’’ that do 

not allow them to work . . . when they 

choose.’’ 390 To the extent a potential 

employer is exerting control over when 

and for how long an individual can 

work, that fact is indicative of the 

employer’s control. And even in those 

scenarios where the worker’s schedule 

is constrained by contract or employer 

requirements, such scheduling control 

is only one fact among many that could 

be considered under the control factor. 

Finally, some commenters asserted 

that the Department’s shift in focus to 

the employer’s control was misguided. 

CWI suggested that ‘‘where a result or 

service is perishable or deadline driven, 

based on the consumer’s desire or the 

nature of the product or service, it is 

inappropriate to describe the final 

deadline as evidence of the business 

setting the worker’s schedule.’’ In this 

way, CWI argued, a focus on scheduling 

flexibility solely from the perspective of 

the employer, ‘‘prevents a 

counterbalancing of those separate 

actions by the employee that, separate 

and apart from its direct interactions 

with the putative employer, establish he 

is in business for himself.’’ Similarly, N/ 

MA noted that a shift in focus ‘‘from the 

worker’s right to control the manner and 

means by which the work is performed 

to the purported employer’s control . . . 

[is] misdirected,’’ and does not consider 

‘‘the totality of the worker’s business 

. . . including . . . whether the worker 

. . . determines to prioritize, stagger, or 

overlap projects from multiple entities’’ 

as they see fit. 


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391For discussion of this issue generally, see 

section V.C.4(a). 

392 Id. 

393 87 FR 62275 (proposed § 795.110(b)(4)). 

394 Id. at 62249. 

395See, e.g., Driscoll, 603 F.2d at 756 

(farmworkers could be employees of a strawberry 

farming company even where the potential 

employer exercised little direct supervision over 

them); Twyeffort, 158 F.2d at 947 (rejecting an 

employer’s contentions that its tailors are 

independent contractors because they are ‘‘free 

from supervision, are at liberty to work or not as 

they choose, and may work for other employers if 

they wish’’). 396 87 FR 62249 n.393 (noting that the legislative 

history of the FLSA supports this point directly, 

since the definition of ‘‘employ’’ was explicitly 

intended to cover as employment relationships 

those relationships where the employer turned a 

blind eye to labor performed for its benefit) (citing 

Antenor, 88 F.3d at 934)). 

397 915 F.3d at 1061–62 (quoting Peno Trucking, 

Inc. v. Comm’r of Internal Revenue, 296 F. App’x 

449, 456 (6th Cir. 2008)). 

398 Id. at 1061. 

399 Id. at 1062. 

400 757 F.2d at 1383–84. See also McComb v. 

Homeworkers’ Handicraft Coop., 176 F.2d 633, 636 

(4th Cir. 1949) (‘‘It is true that there is no 

supervision of [homeworkers’] work; but it is so 

simple that it requires no supervision.’’). 

401Superior Care, 840 F.2d at 1060; cf. Antenor 

88 F.3d at 933 n.10 (explaining in an FLSA joint 

employment case that ‘‘courts have found economic 

dependence under a multitude of circumstances 

where the alleged employer exercised little or no 

control or supervision over the putative 

employees’’). 

402 781 F.3d at 814. 

403 Id. 

404 917 F.3d at 381 (quoting Pilgrim Equip., 527 

F.2d at 1312) (alteration in original)). 

405Nieman, 775 F. App’x at 624–25. 

406 87 FR 62250. 

407 Id. (citing, for example, Ruiz v. Affinity 

Logistics Corp., 754 F.3d 1093, 1102–03 (9th Cir. 

2014) (finding in a state wage-and-hour case that 

techniques used by an employer to monitor its 

furniture delivery drivers were a form of 

supervision that made it more likely that the drivers 

were employees; as the court noted, the employer 

‘‘closely monitored and supervised’’ the drivers by, 

among other things, ‘‘conducting ‘follow-alongs’; 

requiring that drivers call their . . . supervisor after 

every two or three stops; monitoring the progress 

of each driver on the ‘route monitoring screen’; and 

contacting drivers if . . . [they] were running late 

or off course’’). See also Scantland, 721 F.3d at 

1314 (finding ‘‘meaningful supervision and 

monitoring’’ in part because the employer required 

cable installers to log in and out of a service on 

their cell phones to record when they arrived on a 

job, when they completed a job, and what their 

estimated time of arrival was for their next job). 

408See id. (relying on the Department’s 

enforcement experience in this area). For example, 

an employer’s use of electronic visitor verification 

(‘‘EVV’’) systems can be evidence of an employment 

relationship, especially in those instances where 

the employer uses the systems to set schedules, 

discipline staff, or run payroll systems, for example. 

See Domestic Service Final Rule Frequently Asked 

Questions (FAQs), U.S. Department of Labor (March 

The Department’s decision to present 

the control factor from the perspective 

of the employer’s control over the 

economic aspects of the working 

relationship conforms to relevant case 

law describing the factor and also 

represents a common-sense 

understanding that an employer’s ability 

to control a worker’s time may be 

probative of the worker’s status.391 And 

as discussed earlier, where a worker has 

the ability to set their own work 

schedule, courts have often found this 

to be less significant relative to other 

ways in which the employer exerts 

control. As such, scheduling flexibility 

should not be considered potentially 

dispositive of the control factor as 

articulated in the 2021 IC Rule. 

Moreover, the rule does not eliminate 

the relevance of the worker’s ability to 

control their schedule in the analysis, as 

the rule notes that ‘‘more indicia of 

control by the worker,’’ such as control 

over one’s schedule, may ‘‘favor[ ] 

independent contractor status.’’ 392

The Department is finalizing the 

scheduling portion of the control factor 

at § 795.105(b)(4) as proposed. 

c. Supervision 

With respect to the consideration of 

supervision within the control factor, 

the Department proposed that ‘‘[f]acts 

relevant to the employer’s control over 

the worker include whether the 

employer . . . supervises the 

performance of the work’’ including 

‘‘whether the employer uses 

technological means of supervision 

(such as by means of a device or 

electronically)’’ or ‘‘reserves the right to 

supervise or discipline workers.’’ 393 In 

describing its proposal, the Department 

noted the common-sense observation 

that an employer’s close supervision of 

a worker on the job may be evidence of 

the employer’s control over the worker, 

which is indicative of employee status. 

Conversely, as the Department noted, 

the lack of close supervision may be 

evidence that a worker is free from 

control and is in business for 

themself.394 However, courts have 

found that traditional forms of inperson, continuous supervision are not 

required to determine that this factor 

weighs in favor of employee status.395

A lack of supervision is not alone 

indicative of independent contractor 

status,396 such as when the employer’s 

business or the nature of the work make 

direct supervision unnecessary. For 

example, in Off Duty Police, the Sixth 

Circuit determined that security officers 

were employees although they were 

‘‘rarely if ever supervised’’ on the job, 

noting that ‘‘the actual exercise of 

control ‘requires only such supervision 

as the nature of the work requires.’ ’’ 397

Moreover, ‘‘the level of supervision 

necessary in a given case is in part a 

function of the skills required to 

complete the work at issue.’’ 398 As the 

court noted, there was a limited need to 

supervise where officers in that case 

‘‘had far more experience and training 

than necessary to perform the work 

assigned.’’ 399 And in DialAmerica, the 

Third Circuit concluded that 

homeworkers were employees even 

though they were subject to little direct 

supervision (a fact typical of 

homeworkers generally).400 As the 

Second Circuit stated, ‘‘[a]n employer 

does not need to look over his workers’ 

shoulders every day in order to exercise 

control.’’ 401

In the NPRM, the Department also 

explained that employers may rely on 

training and hiring systems that make 

direct supervision unnecessary. As the 

Department noted, in Keller v. Miri 

Microsystems LLC, an employer relied 

on pre-hire certification programs and 

installation instructions when hiring 

their satellite dish installers.402 The 

court noted that the employer had little 

day-to-day control over the workers and 

did not supervise the performance of 

their work, but that a factfinder could 

‘‘find that [the employer] controlled [the 

installer’s] job performance through its 

initial training and hiring practices.’’ 403

The Department also highlighted, from 

the Fifth Circuit’s statement in Parrish, 

that the ‘‘lack of supervision [of the 

individual] over minor regular tasks 

cannot be bootstrapped into an 

appearance of real independence.’’ 404

Yet, the Department recognizes that a 

worker’s ability to work without 

supervision may be probative of their 

independent contractor status, such as 

in Nieman, where the court affirmed a 

district court’s conclusion that an 

insurance claims investigator was 

properly classified as an independent 

contractor, in part, because the 

investigator worked largely without 

supervision when setting up 

appointments, and deciding where to 

work and how and when to complete 

his assignments.405

Finally, the Department noted that 

supervision can come in many different 

forms beyond physical ‘‘over the 

shoulder’’ supervision, which may not 

be immediately apparent.406 For 

instance, supervision can be maintained 

remotely through technology instead of, 

or in addition to, being performed in 

person, such as when supervision is 

implemented via monitoring systems 

that can track a worker’s location and 

productivity, and even generate 

automated reminders to check in with 

supervisors.407 Additionally, an 

employer can remotely supervise its 

workforce, for instance, by using 

electronic systems to verify attendance, 

manage tasks, or assess performance.408


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20, 2023, 4:30 p.m.), https://www.dol.gov/agencies/ 

whd/direct-care/faq#g11 (discussing EVV systems 

at question #10 in relation to an FLSA joint 

employment analysis). 

409See section V(D). 

410See generally Superior Care, 840 F.2d at 1060 

(finding that the employer’s reserved right to 

perform in-person supervision of nursing staff was 

relevant to the economic reality analysis). 

Thus, a totality-of-the-circumstances 

analysis properly includes not only 

exploring ways in which supervision is 

expressly exercised, but also those 

instances where supervision is not 

apparent but still used by the 

employer—either through the job’s 

structure, training, or the use of 

technological tools. 

Several commenters supported the 

Department’s discussion of supervision 

generally. For instance, LCCRUL & WLC 

noted that case law confirms the fact 

that, ‘‘direct, on-site supervision’’ is not 

a prerequisite to find that a worker is an 

employee. As LCCRUL & WLC noted, 

the Department’s approach toward 

supervision allows a ‘‘more accurate 

and comprehensive determination of the 

economic reality of the parties’ 

relationship.’’ ACRE et al., PowerSwitch 

Action and other commenters noted that 

the Department’s description of 

supervision is helpful, since it 

highlights the many ways in which a 

worker might be controlled at work 

through direct management or 

technological surveillance. 

Commenters such as NELP and ROC 

United commended the Department’s 

decision to address technologicallymediated supervision, since, as NELP 

noted, ‘‘[m]any businesses today 

manage their workforces with 

monitoring systems that track 

productivity, location, and attendance.’’ 

Providing this focus, NELP explained, 

‘‘will ensure that supervision is 

analyzed regardless of the medium used 

to accomplish it.’’ As CLASP & GFI 

commented, ‘‘new technologies make[ ] 

it easier for employers to keep close tabs 

on workers and simultaneously 

disengage from modes of management 

that, in a pre-digital world, would likely 

have been indicators of an employment 

relationship.’’ The use of such 

technology, they noted, may particularly 

effect low-wage workers whose jobs can 

be easier to measure, such as warehouse 

workers whose efficiency in moving 

material can be readily quantified, or 

delivery drivers, whose speed, routes, 

and drop-off points can be managed 

digitally. As they describe, in some 

industries, digital ‘‘surveillance has 

completely supplanted in-person 

supervision in cases where the nature of 

the work would otherwise require an 

onsite supervisor.’’ 

While some comments supported the 

overall approach to supervision in the 

NPRM, others suggested that the 

Department go further, either by adding 

additional context to the regulatory text 

or discussing additional facets of 

supervision. For instance, Nichols 

Kaster commented that the 

Department’s approach is helpful since 

‘‘supervision can take multiple forms’’ 

and employers have often argued that 

their workers are independent 

contractors by citing to the fact that they 

don’t engage in in-person supervision of 

their work. However, it, along with 

NELA, called on the Department to 

include more information from the 

preamble discussion in the final 

regulatory text, specifically language 

addressing supervision via automated 

systems and that the lack of apparent 

supervision would not necessarily be 

indicative of a worker’s independent 

contractor status. 

Similarly, NELP requested that the 

Department include language in the 

final regulatory text specifically 

clarifying ‘‘that a lack of direct 

supervision may still support a finding 

of an employer’s right to control if an 

employer can simply exert control when 

it deems it in the employer’s interest to 

do so.’’ Outten & Golden noted that the 

text of the final rule should also 

encompass the concept of ‘‘monitoring,’’ 

since ‘‘many workers who work 

remotely . . . are primarily ‘supervised’ 

through digital monitoring.’’ In 

addition, Gale Healthcare Solutions and 

IntelyCare suggested that the 

Department include supervision 

provided by onsite or related entities 

such as scenarios where healthcare staff 

sent by an employer to a worksite 

receive ‘‘supervisory-like feedback’’ on 

their performance that can be 

communicated back to their employer. 

Moreover, Gale Healthcare was 

concerned that if the Department 

indicated in the final rule that initial 

training—which some employers have 

deployed in lieu of direct supervision— 

is indicative of control, and thus 

employee status, that employers who 

wish to continue engaging independent 

contractors may forego such training, 

which could harm individuals in the 

healthcare industry. 

The Department declines to adopt the 

additional regulatory language 

suggested by commenters, as it believes 

additional discussion is more 

appropriate for future subregulatory 

guidance. In response to NELP, the 

Department understands its suggestion 

as requesting additional detail regarding 

reserved control, which is discussed 

elsewhere in this final rule. The 

Department also declines to add the 

phrase ‘‘monitoring’’ to the final 

regulatory text as requested by Outten & 

Golden. As described below, the 

Department agrees that supervision of a 

worker includes all forms of supervision 

which go to the worker’s performance of 

the work. Thus, while the act of 

collecting data through monitoring 

systems could be used to supervise the 

performance of work, it might instead 

serve other operational needs of the 

employer not related to control. 

Therefore, adding ‘‘monitoring’’ to the 

regulatory text would not be helpful at 

highlighting this distinction. Moreover, 

to the extent Outten & Golden’s 

comments were intended to include 

monitoring to capture situations where 

the employer would monitor a worker 

and then exert supervisory control when 

needed or desired, the Department is 

confident that this scenario is very 

similar to its discussion of reserved 

control where an employer possesses 

supervisory control but elects to exert it 

when it chooses.409 Where an employer 

reserves the right to use electronic or 

digital means of supervision—rather 

than traditional in-person supervision— 

to monitor a worker and thus correct or 

direct the performance of the work 

when it deems necessary, then this too 

would be relevant to the economic 

reality analysis.410 Accordingly, the 

Department concludes that the 

regulatory language describing the 

control factor contains sufficient 

information to inform stakeholders 

about the scope of this factor. 

The Department also recognizes the 

situation that Gale Healthcare Solutions 

and IntelyCare raise regarding 

supervision that may be performed by 

other entities where the work is 

performed and relayed back to a 

potential employer. However, the 

Department declines to add specific 

language addressing this scenario, since 

this scenario would require a factspecific inquiry. For example, if a 

potential employer is exercising control, 

but delegates it to a third party that is 

conducting onsite supervision and then 

reports that to the employer, then the 

same analysis regarding the employer’s 

supervision would apply. Finally, to 

Gale Healthcare’s concern regarding 

training, while it may be indicative of 

other factors in the economic reality test 

(e.g., skill and initiative), its relevance 

for the purposes of this portion of the 

control analysis is to simply highlight 

how training may be used by some 

employers to avoid any necessary 

supervision once the worker begins 

performing work. Such training that is 

not a replacement for close supervision, 


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411See, e.g., Chao v. Mid-Atlantic Installation 

Servs., Inc., 16 F. App’x 104, 106–08 (4th Cir. 2001) 

(agreeing with the district court’s analysis that the 

ability to complete jobs in any order, conduct 

personal affairs, and work independently is 

evidence that leans toward identifying a worker as 

an independent contractor). 

412See, e.g., Superior Care, 840 F.2d at 1060 (‘‘An 

employer does not need to look over his workers’ 

shoulders every day in order to exercise control.’’); 

Driscoll, 603 F.2d at 756 (farmworkers could be 

employees of a strawberry farming company even 

where the employer exercised little direct 

supervision over them); Twyeffort, 158 F.2d at 947 

(rejecting an employer’s contention that its tailors 

are independent contractors because they are ‘‘free 

from supervision, are at liberty to work or not as 

they choose, and may work for other employers if 

they wish’’). 

413The comment noted, for example, that 

distributors of perishable goods like food and 

medicine use technological monitoring ‘‘to ensure 

product integrity, compliance with customer and 

regulatory commitments, and even the safety of the 

public at large,’’ not necessarily to exercise control 

over the worker as an employee. 

414For discussion of comments related to actions 

taken to comply with regulatory requirements see 

section V(C)(4)(a). 

such as apprising workers of safety 

protocols, would not necessarily be 

indicative of supervisory-like control. 

UFCW commended the Department’s 

focus on providing additional context to 

the control factor analysis, specifically 

the ways in which an employer might 

use technology to supervise its 

workforce. However, as discussed in the 

section on examples used in the 

preamble, UFCW, several of its locals, 

and the AFL–CIO would also have the 

Department go further by providing 

additional examples of ways in which 

employers use technology, including 

surveillance, data collection, and 

algorithmic management tools, to 

supervise workers. According to UFCW, 

since ‘‘employers in all industries are 

rapidly exploiting electronic 

surveillance to supervise workers,’’ the 

final rule ‘‘should additionally explain 

that a company’s use of nontransparent 

computer algorithms (programming 

codes) to manage workers is evidence 

indicative of employer control.’’ 

The Department agrees with 

commenters like the AFL–CIO that 

control over the performance of work 

that is exercised by means of data, 

surveillance, or algorithmic supervision 

is relevant to the control inquiry under 

the economic reality test. Such tools 

could be used directly by the employer 

or on their behalf to supervise the 

performance of the work. Digital tools 

are many times developed, controlled, 

and deployed to assist in (or 

independently conduct) supervision in 

ways that would have otherwise 

required in-person oversight. However, 

the Department believes that such tools, 

including algorithmic control, if used by 

the employer to supervise the 

performance of the work, are already 

captured by the regulatory text 

addressing a potential employer’s use of 

‘‘technological means of supervision 

(such as by means of a device or 

electronically).’’ Relatedly, the 

Department declines to add additional 

language suggesting actions like mere 

data collection would constitute 

supervision for the purposes of control. 

Like monitoring, an employer may 

collect data on business operations for 

purposes unrelated to its relationship to 

workers. Yet, the Department recognizes 

that where the employer collects 

information that then is used for the 

purposes of supervision and thus goes 

beyond information collection, that may 

be probative of an employer’s control 

under this factor. 

Several commenters disagreed with 

the Department’s approach regarding 

supervision. CWI noted that a lack of 

supervision may in fact reflect that a 

worker is an independent contractor as 

independent contractors are often 

‘‘retained precisely because they 

perform work that the putative 

employer does not,’’ which results in 

less supervision. CWI further contended 

that a lack of supervision should edge 

toward a finding of independent 

contractor status in most cases. This 

concern was echoed by N/MA, which 

suggested that the Department’s 

approach ‘‘turns the control factor 

upside down by effectively ignoring a 

lack of putative employer control.’’ 

Many independent contractors, N/MA 

contended, function without 

supervision precisely because of the 

specialized or technical services they 

render. N/MA asserted that ‘‘work that 

does not require supervision by the 

hiring entity is exactly the type of work 

that should be recognized as more likely 

to result in a determination of a lack of 

control over the manner and means by 

which the work is performed, and 

indicative of independence.’’ 

The Department agrees with 

commenters that a lack of supervision 

may be probative of a worker’s 

independent contractor status. That fact 

is reflected in case law as well as the 

Department’s proposal.411 For example, 

regarding N/MA’s comment, the 

Department agrees that workers who 

deliver technical or specialized services 

may use that technical expertise to 

operate without supervision (either 

because the employer need not 

supervise a technically-proficient 

worker or the employer does not have 

the expertise themselves to 

meaningfully supervise). In such 

circumstances, an employer’s lack of 

supervision may support a finding that 

the control factor weighs in favor of 

independent contractor status. The 

Department notes however, also 

consistent with case law, that the lack 

of supervision on its face should not 

halt a full analysis.412 Lack of direct or 

in-person supervision may not indicate 

that the control factor weighs in favor of 

independent contractor status if there 

are other ways in which the employer 

is able to accomplish the same manner 

of control that would have otherwise 

been performed through close, in-person 

supervision over the performance of the 

work. As the Department indicated, for 

example, the employer may rely on 

detailed training or instructions, deploy 

electronic tools to direct the 

performance of the work remotely, or 

retain the right to conduct in-person 

supervision. 

CWI further suggested that the 

Department’s proposal missed a critical 

distinction. By focusing merely on the 

fact that supervision may be maintained 

by technological means, they asserted 

that the proposal did not distinguish 

between supervision through 

technology that is ‘‘targeted toward the 

direction of the manner in and means by 

which the worker performs his work’’ 

and monitoring that is ‘‘targeted toward 

the particular goods or services at 

issue.’’ 413 The California and U.S. 

Chambers of Commerce and WPI agreed, 

with WPI similarly contending that 

electronic monitoring ‘‘has little to no 

impact on economic realities, and that 

it is an often-commonplace component 

of normal arm’s-length contracts.’’ See 

also Cambridge Investment Research, 

Raymond James, and WFCA. As Flex 

similarly noted, technology is used to 

manage basic business functions and 

compliance monitoring, as well as 

‘‘enhance[ ] the user experience for 

consumers’’ such as noting a driver’s 

location, arrival time, or facilitating the 

exchange of money for the consumer. 

See also DSA; NHDA. Moreover, Flex 

noted that federal regulations require 

electronic monitoring for safety 

purposes in some industries, like 

trucking.414 See also; American Trucking 

Association; State Trucking 

Associations; U.S. Chamber. Therefore, 

to avoid confusion, Flex suggested that 

references to technology should be 

stricken from the rule. See also DSA; 

PGA; Raymond James. 

CWI also stated, however, that 

technological supervision ‘‘coupled 

with some manner of corrective 

direction about the means and manner 

of performance may evidence 

employment,’’ yet they commented that 

the Department’s proposal ‘‘sweeps too 

broadly.’’ The Coalition of Business 


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415 87 FR 62275 (proposed § 795.110(b)(4)). 

416 87 FR 62250. 

417 Id. 

418Whitaker House, 366 U.S. at 32. 

419 Id. 

420 87 FR 62250–51 (citing Verma, 937 F.3d at 230 

(identifying, among other things, the employer’s 

setting the price and duration of private dances as 

indicative of ‘‘overwhelming control’’ over the 

performance of the work); Off Duty Police, 915 F.3d 

at 1060 (concluding that certain security guards 

were employees, in part, because ‘‘[the employer] 

set the rate at which the workers were paid’’); 

McFeeley, 825 F.3d at 241–42 (affirming that a 

nightclub owner was exercising significant control 

because, among other things, it set the fees for 

private dances); Cornerstone Am., 545 F.3d at 343– 

44 (finding the control factor weighed in favor of 

employee status where employer controlled 

‘‘meaningful’’ economic aspects of the work, 

including pricing of products sold); Selker Bros., 

949 F.2d at 1294 (finding that, among other things, 

the fact that the employer set the price of cash sales 

of gasoline reflected the employer’s ‘‘pervasive 

control’’ over the workers); Agerbrink v. Model 

Serv., LLC, 787 F. App’x 22, 25–26 (2d Cir. 2019) 

(determining that there were material facts in 

dispute regarding the worker’s ‘‘ability to negotiate 

her pay rate,’’ which related to the degree of control 

exerted by the employer, and rejecting the 

employer’s contention that the worker had control 

over her pay rate simply because she could either 

work for the amount offered or not work for that 

amount, stating that this ‘‘says nothing of the power 

to negotiate a rate of pay’’); Karnes v. Happy Trails 

RV Park, LLC, 361 F. Supp. 3d 921, 929 (W.D. Mo. 

2019) (finding park managers to be employees in 

part because the park owners ‘‘set all the prices’’); 

Hurst v. Youngelson, 354 F. Supp. 3d 1362, 1370 

(N.D. Ga. 2019) (finding relevant to the control 

analysis that the plaintiff was not free to set the 

prices she charged customers and had no ability to 

waive or alter cover charges for her customers). 

421 Id. at 62251. 

422 636 F. App’x 225, 227 (5th Cir. 2016); see also 

Nelson v. Texas Sugars, Inc., 838 F. App’x 39, 42 

(5th Cir. 2020) (finding that because ‘‘the dancers 

set their own schedule, worked for other clubs, 

chose their costume and routine, decided where to 

perform (onstage or offstage), kept all the money 

that they earned, and even chose how much to 

charge customers for dances, a reasonable jury 

could conclude that the Club did not exercise 

significant control over them’’) (emphasis added). 

423 87 FR 62251. 

424 Id. n. 410 (quoting McFeeley, 825 F.3d at 242– 

43). 

Stakeholders noted that the language in 

the proposal could encompass the 

employer’s or worker’s use of everyday 

technologies that are used to run a 

contemporary workplace. Finally, the 

CA Chamber noted that independent 

contractors are also supervised, 

suggesting that it would be ‘‘nonsensical 

to assert that you would hire a 

contractor and never oversee their 

services or check in on progress.’’ 

The Department agrees with 

commenters such as CWI and WPI that 

employers may at times use technology 

to track information critical to their 

business or, as the CA Chamber notes, 

the mere status of work performed by a 

worker. Such actions can be performed 

consistent with an independent 

contractor relationship with a worker, 

even when the data being collected is 

generated from the actions of the 

worker. The Department thus agrees 

with CWI, for example, that the 

proposed regulatory text missed this 

nuanced distinction. However, as CWI 

noted, where such tracking is then 

paired with supervisory action on behalf 

of the employer such that the 

performance of the work is being 

monitored so it might then be directed 

or corrected, then this type of behavior 

may suggest that the worker is under the 

employer’s control. Thus, the 

Department is adding additional 

language to the control factor to clarify 

that the relevant consideration is not 

simply the employer’s use of technology 

to supervise, but the use of technology 

‘‘to supervise the performance of the 

work.’’ This is why the Department 

disagrees with Flex’s call to eliminate 

any reference to technology and WPI’s 

assertion that the use of technology 

never implicates the analysis under the 

economic reality test. Such a complete 

bar would suggest that a worker’s 

performance of the work can never be 

controlled or directed by technology, 

which is not correct, especially when 

such tools are not only ubiquitous in 

many employment settings, but also are 

specifically deployed by some 

employers to supervise and direct the 

means through which a worker performs 

their job. Moreover, the Department 

does not believe that the inclusion of a 

reference to technology, as noted by the 

Coalition of Business Stakeholders, 

would act as an unbounded factor, 

pulling in all forms of technology used 

in modern workplaces. The only forms 

of technology referenced by the rule are 

those that are deployed by the employer 

as a means of supervising the 

performance of the work which are thus 

probative of economic dependence, not 

all technologies that the employer might 

be using in their business. 

The Department notes that comments 

received regarding the proposal’s 

discussion of an employer’s reserved 

control over the worker, including 

reserved rights to supervise, are 

addressed in the discussion of reserved 

rights in section V.D. 

The Department is finalizing the 

supervision portion of the control factor 

at § 795.105(b)(4) with the revisions 

discussed herein. 

d. Setting a Price or Rate for Goods or 

Services 

Regarding the control factor’s 

treatment of the ability to set a price or 

rate for goods or services, the 

Department proposed that this factor 

consider whether the ‘‘employer 

controls economic aspects of the 

working relationship . . . including 

control over prices or rates for 

services.’’ 415 As the Department noted, 

facts related to the employer’s ability to 

set prices or rates of service relate 

directly to whether the worker is 

economically dependent on the 

employer for work and help answer the 

question whether the worker is in 

business for themself.416

At the outset, the Department noted 

that workers in business for themselves 

are generally able to set (or at least 

negotiate) their own prices for services 

rendered.417 The Department further 

noted that one of the early Supreme 

Court cases applying the economic 

reality test concluded that the workers 

were employees in part because they 

were not ‘‘selling their products on the 

market for whatever price they can 

command.’’ 418 The Court explained 

that, instead, the workers were 

‘‘regimented under one organization, 

manufacturing what the organization 

desires and receiving the compensation 

the organization dictates.’’ 419 The 

Department also cited multiple court of 

appeals and district court decisions 

finding that an employer’s command 

over the price or rate for services 

indicated their control over the worker 

and that the worker was thus less likely 

to be in business for themself.420

Conversely, the Department noted 

that when a worker negotiates or sets 

prices, those facts weigh in favor of 

independent contractor status.421 For 

instance, in Eberline v. Media Net, LLC, 

the court found that a jury had sufficient 

evidence to conclude that a worker 

exerted control over meaningful aspects 

of his business in part due to ‘‘testimony 

that installers could negotiate prices for 

custom work directly with the customer 

and keep that money without 

consequence.’’ 422

The Department also noted that the 

price of goods and services may 

sometimes be included in contracts 

between a business and an independent 

contractor.423 The Department quoted 

McFeeley, where the court observed that 

a worker doesn’t ‘‘automatically 

become[ ] an employee covered by the 

FLSA the moment a company exercises 

any control over him. After all, a 

company that engages an independent 

contractor seeks to exert some control, 

whether expressed orally or in writing, 

over the performance of the contractor’s 

duties[.]’’ 424 Yet, the Department 

cautioned that the presence of a contract 

does not obviate the need for a complete 

analysis regarding the control exerted by 

the employer, such as the worker’s 

ability to negotiate and alter the terms 


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425 Id. (citing Scantland, 721 F.3d at 1315 

(reversing summary judgment for the employer 

based in part on evidence that the workers ‘‘could 

not bid for jobs or negotiate the prices for jobs’’)). 426 87 FR 62275 (proposed § 795.110(b)(4)). 427 McFeeley, 825 F.3d at 241. 

of the contract. As the discussion in the 

NPRM concluded, it is evidence of 

employee status when an entity other 

than the worker sets a price or rate for 

the goods or services offered by the 

worker, or where the worker simply 

accepts a predetermined price or rate 

without meaningfully being able to 

negotiate it.425

Multiple commenters supported the 

Department’s inclusion and description 

of price setting under the control factor. 

For example, the LA Fed & Teamsters 

Locals stated that this inclusion is a 

‘‘recognition of the great significance of 

an employer’s control over setting prices 

for services’’ which is ‘‘much more 

reliable indicia of entrepreneurial status 

than less significant aspects of control.’’ 

Such an approach, it suggested, will 

prevent employers from ‘‘offering 

[workers] minor forms of control while 

effectively setting a ceiling on the 

workers’ earnings by maintaining 

control over the rates offered to 

customers.’’ The law firm Nichols 

Kaster noted that the proposal 

‘‘expounds on this important point and 

provides focus and clarity on what 

‘economic aspects’ means.’’ NELP stated 

that the Department’s discussion of 

price setting appropriately recognized 

that price-setting is a form of control, 

since an independent contractor 

‘‘controls, and has the right to control, 

all important business decisions,’’ 

including ‘‘what good or service to sell 

and at what price.’’ As NELP further 

noted, ‘‘without the power to set prices 

for goods or services, a worker will 

likely be economically dependent on an 

employer for work, and if she wants to 

increase earnings, her only option is to 

work longer, harder, or more jobs.’’ 

REAL Women in Trucking commended 

the Department for providing ‘‘helpful 

clarity’’ regarding price setting 

generally, providing an example of a 

worker’s ability to negotiate rates where 

drivers select jobs from a ‘‘free-market 

load board’’ where they can negotiate 

the rates for their services and sign a 

rate contract directly with brokers. 

Some commenters suggested revisions 

to the proposed regulatory language. For 

example, UFCW urged the Department 

to amend the discussion regarding 

control to include a discussion of 

information asymmetries, noting that 

where a company conceals pricing data, 

that would indicate that a worker is not 

an independent contractor, since the 

worker lacks key information regarding 

price that would affect entrepreneurial 

decisions they might make. ACRE et al. 

similarly suggested that the Department 

‘‘clarify in the rule that another factor in 

determining if workers are considered 

employees must include if a corporation 

exercises control over workers through 

pay structures,’’ specifically bonus pay 

systems used by some transportation 

network companies that encourage 

workers to drive more. ACRE et al. also 

suggested that the Department clarify 

that price (or wage) setting is so critical 

to the analysis that ‘‘workers who can 

not independently set their own wage 

rates are, per se, not independent 

contractors.’’ See also Jobs With Justice; 

NELA; Outten & Golden; PowerSwitch 

Action. 

The Department agrees that the lack of 

information regarding prices may 

prevent a worker from negotiating prices 

to further their own business. The 

Department believes that this concept 

was captured in the proposed language 

that the Department is finalizing which 

states that ‘‘[w]hether the employer 

controls economic aspects of the 

working relationship’’ should be 

considered, including ‘‘control over 

prices or rates for services.’’ 426 Control 

over price is one specific example and 

is not meant to be exhaustive. Further, 

the Department believes that defining 

the relationship in terms of 

‘‘information asymmetry’’ would be less 

helpful to businesses that are trying to 

understand their obligations, since that 

term is ambiguous. Moreover, the 

Department is confident that situations 

in which the employer is controlling 

specific payment terms or pay structures 

are captured by the proposed regulatory 

language because the relevant inquiry 

focuses on an employer’s control of 

‘‘economic aspects of the working 

relationship,’’ which can embrace a 

nonexclusive set of considerations that 

may be relevant to a specific working 

relationship. Finally, the Department 

declines to adopt multiple commenters’ 

suggestion to state that a worker’s lack 

of control over prices would suggest 

conclusively that they are not 

independent contractors. As mentioned 

throughout this final rule, the 

Department declines suggestions to 

predetermine the weight of certain 

considerations, facts, or individual 

factors. The Department notes, however, 

that in a particular case, after 

considering all the facts of a particular 

relationship, control over pricing may 

be highly relevant to whether the 

control factor weighs in favor of 

employee or independent contractor 

status. This approach is consistent with 

case law, where a court ‘‘adapt[s] its 

analysis to the particular working 

relationship, the particular workplace, 

and the particular industry in each 

FLSA case.’’ 427

Some commenters were opposed to 

the inclusion of price setting or the 

extent to which it may be used to 

illuminate the control factor of the 

economic reality test. For instance, the 

CA Chamber noted that while it 

‘‘generally agree[s] with the description 

of this facet of the control factor,’’ it was 

concerned that it may receive too much 

weight in the analysis because some 

employees, ‘‘such as salaried whitecollar workers’’ can negotiate their pay, 

while others, like an ‘‘hourly employee 

on an assembly line’’ may not. 

Therefore, the CA Chamber stated that 

considerations regarding price control, 

‘‘should have limited use in the analysis 

because it is not a defining feature of 

employment generally.’’ See also AFPF; 

Richard Reibstein, publisher of legal 

blog. 

The IFA noted its concern with the 

Department’s treatment of price as it 

related to franchising relationships. IFA 

explained, ‘‘[f]ranchisors commonly 

suggest resale prices for offerings across 

the franchise system and, subject to 

applicable law, may set minimum or 

maximum prices for products or 

services, or have uniform advertising 

requirements for system-wide 

promotions.’’ IFA requested that the 

Department, ‘‘expressly state that, in the 

franchise context, the fact that a 

franchisor sets prices for goods or 

services is not probative of an 

employment relationship.’’ Similarly, 

ACLI shared that considerations 

regarding price are misplaced for the 

insurance industry, as ‘‘neither insurers 

nor insurance agents have unlimited 

discretion to adjust prices however they 

see fit.’’ In fact, ‘‘[c]onsistent with the 

requirement of financial solvency, 

insurance agents and advisors have no 

say or influence over the price of the 

products that they sell on behalf of 

firms, and they are prohibited by law 

from ‘rebating’ any of the commissions 

earned from those sales,’’ a fact that 

‘‘effectively bars them from getting 

involved in, or setting, pricing.’’ The 

Alternative and Direct Investment 

Securities Association noted a similar 

arrangement among some investment 

advisors, who cannot fully negotiate 

rates for commissions because such 

rates are, in part, determined by the 

application of SEC regulations. 

Similarly, C.A.R. noted that real estate 

industry commission payments in 

California are required to be paid 

through a broker (with a written 


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428Whitaker House, 366 U.S. at 32. 429 87 FR 62275 (proposed § 795.110(b)(4)). 

430See 86 FR 1247 (§ 795.105(d)(1)(i)). 

431 87 FR 62251–52. 

432See Parrish, 917 F.3d at 382 (noting that the 

non-disclosure agreement did not require exclusive 

employment, and was therefore not an element of 

control that indicated employee status); Off Duty 

Police, 915 F.3d at 1060–61 (non-compete clause 

preventing workers from working for employer’s 

customers for two years after leaving employment 

was among evidence supporting finding that control 

factor indicated employee status); Express SixtyMinutes, 161 F.3d at 303 (‘‘Independent Contractor 

Agreement’’ did not contain a ‘‘covenant-not-tocompete’’ and drivers could work for other courier 

delivery providers, which indicated independent 

contractor status); see also WHD Op. Ltr., 2000 WL 

34444342, at *1, 4 (Dec. 7, 2000) (workers were 

required to sign an agreement that prohibited them 

from working for other companies while driving for 

the employer, which suggested employee status); 

but cf. Faludi v. U.S. Shale Sols., LLC, 950 F.3d 269, 

276–77 (5th Cir. 2020) (a non-compete clause ‘‘does 

not automatically negate independent contractor 

status’’); Franze, 826 F. App’x at 76–77 (although 

a non-compete provision prohibited drivers from 

driving routes and carrying products for competing 

companies, facts showed that the drivers 

‘‘controlled the overall scope of their delivery 

operations’’ because of their control over 

distribution territories, ability to hire others, 

schedule flexibility, and lack of oversight). 

433See, e.g., Keller, 781 F.3d at 813–14 (although 

worker was not prohibited from working for other 

companies, ‘‘a reasonable jury could find that the 

way that [the employer] scheduled [the worker’s] 

installation appointments made it impossible for 

[the worker] to provide installation services for 

other companies’’); Scantland, 721 F.3d at 1313–15 

(finding even if workers were not prohibited from 

working for other installation contractors their long 

hours and inability to turn down work suggested 

that the employer controlled whether they could 

work for others, which was in part why the control 

factor favored employee status); Cromwell, 348 F. 

App’x at 61 (‘‘Although it does not appear that [the 

workers] were actually prohibited from taking other 

jobs while working for [the employers], as a 

practical matter the work schedule established by 

[the employers] precluded significant extra work.’’); 

Flint Eng’g, 137 F.3d at 1441 (finding the hours the 

company required of the workers, coupled with 

driving time between home and remote work sites 

every day, made it ‘‘practically impossible for them 

to offer services to other employers’’). 

434See Brant, 43 F.4th at 669–70 (despite having 

the contractual ability to haul freight for other 

carriers, a driver alleged that the company 

maintained a ‘‘system for approving and monitoring 

Continued 

agreement on how the commission will 

be shared between broker and 

salesperson). And the Coalition of Cattle 

Associations stated that cattle health 

processing crews, workers common in 

the cattle industry that care for herds, 

are similarly paid indirectly by a cattle 

farm that contracts for services of a 

company that engages crew members. 

CWI commented that considerations 

around prices or rates are superfluous 

because ‘‘[a] worker’s ability to negotiate 

or otherwise impact the amounts that he 

earns for his work is already fully 

incorporated in the opportunity-forprofit-or-loss factor.’’ Thus, CWI 

suggested that since this consideration 

should be withdrawn as it is redundant. 

The N/MA similarly noted that such 

overlapping analysis results in 

‘‘improper[ ] double counting.’’ See also 

CMAA. & NRA. 

The Department declines to adopt 

commenters’ proposals to de-emphasize 

the relevance of control over prices or 

rates of service. Just as the Department 

declined the suggestion that it elevate 

the role of control over prices, the 

Department concludes that giving this 

consideration less weight would 

similarly undermine a totality-of-thecircumstances analysis. An employer’s 

control over pricing should be one fact 

among all other facts considered under 

the control factor as it may be probative 

of a worker’s economic dependence on 

a potential employer. 

The Department recognizes that many 

industries, occupations, or even 

business sectors set prices and rates for 

goods or services in ways that are 

unique, as noted by commenters like 

ACLI and IFA. However, workers who 

are truly in business for themselves will 

generally control the fundamental 

economic components of their business, 

including the prices to charge customers 

or clients for the goods or services 

offered. As discussed in section V.C.4.a, 

the Department is revising the final 

regulatory text of this factor to state: 

‘‘Actions taken by the potential 

employer for the sole purpose of 

complying with a specific, applicable 

Federal, State, Tribal, or local law or 

regulation are not indicative of control.’’ 

However, beyond those obligations, 

where the potential employer exerts 

control to set rates or prices for services, 

the worker is more likely to be 

‘‘receiving the compensation the 

organization dictates,’’ and thus less 

likely to be in business for themself.428

In addition, the Department disagrees 

with commenters such as CWI and N/ 

MA contending that the discussion of 

price in both the nature and degree of 

control and opportunity for profit and 

loss factors is not warranted. In the 

former, the analysis is focused on the 

employer’s actions that would control 

the economic aspects of the working 

relationship, while the discussion of the 

latter focuses on ways in which the 

individual has opportunities for profit 

or loss based on managerial skill 

(including initiative or business acumen 

or judgment) that affect the worker’s 

economic success or failure in 

performing the work. Each discusses 

prices from different analytical points of 

view, an effort that is consistent with 

this final rule’s approach, which is to 

analyze the working relationship in all 

its facets. 

Finally, the Department declines 

commenter suggestions to omit any 

discussion of price setting under the 

control factor. The Department 

continues to believe, consistent with 

case law, that a potential employer’s 

general control over the prices or rates 

for services—paid to the workers or set 

by the employer—is indicative of 

employee status. When an entity other 

than the worker sets a price or rate for 

the goods or services offered by the 

worker, or where the worker simply 

accepts a predetermined price or rate 

without meaningfully being able to 

negotiate it, this is relevant under the 

control factor. As such, the Department 

declines to create a carve-out for certain 

business models or industries, as 

requested by some commenters, 

although the Department emphasizes 

that this position is intended to be 

consistent with the case law on this 

issue and is not creating a novel 

interpretation. Importantly, however, as 

with all considerations discussed under 

all the factors, the Department does not 

intend for this fact to presuppose the 

outcome of employment classification 

decisions in any particular industry, 

occupation, or profession. 

The Department is finalizing the price 

setting portion of the control factor at 

§ 795.105(b)(4) as proposed. 

e. Ability To Work for Others 

Another consideration that the 

Department proposed under the control 

factor was whether the employer 

‘‘explicitly limits the worker’s ability to 

work for others’’ or ‘‘places demands on 

workers’ time that do not allow them to 

work for others.’’ 429 This consideration 

was consistent with the 2021 IC rule, 

which also recognized that directly or 

indirectly requiring an individual to 

work exclusively for an employer was 

indicative of an employer-employee 

relationship.430

As explained in the NPRM, where an 

employer exercises control over a 

worker’s ability to work for others, this 

is indicative of the type of control over 

economic aspects of the work that is 

associated with an employment 

relationship rather than an independent 

contractor relationship.431 Control over 

a worker’s ability to work for others may 

be exercised by directly prohibiting 

other work—for example, through a 

contractual provision.432 It may also be 

exercised indirectly by, for example, 

making demands on workers’ time such 

that they are not able to work for other 

employers,433 or by imposing other 

restrictions that make it not feasible for 

a worker to work for others.434 For 


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trips made for other carriers’’ that was ‘‘so complex 

and onerous that Drivers could not, as a practical 

matter, carry loads for anyone other than’’ the 

company, which the court determined weighed in 

favor of employee status). 

435 721 F.3d at 1313–15. 

436 Id. at 1315. 

437See, e.g., Razak, 951 F.3d at 145–46 

(discussing disputed facts regarding whether 

drivers could drive for other services—Uber 

contended drivers could drive for other services but 

drivers contended that they could not accept rides 

from other platforms while online for Uber; drivers 

also noted that Uber’s Driver Deactivation Policy 

stated that soliciting rides outside the Uber system 

leads to deactivation and that activities conducted 

outside the Uber system, like ‘‘anonymous 

pickups,’’ were prohibited); Paragon, 884 F.3d at 

1235 (finding control factor favored independent 

contractor status in part because worker could and 

did work for other employers); Saleem, 854 F.3d at 

141–43 (drivers’ ability to work for business rivals 

and transport personal clients showed less control 

by and economic dependence on the employer); 

Express Sixty-Minutes, 161 F.3d at 303 (control 

factor ‘‘point[ed] toward independent contractor 

status’’ in part because the ‘‘Independent Contractor 

Agreement’’ did not contain a covenant-not-tocompete and drivers could work for other courier 

delivery providers). 

438 87 FR 62252. 

439Reich v. Priba Corp., 890 F. Supp. 586, 592 

(N.D. Tex. 1995) (citing Mednick, 508 F.2d at 300, 

301–02). 440 331 U.S. at 706, 718. 441Seafood, Inc., 867 F.2d at 877. 

442 861 F.2d at 451–53. 

443Seafood, Inc., 867 F.2d at 877. 

444Off Duty Police, 915 F.3d at 1058. 

example, in Scantland, the Eleventh 

Circuit determined that cable 

technicians could not work for other 

companies, either because they were 

told they could not do so or because the 

workers essentially had an exclusive 

work relationship with the employer 

because they were required to work 5 to 

7 days a week and could not decline 

work without risking termination or 

being refused subsequent work.435 Thus, 

the employer controlled whether they 

could work for others, which suggested 

that they were economically dependent 

on the employer.436

The NPRM also recognized that some 

courts find that less control is exercised 

by a potential employer where the 

worker is not prohibited from working 

for others, particularly competitors, and 

that this may be indicative of an 

independent contractor relationship.437

However, the Department declined to 

include in the regulatory text for the 

control factor a blanket statement that 

the ability to work for others is a form 

of control exercised by the worker that 

indicates independent contractor status. 

The Department was concerned that this 

framing, which was in the 2021 IC Rule, 

fails to distinguish between work 

relationships where a worker has 

multiple jobs in which they are 

economically dependent on each 

potential employer and do not exercise 

the control associated with being in 

business for oneself, and relationships 

where the worker has sought out 

multiple clients in furtherance of their 

business.438 As the Department noted, if 

one worker holds multiple lower-paying 

jobs for which they are dependent on 

each employer for work in order to earn 

a living, and a different worker provides 

services to multiple clients due to their 

business acumen and entrepreneurial 

skills, there are qualitative and legally 

significant differences in how these two 

scenarios should be evaluated under the 

economic reality test. 

Ultimately, as stated in the NPRM, the 

question is ‘‘whether a [worker’s] 

freedom to work when she wants and 

for whomever she wants reflects 

economic independence, or whether 

those freedoms merely mask the 

economic reality of dependence.’’ 439

Dating back to Silk, the ‘‘unloaders’’ 

who came to the coal yard ‘‘when and 

as they please[d] . . . work[ing] when 

they wish and work[ing] for others at 

will’’ were deemed to be employees 

rather than independent contractors.440

And as the Fifth Circuit has explained, 

‘‘[the] purposes [of the FLSA] are not 

defeated merely because essentially 

fungible piece workers work from time 

to time for neighboring competitors.’’ 441

For example, in Seafood, Inc., the Fifth 

Circuit examined whether piece-rate 

workers who peeled and picked 

crabmeat and crawfish for a seafood 

processor, and who were allowed ‘‘to 

come and go as they please . . . and 

even to work for competitors on a 

regular basis’’ were, as a matter of 

economic reality, dependent on their 

employers and therefore employees 

under the Act.442 The court determined 

that the workers’ ability to work for 

others was not dispositive, and that 

‘‘[l]aborers who work for two different 

employers on alternate days are no less 

economically dependent on their 

employers than laborers who work for a 

single employer’’ because ‘‘that freedom 

is hardly the same as true economic 

independence.’’ 443 The Sixth Circuit 

has further observed that ‘‘[m]any 

workers in the modern economy, 

including employees and independent 

contractors alike, must routinely seek 

out more than one source of income to 

make ends meet.’’ 444

Several commenters supported the 

way the Department’s proposal framed 

consideration of the ability to work for 

others within the control factor, 

including both direct and indirect 

means of limiting individuals’ ability to 

work for others. See, e.g., LA Fed & 

Teamsters Locals; NWLC; Real Women 

in Trucking; UFCW. For example, the 

LA Fed contended that the 2021 IC Rule 

‘‘misapplies the law’’ by stating that 

workers could be found to exercise 

‘‘substantial control’’ by having the 

ability to work for others, because ‘‘[f]or 

decades, employees have been able to 

have multiple jobs . . . without losing 

the protections the law bestows on 

employees.’’ The LA Fed supported the 

Department’s proposal, explaining that 

it ‘‘rightly recognizes that workers’ 

ability to . . . work for others does not 

support independent contractor status 

unless . . . facts actually demonstrate 

the worker’s economic independence.’’ 

Similarly, the NWLC stated that the 

2021 IC Rule ‘‘impermissibly narrow[ed] 

the concept of control itself by focusing 

on control over work exercised by the 

individual worker, as opposed to the 

right to control by an employer’’ and by 

using as an example a worker’s 

‘‘substantial control’’ through the ability 

to work for others despite many 

decisions finding workers to be 

employees even though they worked for 

others. 

Some commenters requested that the 

Department provide a description of this 

aspect of the control factor that would 

address the workers’ ability to work for 

others, not just the employer’s actions, 

and state that where an individual has 

the ability to work for others, including 

competitors, this weighs in favor of 

independent contractor status. See, e.g., 

CPIE; DoorDash; N/MA. For example, 

DoorDash commented that the proposed 

rule ‘‘adopts a one-sided approach: if a 

hiring entity limits a worker’s ability to 

work for others, that counts toward 

employee status, but if a worker has the 

freedom to work for others, that doesn’t 

count toward independent contractor 

status.’’ However, Outten & Golden 

observed that employer limitations on 

the ability to work for others cannot be 

viewed simply as the converse of a 

worker’s ability to work for others: ‘‘The 

fact that an employer entity does not 

prohibit outside work does not suggest 

independent contractor status because 

having multiple jobs is compatible with 

an employment relationship. However, 

being prohibited from working for 

others clearly indicates the control of an 

employer, rather than an independent 

contractor relationship.’’ 

CWI also contended that the 

‘‘employer-centric focus’’ of the 

proposed regulatory text addressing a 

worker’s ability to work for others was 

‘‘misguided’’ because, as the 

Department noted in the NPRM, there is 

appellate authority acknowledging ‘‘a 

worker’s ability to work for others—and 

thus develop multiple sources of 

business—as evidence of independent 

contractor status.’’ CWI did not feel it 


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445See supra, section V.B. 

446Saleem, 854 F.3d at 141. 447 29 CFR 795.110(b)(4). 

448See, e.g., Razak, 951 F.3d at 145–46 

(discussing disputed facts regarding whether 

drivers could drive for other services 

simultaneously—Uber contended drivers could 

drive for other services, but drivers contended that 

they could not accept rides from other platforms 

while online for Uber). 

was sufficient to address this factor by 

stating that a business placing a 

limitation on the ability to work for 

others was evidence of employee status 

because this failed to take into account 

‘‘the fact that a worker may be 

simultaneously (and in a multi-app 

situation, potentially at the exact same 

time) working for others.’’ Moreover, 

referencing Saleem, CWI contended that 

the fact that a worker could earn income 

through work for others meant that the 

worker was ‘‘less economically 

dependent on his putative employer.’’ 

The Department notes that the mere 

fact that a worker earns income from 

more than one employer does not mean 

that the worker is not economically 

dependent on one or all of those 

employers, as a matter of economic 

reality. Economic dependence is based 

on an analysis of the multifactor 

economic reality test, not whether a 

worker is less financially dependent on 

the income they earn from any one 

employer.445 As discussed under this 

factor and the permanence factor 

(section V.C.3), it is well established 

that having multiple jobs is not 

inconsistent with employee status under 

the FLSA, and in fact, workers are often 

required to take on more than one job 

just to make ends meet. Moreover, in 

Saleem, the case referenced in CWI’s 

comment, the Second Circuit recognized 

that: ‘‘a company relinquishes control 

over its workers when it permits them 

to work for its competitors.’’ 446 This 

case supports the importance of looking 

to whether a potential employer restricts 

a worker’s ability to work for others. 

Similarly, N/MA argued that the focus 

should be on the worker’s right to 

control and not the employer’s control, 

because ‘‘a freelancer may perform 

multiple projects among multiple 

separate (and sometimes competing) 

entities,’’ and N/MA felt that the right 

to control factor should consider ‘‘the 

totality of the worker’s business . . . 

including control over whether the 

worker subcontracts any part of the 

work necessary to complete a project, 

whether and how the worker may 

advertise their services, and whether the 

worker determines to prioritize, stagger, 

or overlap projects from multiple 

entities.’’ The Department views N/ 

MA’s comment to be advocating for a 

totality-of-the-circumstances test that is 

congruent with the economic reality 

test, including consideration not just of 

control, but also factors like opportunity 

for profit or loss, investment, and use of 

specialized skills in connection with 

business-like initiative. Whether a 

potential employer restricts a worker’s 

ability to work for others would 

certainly not be the only consideration 

under control, nor would it preclude 

consideration of the other factors listed 

in N/MA’s comment. Further, the 

Department notes that even within the 

control factor, the regulatory text 

acknowledges that ‘‘more indicia of 

control by the worker favors 

independent contractor status.’’ 447

Several commenters pointed out the 

increased fluidity in terms of working 

for others that can be associated with 

using applications or platforms to access 

work. DoorDash explained with respect 

to its business that workers ‘‘are free to 

work with anyone they want, including 

our competitors. Most importantly . . . 

they can do it in real time—even while 

they’re logged into our app. If [they] 

find a better work opportunity (or work 

that’s simply more appealing to them), 

they can switch back and forth.’’ CEI 

noted that ‘‘rideshare drivers often work 

for different app-based companies 

simultaneously. Anyone who calls for a 

ride using [Uber] has noticed the 

driver’s car also bearing a Lyft 

sticker. . . This situation is common in 

gig work, where the companies are, in 

effect, bidding for the same workers.’’ 

CEI further noted the Department’s 

concern that the framing in the 2021 IC 

Rule, which indicated independent 

contractor status if a worker had the 

ability to work for others, fails to 

distinguish between work relationships 

where a worker has multiple jobs in 

which they are dependent on each 

employer and do not exercise the 

control associated with being in 

business for oneself, and relationships 

where the worker has sought out 

multiple clients in furtherance of their 

business. CEI stated: ‘‘The framing does 

not distinguish between the two 

scenarios because there is no significant 

distinction. A worker who has ‘sought 

out multiple clients in furtherance of 

their business’ is no less dependent on 

those clients than the hypothetical 

worker with multiple jobs.’’ CEI 

suggested that the only solution to this 

problem was beyond the scope of this 

rulemaking and would require Congress 

to amend the FLSA to ‘‘carve out 

specific professions.’’ UFCW, however, 

did not view ‘‘multi-apping’’ as a 

unique concept that could not be 

addressed within the economic reality 

test, arguing that a ‘‘worker who 

attempts to leverage earnings between 

two app-based platforms (‘multiapping’) [is] now simply dependent on 

two platform companies for which the 

employee is waiting around for work to 

perform. This is not indicative of the 

worker exercising initiative to develop a 

business for themselves independent of 

these platform companies.’’ 

The Department does not believe that 

the ability to use applications or 

platforms to access work necessitates 

changing how the ability to work for 

others is weighed when determining 

employee or independent contractor 

status. The Department reiterates that as 

always, the overall test is economic 

dependence. Even if a worker has the 

ability to more fluidly move among 

potential employers while performing 

work by using multiple applications, 

this does not necessarily mean that the 

entire control factor weighs in favor of 

independent contractor status. Nor is it 

dispositive of whether the worker is in 

business for themself rather than being 

subject to the control of the entity for 

whom they are performing work at any 

given time.448

While SHRM posited that the 

Department’s proposal ‘‘adopts an 

antiquated view of economic 

independence in its consideration of a 

worker’s ability to work for others under 

the control factor’’ because ‘‘low-wage 

earners may, in fact, gain independence 

by maintaining the flexibility to work 

with multiple hiring entities,’’ NELP 

observed that in ‘‘low-wage industries, 

particularly in services such as 

transportation, delivery, or home care, 

many workers juggle multiple jobs with 

multiple entities not as an exercise of 

their own business judgment but as a 

necessity to cobble together a living 

wage in an underpaying economy.’’ For 

example, the LCCRUL & WLC described 

a current client who ‘‘often has to work 

for a variety of gig economy jobs 

simultaneously, such as Uber Eats, 

GoPuff, Instacart, and Caviar, to keep 

her finances afloat.’’ Further supporting 

the notion that the ability to work for 

multiple employers simultaneously 

does not necessarily indicate 

independent contractor status, the 

NDWA explained that home care 

workers may work for more than one 

third-party agency at the same time, 

‘‘given the scheduling irregularities and 

occasional disruptions in assignments 

that are an unavoidable part of the inhome personal care industry.’’ However, 

it noted that ‘‘[w]hile home care workers 

may choose to have multiple employers 

at the same time, it does not defeat the 


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449See supra, section V.C.3. 

450Brant, 43 F.4th at 669–70. 

451 Id. 

452 Id. (analyzing the driver’s ability to haul 

freight for other carriers under the opportunity for 

profit or loss factor because it was relevant to 

whether the driver could exercise his managerial 

skill to increase profits by selecting more favorable 

loads or by driving for other carriers) (internal 

quotation marks omitted). 

453 87 FR 62275 (proposed § 795.110(b)(4)). 

454See, e.g., Flint Eng’g, 137 F.3d at 1441 (‘‘None 

of the factors alone is dispositive; instead, the court 

must employ a totality-of-the-circumstances 

approach.’’). 

conclusion that they are employees 

rather than independent contractors.’’ 

After considering these comments, the 

Department declines to add a statement 

to the regulatory text stating that a 

worker’s ability to work for others 

indicates independent contractor status. 

The Department believes that having 

multiple jobs can too often be necessary 

for financial survival in the modern 

economy, as many commenters and 

courts have noted.449 For example, an 

employee may have two jobs, several 

part-time jobs, or a regularly-recurring 

seasonal job in addition to a full-time 

employment situation, and an 

independent contractor may also have 

multiple customers based on their 

exercise of business initiative. Thus, the 

mere ability to work for others is not 

necessarily an indicator of employee or 

independent contractor status. 

Some commenters urged the 

Department to create an exception for 

industries like trucking where legal 

requirements make it more complicated 

for drivers to use the same equipment to 

work for another motor carrier. See e.g., 

NHDA, Scopelitis, Garvin, Light, 

Hanson & Feary. However, Real Women 

in Trucking observed that ‘‘the ability to 

work for others is key to whether a 

driver is economically dependent or 

not,’’ noting that ‘‘the Department’s 

emphasis that both direct prohibitions 

on working for others and indirect 

barriers are relevant to this factor’’ was 

‘‘[e]specially important’’ because their 

members experienced working 

arrangements where they were 

nominally permitted to carry loads for 

other carriers, but ‘‘this flexibility is not 

available in practice.’’ 

This situation was addressed by the 

Seventh Circuit in a recent decision 

where the company retained sole 

discretion to deny the driver’s request to 

haul freight for another carrier, and it 

also reserved the right to arrange for 

third-party monitoring of compliance 

with federal safety regulations at the 

driver’s expense if he drove for other 

carriers.450 Further, even if the driver 

received approval to haul for another 

carrier and could have afforded to pay 

for third-party compliance monitoring, 

he would have been required to remove 

or cover the company’s identification on 

his truck and to display his own or the 

other company’s information.451 The 

court determined that these facts, 

showing that the company’s ‘‘system for 

approving and monitoring trips made 

for other carriers was so complex and 

onerous that Drivers could not, as a 

practical matter,’’ haul loads for other 

carriers, weighed in favor of employee 

status.452

Although the Department is 

recognizing in this final rule that actions 

taken by a potential employer for ‘‘the 

sole purpose of complying with a 

specific, applicable Federal, State, 

Tribal, or local law or regulation’’ are 

not indicative of control, the 

Department continues to believe that 

where a business goes beyond 

compliance with the law or regulation 

in a way that serves the business’s own 

compliance methods—for example, the 

system described in Brant that imposed 

several restrictions on the driver’s 

ability to haul freight for others, 

including requiring the driver to pay for 

a third-party monitor—this may be 

indicative of control. Therefore, the 

Department declines to adopt a more 

blanket, imprecise provision pertaining 

to industry-specific limitations on the 

ability to work for others. 

Moreover, commenters and the Brant 

decision have prompted the Department 

to conclude that the regulatory proposal 

addressed indirect means of limiting 

workers’ ability to work for others too 

narrowly, as it only would have 

recognized situations in which the 

potential employer ‘‘places demands on 

workers’ time’’ that do not allow them 

to work for others.453 As NELP noted, 

‘‘whether a worker is truly free to work 

for others requires an examination of the 

facts on the ground; businesses may 

place demands on time or monetary 

penalties that effectively preclude a 

worker from seeking other work.’’ 

Because businesses may impose 

financial demands or other restrictions 

on workers’ ability to work for others 

such as the ‘‘complex and onerous’’ 

system in Brant—in addition to 

demands on time that do not allow them 

to work for others—the Department is 

revising the regulatory language in the 

final rule to encompass such situations. 

The revised text removes the word 

‘‘time’’ and adds the words ‘‘or 

restrictions’’ after ‘‘or places demands’’ 

to more accurately capture indirect 

means of limiting workers’ ability to 

work for others. 

UFCW urged the Department to add 

additional considerations that are 

related to a potential employer limiting 

a worker’s ability to work for others. 

First, it contended that platform 

companies essentially coerce workers to 

continuously accept work (which would 

preclude them from working for others) 

by threatening to terminate workers 

from the platform or reduce the 

availability of work shifts unless the 

worker continuously accepts jobs. 

Additionally, it noted that an employer 

may prohibit workers from developing 

their own business or customer base, for 

example, by prohibiting a platform 

worker from doing any independent 

work for customers they connect with 

through the app. The LCCRUL & WLC 

also described clients—a tow truck 

driver and a cannabis dispensary 

delivery driver—who similarly were not 

able to work for others because they 

were expected to be on call all day 

waiting for assignments. The 

Department agrees that these types of 

facts could be relevant to whether a 

potential employer has either explicitly 

limited the worker’s ability to work for 

others or has placed demands or other 

restrictions on workers that do not allow 

them to work for others. However, the 

Department views these as encompassed 

within the final regulatory text, such 

that there is no need to add additional 

language. 

Finally, OOIDA encouraged the 

Department to view the ability to work 

for others within a working arrangement 

as ‘‘relevant, but not determinative of 

the relationship’’ and as ‘‘one of several 

considerations within the ‘control’ 

factor.’’ The Department reaffirms that 

the ability to work for others is just one 

consideration within the control factor 

and agrees with the commenter that it 

is relevant, but not determinative, of 

whether the worker is an employee or 

independent contractor. Moreover, the 

control factor itself is not determinative 

of a worker’s status—the economic 

reality test is a totality-of-thecircumstances test where no one factor 

is dispositive.454

The Department is finalizing the 

ability to work for others portion of 

control factor at § 795.105(b)(4) with the 

revisions discussed herein. 

Example: Nature and Degree of Control 

A registered nurse provides nursing 

care for Alpha House, a nursing home. 

The nursing home sets the work 

schedule with input from staff regarding 

their preferences and determines where 

in the nursing home each nurse will 

work. Alpha House’s internal policies 

prohibit nurses from working for other 

nursing homes while employed with 


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455 87 FR 62275 (proposed § 795.110(b)(5)). 

456 Id. at 62253. 

457 Id. at 62254; Rutherford, 331 U.S. at 729. 

458 87 FR 62254; see Silk, 331 U.S. at 716 

(unloaders were ‘‘an integral part of the business[] 

of retailing coal’’); see also Off Duty Police, 915 F.3d 

at 1055; McFeeley, 825 F.3d at 244; Scantland, 721 

F.3d at 1319; Flint Eng’g, 137 F.3d at 1443; Superior 

Care, 840 F.2d at 1060–61; Lauritzen, 835 F.2d at 

1537–38; DialAmerica, 757 F.2d at 1385; Driscoll, 

603 F.2d at 755. 

459 331 U.S. at 716. 

460 Id.; see supra section II.B.2. 

461See, e.g., WHD Fact Sheet #13 (July 2008) 

(listing ‘‘[t]he extent to which the services rendered 

are an integral part of the principal’s business’’ as 

a factor). 

462 87 FR 62254. 

463 Id. at 62253. 

464See, e.g., Off Duty Police, 915 F.3d at 1055 

(rejecting employer’s argument that it was merely 

an agent between its customers and the officers 

because the company ‘‘could not function without 

the services its workers provide’’); McFeeley, 825 

F.3d at 244 (‘‘[E]ven the clubs had to concede the 

point that an ‘exotic dance club could [not] 

function, much less be profitable, without exotic 

dancers.’ ’’) (quoting Secretary of Labor’s Amicus 

Br. in Supp. of Appellees at 24); Capital Int’l, 466 

F.3d at 309 (finding security guards were integral 

to a business where company ‘‘was formed 

specifically for the purpose of supplying’’ private 

security); cf. Johnson, 371 F.3d at 730 (upholding 

jury verdict finding independent contractor status 

for security guards working for government housing 

authority and noting, with regard to integral factor, 

that the housing authority ‘‘had functioned for years 

before and after the program’’ under which security 

guards were hired). 

465 87 FR 62253. See, e.g., Brock v. Lauritzen, 624 

F. Supp. 966, 969 (E.D. Wis. 1985), aff’d, 835 F.2d 

1529 (7th Cir. 1987) (finding that cucumber 

harvesters were integral to cucumber farmer’s 

business and were ‘‘economically dependent upon 

Lauritzen’s business for their work during the 

cucumber harvest season’’). 

466See, e.g., Alpha & Omega, 39 F.4th at 1085 

(noting that this factor ‘‘turns ‘on whether workers’ 

services are a necessary component of the 

business’ ’’) (quoting Paragon, 884 F.3d at 1237); 

Flint Eng’g, 137 F.3d at 1443 (finding rig welders’ 

work to be ‘‘an important, and indeed integral, 

component of oil and gas pipeline construction 

work’’ because their work is a critical step on every 

transmission system construction project); 

Lauritzen, 835 F.2d at 1537–38 (‘‘It does not take 

much of a record to demonstrate that picking the 

pickles is a necessary and integral part of the pickle 

business[.]’’); cf. Paragon, 884 F.3d at 1237 

(‘‘Because [the worker]’s management of the pecan 

grove was not integral to the bulk of Paragon’s 

[construction] business, this factor supports 

consideration of [the worker] as an independent 

contractor.’’). 

467See, e.g., Superior Care, 840 F.2d at 1059 (for 

business that provided on-demand health care 

personnel, the nurses provided were themselves 

integral to the business). 

468See, e.g., Keller, 781 F.3d 799 at 815 (‘‘The 

more integral the worker’s services are to the 

business, then the more likely it is that the parties 

have an employer-employee relationship.’’); 

DialAmerica, 757 F.2d at 1385 (‘‘workers are more 

Continued 

Alpha House in order to protect its 

residents. In addition, the nursing staff 

are supervised by regular check-ins with 

managers, but nurses generally perform 

their work without direct supervision. 

While nurses at Alpha House work 

without close supervision and can 

express preferences for their schedule, 

Alpha House maintains control over 

when and where a nurse can work and 

whether a nurse can work for another 

nursing home. These facts indicate 

employee status under the control 

factor. 

Another registered nurse provides 

specialty movement therapy to residents 

at Beta House. The nurse maintains a 

website and was contacted by Beta 

House to assist its residents. The nurse 

provides the movement therapy for 

residents on a schedule agreed upon 

between the nurse and the resident, 

without direction or supervision from 

Beta House, and sets the price for 

services on the website. In addition, the 

nurse simultaneously provides therapy 

sessions to residents at Beta House as 

well as other nursing homes in the 

community. The facts—that the nurse 

markets their specialized services to 

obtain work for multiple clients, is not 

supervised by Beta House, sets their 

own prices, and has the flexibility to 

select a work schedule–indicate 

independent contractor status under the 

control factor. 

5. Extent to Which the Work Performed 

Is an Integral Part of the Potential 

Employer’s Business (§ 795.110(b)(5)) 

In § 795.110(b)(5), the Department 

proposed to return to framing this factor 

as ‘‘whether the work performed is an 

integral part of the employer’s 

business.’’ 455 The Department 

emphasized its belief that its proposed 

articulation of the integral factor— 

which considers whether the work is 

‘‘critical, necessary, or central to the 

employer’s principal business’’—better 

reflects the economic reality case law 

and is more consistent with the totalityof-the-circumstances approach to 

determining whether a worker is an 

employee or an independent contractor 

than the 2021 IC Rule’s ‘‘integrated unit 

of production’’ framing.456

The Department explained that the 

2021 IC Rule’s integral formulation 

relied on a rigid reading of Rutherford 

(which noted that the work was ‘‘part of 

an integrated unit of production’’ of the 

employer).457 Having further considered 

the case law, the Department concluded 

in the NPRM that the 2021 IC Rule’s 

approach did not reflect Supreme Court 

or federal appellate court precedent.458

As the 2021 IC Rule acknowledged, the 

Supreme Court’s decision in Silk 

determined that coal ‘‘unloaders’’ were 

employees of a retail coal company as 

a matter of economic reality in part 

because they were ‘‘an integral part of 

the business[ ] of retailing coal.’’ 459 The 

2021 IC Rule interpreted this language 

as merely articulating a part of the 

overall inquiry rather than a specific 

factor useful for deciding the question of 

economic dependence or independence. 

But as the Department explained in the 

NPRM, the Court in Silk explicitly 

considered the fact that the workers 

were an ‘‘integral part’’ of the business 

to be relevant to the inquiry, and later 

courts likewise found this framing to be 

useful to the economic reality analysis— 

so much so that most federal courts of 

appeals routinely list ‘‘integral’’ as an 

enumerated factor, but no court of 

appeals uses ‘‘integrated unit’’ for this 

factor.460 Additionally, the NPRM 

explained that the Department has also 

used this proposed approach to the 

integral factor for decades and has 

consistently found it to be a useful 

factor in the economic reality 

analysis.461 For these reasons, the 

Department proposed to eliminate the 

‘‘integrated unit’’ factor as an 

enumerated factor and instead to restore 

the integral factor, understood by courts 

as being focused on whether the work 

is critical, necessary, or central to the 

potential employer’s business.462

The Department explained that most 

courts adopt a common-sense approach 

to determining whether the work or 

service performed by a worker is an 

integral part of a potential employer’s 

business.463 For example, if the 

potential employer could not function 

without the service performed by the 

workers, then the service they provide 

is integral.464 The Department noted 

that ‘‘[s]uch workers are more likely to 

be economically dependent on the 

potential employer because their work 

depends on the existence of the 

employer’s principal business, rather 

than their having an independent 

business that would exist with or 

without the employer.’’ 465 Additionally, 

courts also look at whether the work is 

important, critical, primary, or 

necessary to the potential employer’s 

business.466 In most cases, if a potential 

employer’s primary business is to make 

a product or provide a service, then the 

workers who are involved in making the 

product or providing the service are 

performing work that is integral to the 

potential employer’s business.467

The Department emphasized that the 

judicial treatment of the integral factor 

reflects the understanding that a worker 

who performs work that is integral to an 

employer’s business is more likely to be 

employed by the business, whereas a 

worker who performs work that is more 

peripheral to the employer’s business is 

more likely to be independent from the 

employer.468 Finally, the Department 


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likely to be ‘employees’ under the FLSA if they 

perform the primary work of the alleged 

employer’’). 

469 87 FR 62254. See, e.g., Montoya v. S.C.C.P. 

Painting Contractors, Inc., 589 F. Supp. 2d 569, 581 

(D. Md. 2008) (explaining that ‘‘this factor does not 

turn on whether the individual worker was integral 

to the business; rather, it depends on whether the 

service the worker performed was integral to the 

business’’). 

470 87 FR 62254 (giving the example of one 

operator among many in a call center). 

noted that while it is only one part of 

the overall inquiry, courts continue to 

find the integral factor useful for 

evaluating economic dependence. 

Many commenters expressed 

agreement with the Department’s 

decision to return to the framing of this 

factor as the extent to which the work 

performed is an integral part of the 

potential employer’s business. See, e.g., 

AFL–CIO; Century Foundation; IBT; 

NDWA; NELP; NWLC; ROC United; 

State AGs; Transport Workers Union of 

America. For example, NELP 

commented that it agreed with the 

statement in the NPRM that ‘‘if the 

[employer] could not function without 

the service performed by the workers, 

then the service they provide is 

integral,’’ explaining that this factor 

‘‘recognizes a simple truth: workers are 

more likely employees under the FLSA 

if ‘they perform the primary work of the 

alleged employer.’ ’’ AFL–CIO similarly 

commented that it ‘‘strongly supports 

the return of this factor to its 

‘longstanding Departmental and judicial 

interpretation, rather than the 

‘integrated unit of production’ approach 

that was included in the 2021 IC Rule.’ ’’ 

The Century Foundation commented 

that ‘‘[t]his factor helpfully looks at 

whether the work performed is an 

essential or critical aspect of the 

business,—i.e., whether the work is 

critical to the main service or product 

that the business provides.’’ NWLC 

agreed with the NPRM’s rejection of the 

2021 IC Rule’s ‘‘integrated unit’’ framing 

of this factor, stating that the 

Department’s proposal ‘‘appropriately 

considers whether the work performed 

is an essential or critical aspect of the 

business—i.e., whether the work is 

critical to the main service or product 

that the business provides.’’ NWLC 

explained that the NPRM’s ‘‘framing is 

consistent with the long line of court 

decisions finding a worker’s 

performance of work that is integral to 

the employer’s business to be an 

indicator of employee status, reflecting 

the commonsense understanding that 

employers are more likely to hire 

employees to perform the tasks involved 

in providing the core products and/or 

services that their business offers.’’ 

IBT expressed support for the 

Department’s proposed articulation of 

the integral factor and recommended 

‘‘that guidance for this factor make 

explicitly clear the focus of the factor is 

on the work performed, not the 

individual worker.’’ Outten & Golden 

also stated that the final regulatory text 

should incorporate the text from the 

NPRM stating that ‘‘the focus of the 

integral factor is on the work performed, 

not the individual worker.’’ As the 

Department explained in the NPRM, 

this approach evaluates whether the 

worker performs work that is central to 

the employer’s business, not whether 

the worker possesses some unique 

qualities that render them indispensable 

as an individual.469 An individual 

worker who performs the work that an 

employer is in business to provide but 

is just one of hundreds or thousands 

who perform the work is nonetheless an 

integral part of the employer’s business 

even if that one worker makes a 

minimal contribution to the business 

when considered among the workers as 

a whole.470 The Department believes 

that the proposed regulatory text, which 

states that ‘‘[t]his factor considers 

whether the work performed is an 

integral part of the employer’s business’’ 

rather than ‘‘whether any individual 

worker in particular is an integral part 

of the business’’ sufficiently captures 

this understanding of the integral factor. 

Some commenters urged the 

Department to maintain the 2021 IC 

Rule’s framing of this factor as 

‘‘integrated unit of production,’’ 

expressing the view that the 2021 IC 

Rule’s approach is more consistent with 

Silk and Rutherford. See e.g., Freedom 

Foundation; Scalia Law Clinic; U.S. 

Chamber; see also NELA; Outten & 

Golden. For example, Scalia Law Clinic 

commented that Rutherford and Silk 

‘‘make clear that the ‘integral’ factor 

concerns whether a worker is part of an 

integrated unit of production, not 

whether she is economically important 

to a business operation.’’ The U.S. 

Chamber commented that ‘‘focusing the 

integral prong on an integrated unit of 

production is fully supported by the 

extant decisional law’’ stating that ‘‘[t]he 

Supreme Court has described this prong 

as considering whether the worker is 

part of an ‘integrated economic unit’ in 

the putative employer’s business.’’ The 

Freedom Foundation similarly 

commented that the Supreme Court in 

Rutherford espoused the proper 

articulation of the factor as ‘‘integrated 

unit of production’’ explaining that 

‘‘ ‘[i]ntegral’ and ‘integrated’ could be 

described as near homonyms . . . they 

are etymologically related words that 

sound similar but have different 

meanings.’’ The Freedom Foundation 

further explained that ‘‘ ‘[i]ntegral,’ in 

the sense described by the Department 

. . . means ‘necessary to make a whole 

complete; essential, fundamental;’ 

whereas ‘integrated’ in the sense used 

by the Supreme Court in Rutherford 

means ‘with various parts linked or 

coordinated.’ ’’ The Freedom 

Foundation commented that it believes 

the Department misrelies on Silk to 

support its proposed framing of the 

integral factor, noting that ‘‘Silk did not 

include integrality in its list of factors, 

nor did it apply it as a factor of 

decision.’’ See also I4AW (factor was 

originally articulated as ‘‘integrated unit 

of production’’ but ‘‘[o]ver the years 

. . . morphed, without explanation, into 

whether a role was ‘integral’ to the 

business hiring the putative 

contractor. . . . [T]his scrivener’s error 

has created greater confusion for 

businesses that want to be or work with 

ICs and has made it more difficult for 

courts to permit independent contract 

work’’). 

NELP agreed with the Department’s 

framing of the integral factor but stated 

that ‘‘[t]o provide further clarity on this 

factor, the DOL should recognize that 

the question of integration is not an 

either/or proposition’’ noting that 

‘‘[w]hether the work is integral such that 

the business could not offer its goods or 

services without it . . . is important to 

consider’’ but ‘‘it does not define the 

outer limits of this factor.’’ NELP 

explained that ‘‘[a]s the Supreme Court 

has recognized[,] whether the work is 

part of an ‘integrated unit of production’ 

also informs whether the worker is more 

likely to be an employee or independent 

contractor.’’ 

After considering these comments, the 

Department is retaining the approach 

proposed in the NPRM, which considers 

whether the work performed by the 

worker is an integral part of the 

employer’s business. As discussed 

below, the Department believes that its 

proposed approach to the integral factor 

is more consistent with longstanding 

judicial precedent and decades of 

Department guidance than the 2021 IC 

Rule’s articulation of this factor, which 

focused on whether the worker is part 

of a ‘‘integrated unit of production.’’ 

The Department notes, however, that it 

does not intend to preclude 

consideration of the potential relevance 

of the Supreme Court’s discussion of the 

‘‘integrated unit of production’’ in 

Rutherford. Consistent with the totalityof-the-circumstances approach, under 

which all relevant facts should be 

considered, the Department recognizes 

that the extent to which a worker is 


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471 87 FR 62254. 

472 331 U.S. at 716. 

473See supra section II.B.2. 

474See e.g., Superior Care, 840 F.2d at 1058–59; 

DialAmerica, 757 F.2d at 1382–83; McFeeley, 825 

F.3d at 241; Off Duty Police, 915 F.3d at 1055; 

Lauritzen, 835 F.2d at 1537–38; Alpha & Omega, 39 

F.4th at 1082; Driscoll, 603 F.2d at 754; Sureway, 

656 F.2d at 1368; Paragon, 884 F.3d at 1235; 

Scantland, 721 F.3d at 1311–12; Morrison, 253 F.3d 

at 11. 475See, e.g., Hobbs, 946 F.3d at 836. 476See WHD Op. Ltr. (June 23, 1949); 27 FR 8033; 

WHD Fact Sheet #13 (1997); WHD Fact Sheet #13 

(July 2008); AI 2015–1, available at 2015 WL 

4449086. 477WHD Op. Ltr. (June 23, 1949). 478 196 F.2d 547, 550 (8th Cir. 1952) (analyzing 

whether timber haulers and wood workers were ‘‘an 

integrated part of defendant’s production set-up’’). 

479 Id. 

480Alpha & Omega, 39 F.4th at 1082 (stating 

‘‘[w]e assume without deciding that the economic 

realities test is appropriate in determining whether 

a worker is an employee or independent contractor 

under the FLSA’’ and articulating the sixth relevant 

factor as ‘‘the degree to which the alleged 

employee’s tasks are integral to the employer’s 

business.’’). 

integrated into a business’s production 

processes may be relevant to the 

question of economic dependence or 

independence and may be considered 

under any relevant enumerated factor, 

or as an additional factor. For example, 

as the Department expressed in the 

NPRM, indicators that a worker is 

integrated into an employer’s main 

production processes, such as whether 

the worker is required to work at the 

employer’s main workplace or wear the 

employer’s uniform, may illustrate an 

employer’s control over the work being 

performed.471

Commenters’ claims that the 2021 IC 

Rule’s emphasis on the ‘‘integrated unit 

of production’’ is more consistent with 

applicable judicial precedent than the 

approach proposed in the NPRM stands 

in sharp contrast to decades of judicial 

precedent and Departmental guidance. 

The Supreme Court’s decision in Silk 

determined that coal ‘‘unloaders’’ were 

employees of a retail coal company as 

a matter of economic reality in part 

because they were ‘‘an integral part of 

the business [ ] of retailing coal.’’ 472

Some commenters took the position that 

the Court in Silk merely mentioned the 

integral nature of the work performed 

but did not intend for it to be a factor 

considered in the overall inquiry. 

However, the Supreme Court in Silk 

emphasized that its list of factors was 

not intended to be exhaustive, but 

instead consisted of factors the Court 

believed would be useful to courts and 

agencies applying the economic reality 

test in the future. Moreover, the Court 

explicitly considered it relevant to the 

determination of employment status 

that the coal unloaders in Silk were an 

‘‘integral part’’ of the retail coal 

business, and the majority of federal 

courts of appeals have likewise adopted 

this consideration as a relevant factor 

for the inquiry into economic 

dependence or independence.473

Commenters attempted to cast aside 

decades of judicial precedent by 

employing an overly rigid 

understanding of Rutherford, an 

understanding that no federal court of 

appeals has adopted as the standard for 

this factor in the decades since Silk and 

Rutherford. As the Department has 

emphasized, the approach in this final 

rule is underpinned by a desire to bring 

consistency and clarity to the economic 

reality inquiry by aligning this rule with 

the approach taken by the majority of 

federal appellate case law. Nearly all the 

federal courts of appeals expressly 

consider whether the work performed is 

an integral part of the potential 

employer’s business as a sixth 

enumerated factor in the economic 

dependence or independence 

inquiry.474 The Fifth Circuit has not 

expressly enumerated the integral factor 

but has at times assessed integrality as 

an additional relevant factor.475 The 

Department has also long considered 

whether the work performed is an 

integral part of the employer’s business 

as a factor in the economic realities’ 

inquiry.476 For example, in one of the 

Department’s earliest pronouncements 

of the economic reality factors—a 1949 

WHD opinion letter distilling the six 

‘‘primary factors which the Court 

considered significant’’ in Rutherford 

and Silk—the first factor enumerated 

was ‘‘the extent to which the services in 

question are an integral part of the 

‘employer[’]s’ business.’’ 477

The Department disagrees with the 

commenters’ contention that the 

approach proposed by the Department 

and taken by nearly every federal court 

of appeals is a result of a 

misunderstanding of Rutherford, Silk, 

the FLSA, and the economic reality 

inquiry. The historical approach to this 

factor by the Department and the courts 

stands in stark contrast to the fact that 

not a single federal court of appeals 

identifies ‘‘integrated unit of 

production’’ as the standard for this 

enumerated factor of the economic 

reality test. Commenters identified one 

federal appellate decision that they 

contend applied Rutherford’s 

‘‘integrated unit of production’’ as the 

standard for this factor in an 

independent contractor inquiry under 

the FLSA, Tobin v. Anthony-Williams 

Mfg. Co.478 See e.g., CPIE; CWI; DSA; 

IBA; N/MA. The decision in Tobin does 

not, however, stand for the proposition 

that the relevant standard for this factor 

under the enumerated factors of the 

economic reality test is whether workers 

are part of an ‘‘integrated unit of 

production.’’ Instead, Tobin was a 

factually analogous case to Rutherford 

where the Eighth Circuit found it 

relevant to the overall economic reality 

inquiry that the timber haulers and 

wood workers were part of one 

integrated unit of production.479

Consistent with the Department’s 

discussion above, Tobin illustrates how 

Rutherford’s ‘‘integrated unit of 

production’’ framing may be considered 

when relevant to the question of 

economic dependence. Moreover, the 

Eighth Circuit has elsewhere recognized 

that the extent to which the work 

performed is integral to the employer’s 

business is one of the enumerated 

factors under the economic reality 

test.480

A number of commenters expressed 

concerns that the Department’s 

proposed articulation of the integral 

factor was an attempt to adopt one of 

the prongs of the ABC test. See, e.g., 

4A’s; Club for Growth; Fight for 

Freelancers; NRF & NCCR; U.S. 

Chamber; WSTA. For example, the U.S. 

Chamber commented that ‘‘it appears 

that the Proposed Rule’s shift away from 

the Supreme Court’s focus on an 

‘integrated unit’ to whether the work is 

‘critical, necessary, or central’ is a thinly 

veiled attempt to inject Prong B of the 

ABC test—whether the work takes place 

outside the usual course of the putative 

employer’s business—into the analysis.’’ 

The Club for Growth, NRF & NCCR, and 

the U.S. Chamber contended that the 

Department’s proposal for the integral 

factor was at odds with the 

Department’s explanation elsewhere in 

the NPRM that the Department believes 

the ABC test to be inconsistent with 

Supreme Court precedent interpreting 

the FLSA, and as such, cannot be 

adopted without Supreme Court or 

congressional alteration of the 

applicable analysis under the FLSA. 

Fight for Freelancers also commented 

that ‘‘[the integral factor] is the most 

likely to misclassify legitimate 

independent contractors as employees, 

because it is so similar to the B-prong 

of the ABC Test.’’ 

Although there may be conceptual 

overlap between the Department’s 

proposed integral factor and Prong B of 

the ABC test, as discussed above, the 

Department is not adopting an ABC test. 

The assertion that the Department’s 

proposal regarding the integral factor is 

an attempt to insert Prong B of an ABC 

test in this rule is baseless. First, the 

integral factor is but one factor in a 


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481See, e.g., Meyer, 607 F. App’x at 123 

(‘‘Although tennis umpires are an integral part of 

the U.S. Open,’’ other factors supported 

determination that umpires were independent 

contractors.); Perdomo v. Ask 4 Realty & Mgmt., 

Inc., No. 07–20089, 2007 WL 9706364, at *4 (S.D. 

Fla. Dec. 19, 2007) (construction worker’s work was 

integral to remodeling business, but economic 

reality factors as a whole indicated independent 

contractor status). 

482 87 FR 62231. 483 87 FR 62253. 

multifactor inquiry, where no one factor 

is dispositive, and where the totality of 

the circumstances is considered to 

determine the ultimate question of 

whether a worker is economically 

dependent on the potential employer for 

work or is in business for themself. The 

totality-of-the-circumstances test thus 

stands in stark contrast to an ABC test, 

in which each element of the test is 

dispositive. As the Department 

expressly recognized in the NPRM, and 

reaffirms here, not all workers who 

perform integral work are employees, 

and there may be times when this factor 

misaligns with the ultimate result. This 

is entirely consistent with the totalityof-the-circumstances approach.481 Prong 

B of the ABC test, on the other hand, is 

dispositive of employment status. If the 

hiring entity cannot show that the work 

being performed by the worker is 

outside the usual course of the hiring 

entity’s business, employment status is 

found regardless of the other factors of 

the ABC test.482 Thus, while a worker 

can perform work that is integral to the 

potential employer’s business and still 

be considered an independent 

contractor under this final rule, a 

worker performing work in the usual 

course of their potential employer’s 

business will always be an employee 

under the ABC test. In this final rule, 

the Department is returning to the 

longstanding understanding of the 

integral factor consistent with decades 

of court precedent and Department 

guidance applying the economic reality 

test under the FLSA. Again, the 

Department is not adopting an ABC test. 

Several commenters expressed 

concerns that the integral factor would 

lead to virtually every worker being 

classified as an employee since most, if 

not all, work performed for a business 

could theoretically be considered 

critical or necessary to an employer’s 

business. See, e.g., Alabama Forestry 

Association; FMI; Goldwater Institute; 

MEP; NAFO; Scalia Law Clinic; U.S. 

Chamber. For example, Scalia Law 

Clinic commented that ‘‘[a]ll work for a 

business is in some sense ‘critical, 

necessary, or central to . . . [a] 

business,’ because businesses only hire 

workers that add economic value.’’ The 

U.S. Chamber similarly commented that 

‘‘[t]he Department has mistakenly 

equated ‘integral’ with ‘critical, 

necessary, or central to the employer’s 

business’. . . . Taken literally, this 

could include every independent 

contractor, because a business would 

not hire an independent contractor 

unless it was ‘necessary’ to do so.’’ 

NAFO similarly commented ‘‘[t]his new 

interpretation makes it impossible to 

understand or apply the ‘integral’ 

factor’’ noting that the Department’s rule 

‘‘would effectively subsume virtually 

every contracting or subcontracting 

relationship because all subcontractors 

perform a function that the entity deems 

‘integral’ to a product or a service— 

otherwise, it would not contract with 

them.’’ MEP further explained that 

‘‘[t]his is particularly the case with 

small businesses that need to rely on 

outside expertise.’’ As an example, MEP 

noted that IT, security, services, 

marketing, or legal consulting services, 

may not be the main intent of the 

business, but they may be critical or 

necessary to the business. 

As a threshold matter, the Department 

reiterates that, as with the other 

enumerated factors of the economic 

reality test, the integral factor is just one 

area of inquiry that is considered along 

with the other factors to reach the 

ultimate determination of economic 

dependence or independence. The 

Department again emphasizes that it is 

‘‘not always true that workers whose 

work is integral are employees.’’ 483

Additionally, commenters’ assertions 

that this factor would subsume every 

contracting relationship and would 

always weigh in favor of employee 

status are misguided. The commenters 

misapply the Department’s articulation 

of this factor by suggesting that virtually 

every type of work commissioned by a 

business would be considered integral, 

since businesses do not contract for 

work that isn’t necessary or critical to 

their functioning. The key limiting word 

that commenters appear to overlook is 

‘‘principal.’’ As illustrated by the 

example the Department provided for 

this factor in the NPRM, which is also 

part of this final rule, while it might in 

some sense be critical or necessary for 

a business to hire an accountant to 

manage their tax obligations, for 

example, this accounting work may 

nonetheless not be critical, necessary, or 

central to the potential employer’s 

principal business. To further illustrate, 

a coffee shop’s ‘‘principal’’ business is 

making, selling, and serving coffee. A 

coffee shop might need window 

washers to ensure clear views and a 

clean appearance for customers, but the 

window washers are not generally 

integral to the principal business of the 

coffee shop. Commenters maintaining 

that any work contracted by a business 

is central, necessary, or critical to its 

functioning overlook this important 

limitation of the integral factor—only 

work that is critical, necessary, or 

central to the potential employer’s 

principal business is integral. 

Some commenters requested 

clarification for their specific industries, 

expressing concerns that in certain 

industries laws and regulations mandate 

relationships such that the work 

performed would be considered an 

integral part of the potential employer’s 

business. For example, NAR commented 

‘‘that the extent to which the work is 

performed as an integral part of the 

employer’s business within the real 

estate industry context, is mandated by 

state laws and regulations.’’ NAR 

suggested the Department’s rule ‘‘should 

recognize such industry nuances, 

understanding that compliance with 

state statutory and regulatory provisions 

does not conflict with the ability to 

work as an independent contractor 

under the test.’’ ACLI similarly 

commented that ‘‘if insurance and/or 

securities industry laws and regulations 

compelling agents and registered 

representatives to affiliate with licensed 

insurers and broker dealers were 

sufficient to negate independent 

contractor status, this factor would 

perpetually weigh against independent 

contractor status for insurance industry 

relationships.’’ ACLI requested the 

Department ‘‘categorically affirm that 

where laws or regulations dictate that an 

insurance worker must be affiliated with 

a company in the same business . . . 

the integral part of the business factor be 

viewed as at most a neutral factor.’’ 

As the Department repeatedly states 

throughout this final rule, no one factor 

is dispositive, and the ultimate question 

is whether as matter of economic reality 

the worker is in business for themself or 

is economically dependent on the 

potential employer for work. If the work 

being performed is necessarily integral 

to the business of the potential 

employer, the integral factor may weigh 

in favor of employee status, but it is 

only one part of the inquiry. It is not 

dispositive. Where the other factors 

weigh in favor of independent 

contractor status, and the economic 

reality as a whole indicates the worker 

is in business for themself, the overall 

conclusion may likely be that the 

worker is an independent contractor; 

notably, compliance with specific, 

applicable legal obligations is addressed 

in the discussion of the control factor, 

section V.C.4.a of this preamble. This 

inquiry, however, is specific to the 


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484See generally 87 FR 62275 (proposed 

§ 795.110(b)(6)). 

485See generally id. at 62254–57. 

factual circumstances of a particular 

relationship, and the Department cannot 

broadly make a determination about the 

status of an entire sector of workers 

whose economic relationships are 

varied. Therefore, the Department 

declines to provide exemptions from a 

particular factor for certain industries. 

After consideration of the comments 

received, the Department reiterates its 

belief that the extent to which the work 

performed is an integral part of the 

potential employer’s business sheds 

light on the ultimate inquiry of whether 

a worker is economically dependent on 

the potential employer for work or is in 

business for themself. The Department 

is returning to this framing of the 

integral factor in this final rule because 

this approach is more consistent with 

Supreme Court precedent, decades of 

judicial precedent in the federal courts 

of appeals, and the totality-of-thecircumstances approach than the 2021 

IC Rule’s ‘‘integrated unit of 

production’’ framing of this factor. The 

Department is adopting the integral 

factor as proposed in the NPRM with 

minor wording changes to provide 

additional clarity (adding ‘‘of the 

business’’ to the end of the second 

sentence of the regulatory text to state 

‘‘whether the function they perform is 

an integral part of the business’’). 

The Department is finalizing the 

integral factor (§ 795.110(b)(5)) as 

discussed herein. 

Example: Extent to Which the Work 

Performed Is an Integral Part of the 

Employer’s Business 

A large farm grows tomatoes that it 

sells to distributors. The farm pays 

workers to pick the tomatoes during the 

harvest season. Because picking 

tomatoes is an integral part of farming 

tomatoes, and the company is in the 

business of farming tomatoes, the 

tomato pickers are integral to the 

company’s business. These facts 

indicate employee status under the 

integral factor. 

Alternatively, the same farm pays an 

accountant to provide non-payroll 

accounting support, including filing its 

annual tax return. This accounting 

support is not critical, necessary, or 

central to the principal business of the 

farm (farming tomatoes), thus the 

accountant’s work is not integral to the 

business. Therefore, these facts indicate 

independent contractor status under the 

integral factor. 

6. Skill and Initiative (§ 795.110(b)(6)) 

The Department proposed that the 

skill and initiative factor consider 

‘‘whether the worker uses specialized 

skills to perform the work and whether 

those skills contribute to business-like 

initiative.’’ The Department stated that 

‘‘[t]his factor indicates employee status 

where the worker does not use 

specialized skills in performing the 

work or where the worker is dependent 

on training from the employer to 

perform the work.’’ The Department 

further stated that, ‘‘[w]here the worker 

brings specialized skills to the work 

relationship, it is the worker’s use of 

those specialized skills in connection 

with business-like initiative that 

indicates that the worker is an 

independent contractor.’’ 484

The Department explained that the 

proposed regulatory text for this factor 

would reaffirm the longstanding 

principle that this factor indicates 

employee status where the worker lacks 

specialized skills. The Department 

further explained that it believed that 

the application of initiative in 

connection with specialized skills is 

useful in answering the overarching 

inquiry of whether the worker is 

economically dependent on the 

employer for work or is in business for 

themselves, and that, as a result, it was 

‘‘proposing to reintegrate initiative into 

this factor and no longer exclude 

consideration of initiative when 

applying this factor, as provided in the 

2021 IC Rule.’’ The Department then 

discussed the case law supporting its 

position that a worker’s lack of 

specialized skills when performing the 

work generally indicates employee 

status, but also reiterated that no one 

factor is dispositive, consistent with the 

overarching economic realities analysis. 

Because both employees and 

independent contractors can be highly 

skilled and/or bring specialized skills to 

the work relationship, the Department 

discussed how focusing on whether the 

worker uses ‘‘the specialized skills in 

connection with business-like 

initiative’’ is helpful in distinguishing 

between the two classifications and 

further discussed the case law and its 

prior guidance supporting such an 

approach. Finally, the Department 

acknowledged that some facts showing 

an exercise of initiative can be relevant 

under the skill factor and another factor, 

and explained that considering facts 

showing an exercise of initiative under 

more than one factor to the extent 

appropriate depending on the facts of a 

case is consistent with and furthers the 

totality-of-the-circumstances approach 

to assessing the economic realities of the 

work relationship.485

In addition to the numerous 

comments generally supporting the 

Department’s six-factor analysis, a 

number of commenters expressed 

support for the NPRM’s discussion of 

the skill and initiative factor. For 

example, NDWA stated that the NPRM’s 

analysis ‘‘is helpful because requiring 

initiative as well as skill better answers 

the questions of whether a worker is in 

business for themselves.’’ The Shriver 

Center agreed. The Leadership 

Conference similarly stated that the 

NPRM’s analysis ‘‘is helpful because we 

believe that all work is skilled work in 

the colloquial sense of the term, and 

elevating the question of whether a 

worker can exercise initiative as well as 

skill better answers the question of 

whether a worker is in business for 

themselves.’’ Gale Healthcare Solutions 

advised that for nurses, ‘‘adding 

business initiative to skill is an 

appropriate measure for distinguishing 

workers who should be classified as 

independent contractors . . . from those 

who, while they employ nursing skills 

in the performance of their work, do not 

do so in combination with the businesslike initiative needed to grow a nursing 

practice.’’ The LA Fed & Teamsters 

Locals commented that the NPRM 

‘‘appropriately recognizes that while a 

lack of specialized skills indicates 

employee status, the exercise of such 

specialized skills does not indicate 

independent contractor status absent the 

worker’s using business-like initiative in 

relation to those skills.’’ And ROC 

United stated that the NPRM’s ‘‘decision 

to include skill and initiative as a standalone factor is another improvement 

over the 2021 Rule,’’ and that the NPRM 

‘‘correctly recognizes that most work 

that does not require specialized skills 

is not performed by independent 

contractors (e.g., security guards, 

janitors, drivers, landscape workers, and 

call center workers).’’ See also NELP 

(expressing agreement with also 

including in this factor ‘‘an analysis of 

whether the worker uses those skills in 

connection with ‘business-like 

initiative’ ’’); NWLC (commenting that 

the NPRM would correctly restore 

consideration of initiative to this factor 

and affirm that ‘‘a true independent 

contractor is likely to have specialized 

skills’’ and use those skills to exercise 

‘‘business-like initiative’’). 

Some other commenters that generally 

supported the Department’s proposal 

requested changes to or clarifications of 

the skill and initiative factor. For 

example, SMACNA stated that ‘‘[t]his is 

correct as far as skills’’ but added that, 

‘‘for workers who are highly skilled, the 

‘skill and initiative’ factor should not be 


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486See id. (citing cases). 

487See, e.g., Perez v. Howes, 7 F. Supp.3d 715, 

724–25 (W.D. Mich. 2014), aff’d, 790 F.3d 681 (6th 

Cir. 2015). 

488The first sentence was at 87 FR 62255 (quoting 

Superior Care, 840 F.2d at 1060); the second 

sentence was at 87 FR 62256. 

489See 29 CFR 795.110(a)(2) (‘‘Consistent with a 

totality-of-the-circumstances analysis, no one factor 

or subset of factors is necessarily dispositive, and 

the weight to give each factor may depend on the 

facts and circumstances of the particular case.’’). 

Scalia Law Clinic further commented that, ‘‘[w]hile 

the 2021 [IC] Rule did not prohibit considering a 

worker’s skill, [it] rightly excluded skill from its 

‘core factors.’ ’’ As explained in this final rule and 

as the regulatory text provides, however, the 

Department is rejecting the concept of ‘‘core’’ 

factors in favor of not giving a predetermined 

weight to any factor. See id. The 2021 IC Rule stated 

(and Scalia Law Clinic reiterated in its comment) 

that skill should be given lesser weight because 

highly-skilled workers can be employees and 

comparatively lesser-skilled workers can be 

independent contractors. The Department believes, 

however, that this is better addressed by 

reintegrating initiative into the skill factor for the 

reasons explained in the NPRM and herein and by 

reinforcing that all factors determine a worker’s 

status. 

490See, e.g., Hobbs, 946 F.3d at 834; Parrish, 917 

F.3d at 385; Cornerstone Am., 545 F.3d at 345; 

used to weigh against employee status.’’ 

The case law, however, does not 

support the position that, for highly 

skilled workers, this factor should not 

weigh against employee status.486 Real 

Women in Trucking stated that it would 

appreciate clarification that, ‘‘although 

truck driving typically is not classified 

as ‘skilled’ labor in other contexts, it 

requires sufficient skill that, when 

combined with business-like initiative, 

drivers are appropriately considered 

independent contractors.’’ The 

Department agrees that, consistent with 

the analysis for this factor and its 

discussion of commercial drivers’ 

licenses (CDLs) below, this factor would 

indicate independent contractor status 

for a worker who uses truck-driving 

skills in connection with business-like 

initiative. 

Farmworker Justice stated that ‘‘courts 

have made clear that ‘most farm labor 

jobs require little specialized skill’ ’’ and 

‘‘encourage[d] the DOL to include 

reference to such cases in the Final 

Rule, as it has for workers in numerous 

other industries, such as janitors, 

security guards, landscape workers, and 

call center workers.’’ The Department 

agrees with this characterization of the 

case law regarding ‘‘most farm labor 

jobs’’ and notes that it has taken that 

position in its own enforcement 

actions.487 IBT ‘‘supports the 

Department’s proposal for this factor,’’ 

‘‘applauds the Department’s recognition 

that several courts have already 

determined that certain workers 

including, drivers, security guards, 

janitors, landscape workers, and call 

center workers do not require 

specialized skills,’’ and ‘‘recommends 

that guidance for this factor include 

specific instruction that asks courts to 

rely on the previous decisions finding 

certain occupations do not require prior 

experience; the workers are dependent 

on training from the employer to 

perform the work; or that the work 

requires no training, and thus are 

indicators that the relevant worker(s) 

lack(s) specialized skills.’’ The 

Department declines to include that 

type of instruction as it is unnecessary 

in light of these court decisions. 

Moreover, the Department is not 

intending to identify any particular 

occupation as lacking specialized skills 

in all cases. 

NELA stated that, ‘‘[a]lthough the 

Proposed Rule correctly reestablishes 

the link between skill and business-like 

initiative as the raison d’etre of the 

factor, it does not make clear enough 

that the factor only points to 

independent contractor status when 

such a link is found.’’ NELA suggested 

accordingly that the final rule ‘‘would 

be strengthened by incorporating a few 

key principles from the commentary 

into the rule itself.’’ NELA requested 

that sentences from the NPRM stating 

that the ‘‘fact that workers are skilled is 

not itself indicative of independent 

contractor status’’ and that ‘‘[b]oth 

employees and independent contractors 

may be skilled workers’’ be added to the 

regulatory text.488 The Department 

agrees that including versions of these 

sentences in the regulatory text will 

help sharpen the point that use of skills 

in connection with business-like 

initiative is what distinguishes between 

independent contractors and employees 

under this factor. Accordingly, the 

Department is revising the last sentence 

of the proposed regulatory text for this 

factor to be two sentences and to read 

(the italicized language is new as 

compared to the NPRM): ‘‘Where the 

worker brings specialized skills to the 

work relationship, this fact is not itself 

indicative of independent contractor 

status because both employees and 

independent contractors may be skilled 

workers. It is the worker’s use of those 

specialized skills in connection with 

business-like initiative that indicates 

that the worker is an independent 

contractor.’’ 

The Department, however, believes 

that it is unnecessary to add the 

following sentence that NELA suggested 

incorporating into the regulatory text: 

‘‘To indicate possible independent 

contractor status, the worker’s skills 

should demonstrate that they exercise 

independent business judgment.’’ This 

sentence would be duplicative of the 

existing regulatory text language that it 

‘‘is the worker’s use of those specialized 

skills in connection with business-like 

initiative that indicates that the worker 

is an independent contractor.’’ The 

Department further believes that adding 

‘‘only’’ to this existing regulatory text 

language (as NELA requested) so that it 

would read that it ‘‘is only the worker’s 

use . . .’’ would not provide 

clarification, especially considering the 

changes that the Department is making 

to the regulatory text. 

Numerous commenters opposed, 

disagreed with, and/or requested 

changes to, or clarifications of, the 

proposed skill and initiative factor. For 

example, CWI stated that, although it 

agrees that ‘‘both skill and initiative 

may play a role in the independent 

contractor calculus,’’ it ‘‘fundamentally 

disagrees, however, that those 

considerations should be treated as a 

standalone factor in the economic 

realities calculus.’’ And N/MA stated 

that ‘‘[c]onsideration of skill and 

initiative as a stand-alone factor creates 

confusion and ambiguity, and results in 

the considerations under that factor 

being provided outsized weight in the 

totality of the circumstances analysis.’’ 

See also Scalia Law Clinic (‘‘The NPRM 

creates a new definition of the ‘skill’ 

factor that gives it greater weight, 

despite precedent to the contrary.’’). 

However, courts and the Department 

have invariably included some version 

of skill and initiative as a separate and 

distinct factor in their analyses for 

decades. Consistent with the 

Department’s repeated statements in 

this final rule, this factor should not be 

given, as a predetermined matter, any 

different weight than any of the other 

factors.489

SHRM commented that the NPRM 

‘‘purports to convert a standard 

consideration utilized by myriad 

independent contractor classification 

tests—the degree of skill required by the 

work—into an assessment of a worker’s 

business acumen.’’ See also 

TheDream.US (describing a focus on 

business-like initiative as an 

‘‘amorphous qualification to an 

otherwise straightforward 

consideration’’). SHRM expressed 

concern that ‘‘[t]his is not only a drastic 

departure from a well-settled standard, 

but it also negates the Proposed Rule’s 

decree that a worker’s opportunity for 

profit or loss based on their managerial 

skill is relevant to their classification as 

an employee or an independent 

contractor.’’ Many federal courts of 

appeals consider initiative as part of this 

factor,490 and thus, it is by no means a 


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Express Sixty-Minutes, 161 F.3d at 305 (‘‘The 

district court did not discuss initiative during its 

evaluation of this factor. We agree with the 

Secretary that the skill and initiative factor points 

toward employee status.’’); Flint Eng’g, 137 F.3d at 

1443 (quoting Selker Bros., 949 F.2d at 1295); Circle 

C. Invs., 998 F.2d at 328; Superior Care, 840 F.2d 

at 1060; DialAmerica, 757 F.2d at 1387. 

491See, e.g., Scantland, 721 F.3d at 1318; Flint 

Eng’g, 137 F.3d at 1443; Selker Bros., 949 F.2d at 

1295; Superior Care, 840 F.2d at 1060; DialAmerica, 

757 F.2d at 1387. 

492See 87 FR 62256–57. 

493 334 U.S. at 718. 

494 Id. at 719. 

495See also, e.g., Razak, 951 F.3d at 147; Off Duty 

Police, 915 F.3d at 1055–56; Iontchev, 685 F. App’x 

at 550; Walsh v. EM Protective Servs. LLC, No. 3:19– 

cv–00700, 2021 WL 3490040, at *7 (M.D. Tenn. 

Aug. 9, 2021); Acosta v. New Image Landscaping, 

LLC, No. 1:18–cv–429, 2019 WL 6463512, at *6 

(W.D. Mich. Dec. 2, 2019); Acosta v. Wellfleet 

Commc’ns, LLC, No. 2:16–cv–02353–GMN–GWF, 

2018 WL 4682316, at *7 (D. Nev. Sept. 29, 2018), 

aff’d sub nom. Walsh v. Wellfleet Commc’ns, No. 

20–16385, 2021 WL 4796537 (9th Cir. Oct. 14, 

2021); Perez v. Super Maid, LLC, 55 F. Supp. 3d 

1065, 1077–78 (N.D. Ill. 2014); Harris v. Skokie 

Maid & Cleaning Serv., Ltd., No. 11 C 8688, 2013 

WL 3506149, at *8 (N.D. Ill. July 11, 2013); Campos 

v. Zopounidis, No. 3:09–cv–1138 (VLB), 2011 WL 

2971298, at *7 (D. Conn. July 20, 2011); Solis v. Int’l 

Detective & Protective Serv., Ltd., 819 F. Supp. 2d 

740, 752 (N.D. Ill. 2011). 496 87 FR 62255 (‘‘A landscaper, for example, may 

perform work that does not require specialized 

skills, but application of the other factors may 

demonstrate that the landscaper is an independent 

contractor (for example, the landscaper may have a 

meaningful role in determining the price charged 

for the work, make decisions affecting opportunity 

for profit or loss, determine the extent of capital 

investment, work for many clients, and/or perform 

work for clients for which landscaping is not 

integral).’’). DSA’s statement that the examples of 

welders in the NPRM’s discussion of the skill and 

initiative factor do not include the scenario where 

‘‘there is no specialized skill, but the ability to 

independently market a business’’ overlooked the 

landscaper example that addresses that scenario. 

‘‘drastic departure.’’ Moreover, because 

both employees and independent 

contractors may be skilled workers, 

considering whether a worker uses 

specialized skills in connection with 

business-like initiative—rather than 

considering only whether the worker 

has specialized skills—helps to 

distinguish the worker’s status and is 

probative of the ultimate question of 

economic dependence.491 And there is 

no basis for asserting that the skill and 

initiative factor ‘‘negates’’ the relevance 

of the opportunity for profit or loss 

factor; both factors are relevant to the 

analysis even if, as explained in the 

NPRM,492 some facts showing an 

exercise of initiative can be considered 

under both factors. 

FSI, Coalition of Business 

Stakeholders, and NRF & NCCR 

similarly objected to the inclusion of 

initiative in this factor. FSI stated that 

including initiative in the skill factor 

contravenes Silk and that ‘‘this 

alteration represents yet another way in 

which the Proposed Rule repeatedly and 

improperly emphasizes ‘entrepreneurial 

drive’ as an overarching consideration 

across many factors.’’ The Coalition of 

Business Stakeholders and NRF & NCCR 

disagreed with the inclusion of 

initiative in this factor and described it 

as ‘‘inconsistent’’ with Silk. This factor, 

however, is consistent with Silk. The 

unloaders in Silk performed ‘‘simple 

tasks’’ 493 and were employees, in part, 

for that reason; the Department’s skill 

and initiative factor would likewise 

point to employee status for such 

unloaders. The ‘‘driver-owners’’ in Silk, 

on the other hand, seemed to use their 

truck-driving skills in a business-like 

way, drove for multiple clients, and 

were described by the Court as ‘‘small 

businessmen.’’ 494 The Department’s 

skill and initiative factor would likewise 

point to independent contractor status 

for such driver-owners. 

FSI further stated that emphasizing 

‘‘entrepreneurial drive’’ may ‘‘lead to 

erroneous classification decisions 

because, among other considerations, 

some workers may strongly prefer to 

work as independent contractors, not for 

the flexibility to grow their businesses, 

but for the flexibility to control their 

workloads and to work when they want 

to.’’ It added that, ‘‘while initiative is an 

appropriate consideration in favor of 

independent contractor status, its 

absence does not indicate that a worker 

is not pursuing independence.’’ 4A’s 

similarly stated that the ‘‘the proposed 

rule could create uncertainty for 

agencies that utilize legitimate 

independent contractor relationships to 

carry out important business functions, 

but their freelance talent does not have 

entrepreneurial drive or take personal 

initiative to expand their business to 

working with other agencies or in house 

marketing shops.’’ The Department 

continues to believe that whether 

workers with specialized skills use 

those skills in connection with 

business-like initiative is probative of 

their status as employees or 

independent contractors. Using such 

skills to ‘‘grow’’ or ‘‘expand’’ their work 

is a prime example of business-like 

initiative as the commenters recognize, 

but there may be other ways in which 

workers can use such skills in 

connection with business-like initiative. 

Of course, the determination of a 

worker’s status ultimately requires 

consideration of the totality of the 

circumstances—not just the skill and 

initiative factor. 

DSA stated that ‘‘[a]n individual 

could not have a specialized skill, but 

still take the initiative of an 

independent business or vice versa. If 

the rule were to go forward as proposed, 

and each factor pointed in different 

directions, there could be confusion as 

to where a ruling may come down on 

this one factor.’’ The Department does 

not believe this to be the case when 

applying the skill and initiative factor. 

As explained in the NPRM, courts have 

often recognized that a worker’s lack of 

specialized skills to perform the work 

indicates that the worker is an 

employee. As the Tenth Circuit, for 

example, has explained, ‘‘the lack of the 

requirement of specialized skills is 

indicative of employee status.’’ Flint 

Eng’g, 137 F.3d at 1443 (quoting Snell, 

875 F.2d at 811) (alteration omitted).495

When a worker lacks specialized skills, 

this factor will indicate employee status 

even if the worker exercises ‘‘the 

initiative of an independent business.’’ 

That initiative, of course, is very 

relevant to the overall analysis, and the 

worker who lacks the specialized skills 

but exercises ‘‘the initiative of an 

independent business’’ may very well 

be an independent contractor after 

considering all of the factors. For those 

reasons, there should be no confusion. 

The landscaper example in the NPRM’s 

discussion of the skill and initiative 

factor provides additional explanation; 

the landscaper’s landscaping work does 

not require specialized skills, but the 

landscaper’s use of initiative and other 

facts may demonstrate that the 

landscaper is an independent 

contractor.496

The U.S. Chamber similarly 

commented that the NPRM was ‘‘wrong 

to focus on ‘specialized skills’ as 

probative in determining independent 

contractor status.’’ The U.S. Chamber 

further commented that ‘‘a focus on ‘the 

amount of skill required’ separate from 

a worker’s initiative that impacts the 

worker’s profits is an unnecessarily 

restrictive view of independent work 

currently being performed in the U.S. 

economy.’’ In making these arguments, 

however, the U.S. Chamber did not 

rebut the substantial case law relied on 

by the Department explaining that the 

use of specialized skills in an 

independent or business-like way is 

what makes this factor probative of 

employee or independent contractor 

status. The Department grounds this 

factor in that case law. Citing drivers 

among other occupations, the U.S. 

Chamber added that ‘‘[e]ven low-skilled 

workers can work as independent 

contractors if they have a skill that they 

can market to customers.’’ See also 

Scalia Law Clinic. The Department 

agrees, as stated above, that workers 

lacking specialized skills can be 

independent contractors when all of the 


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497See also Iontchev, 685 F. App’x at 550–51 

(finding that the ‘‘service rendered by the Drivers 

did not require a special skill,’’ but concluding that, 

‘‘[u]nder the totality of the circumstances, the 

Drivers were not economically dependent upon [the 

employer]’’ and thus independent contractors). 

498See, e.g., Razak, 951 F.3d at 147 (noting that 

it ‘‘is generally accepted that ‘driving’ is not itself 

a ‘special skill’ ’’ in determining that the skill factor 

weighs in favor of employee status); Off Duty Police, 

915 F.3d at 1055–56 (noting that ‘‘[t]he skills 

required to work for ODPS are far more limited than 

those of a typical independent contractor’’ in 

finding that the skill factor weighed in favor of 

employee status for security guards and traffic 

control workers); Iontchev, 685 F. App’x at 550 

(‘‘The service rendered by the [taxi drivers] did not 

require a special skill.’’); EM Protective Servs., 2021 

WL 3490040, at *7 (traffic control officers require 

‘‘relatively little skill’’ and security guards require 

‘‘minimal skill,’’ indicating employee status); New 

Image Landscaping, 2019 WL 6463512, at *6 (facts 

that ‘‘little or no skill was required’’ and ‘‘prior 

landscaping experience’’ was not required meant 

that skill factor favored employee status for 

landscapers); Wellfleet Commc’ns, 2018 WL 

4682316, at *7 (explaining that skill factor favored 

employee status for call center workers because ‘‘all 

that Defendants required was the ability to 

communicate well and read a script’’); Super Maid, 

55 F. Supp. 3d at 1077–78 (noting, in finding that 

skill factor favored employee status, that 

‘‘[m]aintenance work, such as cleaning, sweeping 

floors, mowing grass, unclogging toilets, changing 

light fixtures, and cleaning gutters, does not 

necessarily involve such specialized skills as would 

support independent contractor status,’’ and that 

‘‘cleaning services, although difficult and 

demanding, were even less complex than those 

maintenance services’’) (internal quotation marks 

omitted); Skokie Maid, 2013 WL 3506149, at *8 

(‘‘The maids’ work may be difficult and demanding, 

but it does not require special skill,’’ indicating 

employee status.); Campos, 2011 WL 2971298, at *7 

(‘‘There is no evidence that Campos’s job as a 

delivery person required him to possess any 

particular degree of skill. Campos did not need 

education or experience to perform his job. 

Although he needed a driver’s license in order to 

legally drive his vehicle for deliveries, the 

possession of a driver’s license and the ability to 

drive an automobile is properly characterized as a 

‘routine life skill’ that other courts have found to 

be indicative of employment status rather than 

independent contractor status.’’); Int’l Detective & 

Protective Serv., 819 F. Supp. 2d at 752 (finding that 

the ‘‘vast majority of the Guards’ work . . . did not 

require any special skills’’). 

499NRF & NCCR commented that ‘‘[t]he fact that 

many people have regular driver’s licenses should 

not be viewed as in any way negating or reducing 

the likelihood that a contractor who meets the other 

factors will be properly treated as an independent 

contractor.’’ As the Department has clearly and 

repeatedly stated, no one fact will determine a 

worker’s status as an employee or independent 

contractor. 

factors are considered. In addition, the 

Department continues to believe that the 

landscaper example in the NPRM’s 

discussion of this factor, an example 

which the Department reaffirms, 

addresses that scenario.497 Moreover, no 

one fact or factor determines whether a 

worker of any skill level is an employee 

or independent contractor. 

MEP described the Department’s 

articulation of this factor as 

‘‘unreasonably narrow’’ and stated that 

the Department ‘‘should recognize a 

wide variety of skills that demonstrate 

an individual’s business-like initiative.’’ 

It added that the Department ‘‘should 

not be in the business of judging which 

skills are considered specialized or 

nonspecialized or place high or low 

value on the skills independent 

contractors provide.’’ As noted in the 

NPRM, courts have identified some 

occupations where workers were found 

to lack specialized skills (for example, 

security guards, traffic control officers, 

drivers, janitorial work, landscaping, 

and call center workers).498 The 

Department is seeking to ground this 

factor in that case law. Certain 

occupations may often lack specialized 

skills, but the Department cannot say 

that a particular occupation always 

lacks specialized skills. For example, a 

explained below, drivers may often lack 

specialized skills, but drivers with CDLs 

may have a specialized skill. Moreover, 

determining whether a worker has 

specialized skills is just one part of the 

inquiry, and workers who lack 

specialized skills may still be 

independent contractors. The 

landscaper example referenced above is 

one example of a worker who can be an 

independent contractor even if the work 

is unskilled, and this outcome is 

possible in other industries because a 

worker’s classification is ultimately 

determined by application of all of the 

factors. 

NRF & NCCR recommended that 

‘‘specialized skills’’ be changed to 

‘‘skill, talent or creativity,’’ referencing 

singers at restaurants among other 

examples. Again, the Department is not 

seeking to limit the types of work that 

involve skills or taking the position that 

any particular occupation lacks 

specialized skills. Instead, consistent 

with the bulk of case law, the 

Department is focusing this factor on 

whether the worker uses their 

specialized skills in connection with 

business-like initiative—rather than 

only considering whether the worker 

has specialized skills—because that 

focus is probative of the ultimate 

question of economic dependence. 

Regarding the NPRM’s statement that 

‘‘[n]umerous courts have found that 

driving is not a specialized skill,’’ 

NHDA commented that ‘‘a number of 

courts have found professional driving, 

including driving that requires a 

commercial driver’s license (CDL), 

involves specialized skills’’ (footnote 

omitted). See also Scopelitis. These 

commenters added that ‘‘[a] driver with 

a CDL is a clear indicator of an 

individual pursuing a specialized skill 

to engage in a business.’’ OOIDA 

commented similarly, stating that the 

cases relied on by the Department in the 

NPRM ‘‘were focused on automobile 

driving, not the driving of a commercial 

motor vehicle,’’ and that it was ‘‘unclear 

whether the Department believes the 

driving skills required for a Class A 

Commercial Drivers License (CDL) are 

not specialized.’’ Considering these 

comments and the requests for 

clarification, the Department clarifies 

that it recognizes the distinctive nature 

of CDLs and further recognizes that 

drivers performing work requiring such 

licenses are likely using specialized 

skills as compared to drivers 

generally.499 As with any worker, 

consideration of whether a driver with 

a CDL uses that specialized skill in 

connection with business-like initiative 

determines whether this factor indicates 

employee or independent contractor 

status. 

CPIE stated that ‘‘the NPRM’s 

interpretation would ignore any 

initiative that is not attributable to an 

individual’s specialized skill,’’ 

expressed concern that this factor may 

not always align with the ultimate 

outcome, and ‘‘respectfully urges DOL 

to interpret this factor to consider any 

business initiative that demonstrates an 

individual’s economic independence, 

regardless of whether the initiative is 

attributable to any skills.’’ As an initial 

matter, the Department notes that it is 

not unusual when applying a 

multifactor economic realities analysis 

for one factor to not align with the 

ultimate outcome when the analysis is 

applied and the totality of the 

circumstances is considered. Regardless, 

any business initiative by a worker is 

plainly relevant to the analysis and may 

be considered under the opportunity for 

profit or loss depending on managerial 

skill factor and other factors, as the 

landscaper example in the NPRM’s 

discussion of the skill and initiative 

factor demonstrates. Accordingly, this 

rulemaking accounts for IBA’s comment 

that ‘‘[a] true measure of economic 

independence would not restrict the 

analysis of skill and initiative to 

considering only specialized skills and 

only initiative attributable to those skills 

but instead would consider ‘all major 

components open to initiative,’ such as 

‘business management skills.’ ’’ If not 

under the skill and initiative factor, the 

factors comprising the economic 

realities analysis certainly consider all 

types of initiative and business 

management skills by the worker. 

Fight for Freelancers asserted that, in 

the case of a highly skilled worker who 

is asked by ‘‘one of her regular clients’’ 

to do ‘‘a task that requires far less skill’’ 


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500 29 CFR 795.110(a)(1) and (a)(2), respectively. 

501 86 FR 1247. 

502 87 FR 62275 (proposed § 795.110(b)(7)). 

503 Id. at 62257. 

504 Id. 

505 331 U.S. at 716 (‘‘No one [factor] is controlling 

nor is the list complete.’’). 

506See generally 87 FR 62257; infra n.512. 

507 87 FR 62257. 

than usual, the worker ‘‘would now 

have to tell her client—with whom she 

likes to work—that she cannot provide 

what the client needs for this particular 

project, because it does not make use of 

her more specialized skills.’’ The 

Department recognizes that using 

specialized skills in connection with 

business-like initiative does not 

preclude (and, in fact, may often also 

include) performance of lower-skilled 

tasks. Whether the worker uses 

specialized skills to perform the work is 

not determined by isolating any one task 

performed by the worker; instead, 

consistent with a totality-of-thecircumstances approach, the worker’s 

work on the whole should be 

considered to determine if the worker 

uses specialized skills in connection 

with business-like initiative. 

Coalition of Business Stakeholders 

stated that the Department’s articulation 

of this factor ‘‘dispenses with all 

independent consideration of a worker’s 

specialized skills obtained or developed 

separate and apart from the hiring 

entity’’ and ‘‘all but ensures 

consideration of this factor will 

preclude an independent contractor 

finding.’’ This comment overlooks the 

totality-of-the-circumstances nature of 

the analysis; no one factor can preclude 

an independent contractor or employee 

finding. Contrary to this commenter’s 

assertion, the Department believes that 

the worker’s skills developed separate 

and apart from the hiring entity are 

relevant. The regulatory text providing 

that this factor indicates ‘‘employee 

status . . . where the work is dependent 

on training from the employer to 

perform the work’’ reflects that bringing 

skills to the work relationship (i.e., 

skills developed separate and apart from 

the employer) may indicate 

independent contractor status if the 

skills contribute to business-like 

initiative. 

Regarding training, America Outdoors 

Association stated that it ‘‘may benefit 

an outfitter to train an independent 

contractor, or pay for a first aid 

certification class, in order for the 

contractor to better serve out the terms 

of the contract.’’ Referencing a labor 

shortage in its industry, WFCA stated 

that ‘‘the mere fact that a contractor or 

dealer is willing to pay to train 

independent contractor should not 

make the worker an employee’’ and 

asked that the regulatory text be revised 

to reflect that. See also ABC. As an 

initial matter, some basic training in a 

workplace, such as paying for a first-aid 

certification class, does not prevent a 

finding that a worker uses specialized 

skills to perform the work. Instead, the 

analysis is more general and, as the 

regulatory text states, should focus on 

whether the worker is dependent on 

training from the employer to perform 

the work. Finally, the revision requested 

by WFCA is unnecessary given that the 

regulatory text already provides 

generally that ‘‘the outcome of the 

analysis does not depend on isolated 

factors but rather upon the 

circumstances of the whole activity’’ 

and, ‘‘[c]onsistent with a totality-of-thecircumstances analysis, no one factor or 

subset of factors is necessarily 

dispositive.’’ 500

The Department is finalizing the skill 

and initiative factor (§ 795.110(b)(6)) as 

discussed herein. 

Example: Skill and Initiative 

A highly skilled welder provides 

welding services for a construction firm. 

The welder does not make any 

independent judgments at the job site 

beyond the decisions necessary to do 

the work assigned. The welder does not 

determine the sequence of work, order 

additional materials, think about 

bidding the next job, or use those skills 

to obtain additional jobs, and is told 

what work to perform and where to do 

it. In this scenario, the welder, although 

highly skilled technically, is not using 

those skills in a manner that evidences 

business-like initiative. These facts 

indicate employee status under the skill 

and initiative factor. 

A highly skilled welder provides a 

specialty welding service, such as 

custom aluminum welding, for a variety 

of area construction companies. The 

welder uses these skills for marketing 

purposes, to generate new business, and 

to obtain work from multiple 

companies. The welder is not only 

technically skilled, but also uses and 

markets those skills in a manner that 

evidences business-like initiative. These 

facts indicate independent contractor 

status under the skill and initiative 

factor. 

7. Additional Factors (§ 795.110(b)(7)) 

Section 795.105(d)(2)(iv) of the 2021 

IC Rule stated that additional factors 

may be considered if they are relevant 

to the ultimate question of whether the 

workers are economically dependent on 

the employer for work or in business for 

themselves.501 The Department 

proposed to retain this provision with 

only minor editorial changes, moving it 

to § 795.110(b)(7). Specifically, the 

Department’s proposed regulatory text 

provided that ‘‘[a]dditional factors may 

be relevant in determining whether the 

worker is an employee or independent 

contractor for purposes of the FLSA, if 

the factors in some way indicate 

whether the worker is in business for 

themself, as opposed to being 

economically dependent on the 

employer for work.’’ 502

The Department explained in the 

NPRM that retaining this provision 

would ‘‘reiterate[ ] that the enumerated 

factors are not to be applied 

mechanically but should be viewed 

along with any other relevant facts in 

light of whether they indicate economic 

dependence or independence.’’ 503

Additionally, it reemphasized that 

‘‘only factors that are relevant to the 

overall question of economic 

dependence or independence should be 

considered.’’ 504 The Department 

explained that this approach reflects the 

necessity of considering all facts that are 

relevant to the question of economic 

dependence or independence, 

regardless of whether those facts fit 

within one of the enumerated factors. 

The Department reasoned that this 

approach is consistent with the 

Supreme Court’s guidance in Silk, 

where the Court cautioned that its 

suggested factors are not intended to be 

exhaustive.505 Additionally, this 

approach is also consistent with the 

approach that courts and the 

Department have used in the decades 

since Silk to determine whether workers 

are employees or independent 

contractors under the FLSA.506

Like in the 2021 IC Rule, the 

Department proposed not to identify 

any specific additional factors, and 

specifically declined to identify the 

‘‘degree of independent business 

organization and operation,’’ a factor 

considered in prior departmental 

guidance, as a seventh factor in the 

analysis. The Department explained that 

given the ‘‘focus in this proposed 

rulemaking on reflecting the economic 

reality factors commonly used by the 

circuit courts of appeals, the 

Department chose not to include the 

worker’s ‘degree of independent 

business organization and operation’ as 

a seventh factor.’’ 507 The Department 

noted that it was not aware of any court 

that has used this as a standalone factor 

and expressed concerns that ‘‘facts that 

may relate to whether a worker has an 

independent business organization— 

such as whether the worker has 

incorporated or receives an Internal 


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508 Id. 

509The Department notes that it included the 

additional factors provision in the 2021 IC Rule in 

response to the National Restaurant Association’s 

comment in that rulemaking expressing concern 

about the lack of a specific regulatory provision 

acknowledging that additional factors could be 

relevant. Specifically, as explained in the 2021 IC 

Rule, the Restaurant Association contended that 

‘‘facts and factors’’ that were not listed in the 

Department’s 2020 proposal, which included two 

core factors and three additional factors, ‘‘may be 

relevant to the question of economic dependence 

even if they would not be as probative as the two 

core factors.’’ They expressed ‘‘concern that future 

courts may ignore these unlisted but potentially 

relevant considerations in response to this 

rulemaking’’ and ‘‘requested that the Department 

revise the regulatory text to explicitly recognize that 

unlisted factors may be relevant.’’ 86 FR 1196. 

510 331 U.S. at 716. 

511See Sureway, 656 F.2d at 1370 (stating that 

‘‘the courts have identified a number of factors that 

should be considered’’ when determining if an 

individual is an employee under the FLSA but 

noting that ‘‘the list is not exhaustive’’); Razak, 951 

F.3d at 143 (noting that the Third Circuit agreed 

with Sureway ‘‘that ‘neither the presence nor 

absence of any particular factor is dispositive’ ’’ and 

explaining that ‘‘ ‘courts should examine the 

circumstances of the whole activity,’ determining 

whether, ‘as a matter of economic reality, the 

individuals are dependent upon the business to 

which they render service’ ’’) (internal citation 

omitted); Hobbs, 946 F.3d at 836 (stating that 

‘‘[b]ecause the Silk factors are non-exhaustive, we 

will also look to other factors to help gauge the 

economic dependence of the pipe welders’’); 

Parrish, 917 F.3d at 387 (stating that the ‘‘Silk 

factors being ‘non-exhaustive’, other relevant factors 

may be in play in an employee vel non analysis’’); 

Karlson, 860 F.3d at 1092 (‘‘No one [factor] is 

controlling nor is the list complete.’’) (quoting Silk, 

331 U.S. at 716) (internal quotations omitted); 

Scantland, 721 F.3d at 1312 (‘‘We note, however, 

that these six factors are not exclusive and no single 

factor is dominant.’’); Lauritzen, 835 F.2d at 1534 

(‘‘Certain criteria have been developed to assist in 

determining the true nature of the relationship, but 

no criterion is by itself, or by its absence, 

dispositive or controlling.’’); Superior Care, 814 

F.2d at 1043 (explaining that ‘‘[t]hese factors are not 

exhaustive’’ and ‘‘must always be aimed at an 

assessment of the ‘economic dependence’ of the 

putative employees, the touchstone for this totality 

of the circumstances test’’) (internal citation 

omitted). 

512Saleem, 854 F.3d at 140 (quoting Barfield v. 

New York City Health & Hospitals Corp., 537 F.3d 

132, 141 (2008) quoting Goldberg, 366 U.S. at 33, 

and Rutherford, 331 U.S. at 730)) (internal 

quotation marks omitted). 

513See WHD Fact Sheet #13 (July 2008). 

514 2015 WL 4449086, at *3 n.4 (withdrawn June 

7, 2017). 

Revenue Service (IRS) Form 1099 from 

an potential employer—reflect mere 

labels rather than the economic realities 

and are thus not relevant.’’ 508

A few commenters expressed support 

for the Department’s proposed section 

on additional factors. See e.g., NWLC; 

AFL–CIO; DSA; and State AGs. DSA 

commented that it ‘‘agrees with the 

Department’s retention of the 2021 IC 

Rule that additional factors may be 

considered if they are relevant to the 

ultimate question of economic 

dependence.’’ The AFL–CIO expressed 

support for the Department’s additional 

factors provision, noting that the 

Department correctly recognized that 

additional factors should be considered 

when relevant to the economic reality. 

Several commenters expressed 

concerns with a perceived vagueness 

and lack of clarity arising from 

inclusion of additional factors, and 

some requested that the Department 

delete the additional factors section 

from the final rule entirely. For 

example, IEC commented that ‘‘[t]he 

proposed rule does little to further 

define ‘additional factors’ which will 

only lead to employers, employees, and 

independent contractors’’ speculating 

about ‘‘how to apply this in their 

analysis.’’ SBA expressed concerns with 

what it described as an ‘‘open-ended 

factor’’ and recommended the 

Department delete it. Inline Translation 

Services similarly commented that 

‘‘[t]he catch all phrase ‘additional 

factors’ should be removed entirely,’’ 

stating that ‘‘this open ended clause 

could introduce innumerable other 

factors during labor audits with very 

uncertain and unpredictable outcomes.’’ 

AFPF expressed concerns that 

‘‘[s]takeholders will have no clarity as to 

what additional factors may be 

considered in any particular case.’’ 

Goldwater Institute commented that 

‘‘[t]o the extent an employer has 

concluded its economic dependence 

analysis and finds that the worker is 

indeed an independent contractor, this 

final consideration could ostensibly 

swallow the rule.’’ The National 

Restaurant Association also expressed 

concerns with the Department’s 

decision not to define specific 

additional factors, commenting that the 

undefined additional factors section 

could create confusion as it offers ‘‘little 

guidance to the regulated 

community.’’ 509

NAFO commented that ‘‘this catch-all 

factor provides [the Department] a vague 

and highly discretionary means by 

which it can determine whether there is 

something that ‘indicates’ whether a 

worker is economically dependent on 

an employer for work without historical 

precedent or guidance.’’ The Coalition 

of Business Stakeholders similarly 

expressed that ‘‘the [Department] inserts 

into the Proposed Rule a mechanism 

whereby it can hinge its classification 

decision on anything it deems to 

‘indicate’ that a worker is either in 

business for themselves or economically 

dependent on an employer, regardless of 

whether such consideration has 

historically, or ever, been considered as 

part of the classification analysis.’’ See 

also, e.g., MEP, Promotional Products 

Association International. 

Contrary to some of the commenters’ 

assertions, the Department reiterates 

that the proposed regulatory language 

on additional factors is consistent with 

and reflects decades of Supreme Court 

and federal appellate court precedent— 

as well as guidance from the 

Department including the 2021 IC 

Rule—emphasizing that the enumerated 

economic realities factors are not 

exhaustive. For example, the Supreme 

Court explained in Silk that ‘‘[n]o one 

[factor] is controlling nor is the list 

complete.’’ 510 Many federal courts of 

appeals have also emphasized that the 

enumerated factors are not 

exhaustive.511 Courts have reiterated 

that ‘‘[t]he determination of whether an 

employer-employee relationship exists 

for purposes of the FLSA should be 

grounded in ‘economic reality rather 

than technical concepts,’ . . . 

determined by reference not to ‘isolated 

factors but rather upon the 

circumstances of the whole 

activity.’ ’’ 512 The Department’s 

guidance has emphasized a similar 

approach. For example, WHD Fact Sheet 

#13 has indicated that its factors are not 

exhaustive and stated that ‘‘the Supreme 

Court has held that it is the total activity 

or situation which controls’’ the inquiry 

and that ‘‘[t]he employer-employee 

relationship under the FLSA is tested by 

‘economic reality’ rather than ‘technical 

concepts.’ ’’ 513 AI 2015–1 explained that 

courts ‘‘routinely note that they may 

consider additional factors depending 

on the circumstances.’’ 514

The Department continues to believe 

that the additional factors section is 

entirely consistent with how the courts 

and the Department have approached 

the economic realities inquiry for 

decades, including in the 2021 IC Rule. 

Commenters expressing concerns that 

the consideration of additional factors 

will lead to confusion and uncertainty 

overlook several important 

considerations. First, as mentioned, this 

has been the approach of the courts and 

the Department for decades—the 

enumerated economic realities factors 

are not exhaustive, all relevant facts 

should be considered, and the focus of 

the determination should be grounded 

in the economic realities as opposed to 

any isolated factors. There is no basis 

for the concern that the retention of a 

regulatory provision stating what courts, 

the Department, and the regulated 

community have understood to be part 

of the economic reality test under the 

FLSA for over 75 years will result in 

confusion and uncertainty as opposed to 

consistency and familiarity. Second, the 

additional factors section is not 


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515 87 FR 62236. 

516See WHD Fact Sheet #13 (July 2008). 

517See, e.g., Safarian v. American DG Energy Inc., 

622 F. App’x 149, 151 (3d Cir. 2015) (even where 

‘‘the parties structure[ ] the relationship as an 

independent contractor, . . . the caselaw counsels 

that, for purposes of the worker’s rights under the 

FLSA, we must look beyond the structure to the 

economic realities’’). 

unbounded and includes clear 

constraining language in the regulatory 

text, emphasizing that only those 

additional factors which indicate that 

the worker is economically dependent 

on the potential employer for work or in 

business for themself can be considered. 

This reflects the necessity of 

considering all facts that are relevant to 

the question of economic dependence or 

independence, regardless of whether 

those facts fit within one of the six 

enumerated factors. While the 

department declines to specify any 

particular additional factors, the 

language of the regulatory text 

appropriately limits the scope of 

potentially relevant additional facts or 

factors that might be considered. 

Moreover, the Department recognizes 

that, in many instances, consideration of 

additional factors will not be necessary 

because the relevant factual 

considerations can and will be 

considered under one or more of the 

enumerated factors. The additional 

factors section is simply a recognition 

by the Department, consistent with 

decades of case law, that a rule applying 

to varying economic relationships 

across sectors of the economy must be 

applied in a non-mechanical fashion 

and must focus on the totality of the 

circumstances. 

The U.S. Chamber expressed concern 

that the additional factors section ‘‘has 

the potential to swallow the six defined 

factors,’’ and that ‘‘[b]usinesses and 

workers alike are being asked to 

consider, weigh, and make significant 

business decisions under a test that has 

unlimited undefined possibilities.’’ The 

U.S. Chamber distinguished the NPRM’s 

additional factors section from the 2021 

IC Rule’s section on additional factors, 

asserting that the 2021 IC Rule 

constrained or narrowed the additional 

factors application by, first, explicitly 

assigning more weight to core factors 

than any potentially relevant additional 

factors, and second, by identifying 

relevant additional factors. 

Some commenters suggested that the 

Department assign the category of 

potentially relevant additional factors 

less weight than the enumerated factors. 

See SHRM; U.S. Chamber. But as the 

Department explained in the NPRM, ‘‘to 

assign a predetermined and immutable 

weight to certain factors ignores the 

totality-of-the-circumstances, factspecific nature of the inquiry that is 

intended to reach a multitude of 

employment relationships across 

occupations and industries and over 

time.’’ 515 This is true both in respect to 

the elevation of core factors above noncore and additional factors in 2021 IC 

Rule, and with respect to the suggested 

devaluation of potential additional 

factors that some commenters urged 

here. 

Other commenters asked the 

Department to specifically recognize 

certain additional factors. For example, 

DSA suggested that the Department 

identify as an additional factor ‘‘the 

recognition of independent contractor 

status for businesses under other 

statutes, such as the Internal Revenue 

Code and numerous state statutes.’’ 

TechServe Alliance urged the 

Department to ‘‘consider the degree of 

independent business formalization 

(incorporation, licenses, taxes) in 

analyzing’’ independent contractor 

status. ACRE et al. requested that the 

Department consider the degree of 

transparency provided to a worker about 

the nature of the work, such as the 

location, scope, and pay for a particular 

task, as an additional factor. SIFMA 

commented that the Department should 

recognize employment or independent 

contractor agreements as an additional 

factor relevant to the economic reality 

inquiry. ABC suggested the Department 

recognize as an additional factor 

‘‘whether it is a recognized, 

longstanding practice for a large 

segment of the industry to treat certain 

types of workers as independent 

contractors.’’ A legal blogger urged the 

Department to clarify some additional 

factors courts have used in determining 

whether there is an employment 

relationship, stating that, for example, 

‘‘the courts have considered whether the 

potential employer has the right to 

terminate the worker for any reason at 

any time; whether the parties are subject 

to an agreement indicating an intent to 

establish an independent contractor 

relationship; and whether the worker 

operates in the form of a corporate 

entity, including as a limited liability 

company.’’ 

After further consideration, and 

consistent with the NPRM, the 

Department declines to identify in this 

final rule any particular additional 

factors that may be relevant. The 

Department believes that the regulatory 

text addressing additional factors, 

which focuses on whether the 

additional factors are indicative of 

whether the worker is in business for 

themselves or is economically 

dependent on the potential employer for 

work, is sufficiently constrained to 

narrow the possible relevant 

considerations and sufficiently flexible 

to capture potentially relevant factual 

considerations that fall outside the 

enumerated factors. In light of this, the 

Department believes it is unnecessary to 

specify any additional factors. The 

Department previously identified the 

‘‘degree of independent business 

organization and operation’’ as a 

seventh factor that it considered in its 

analysis.516 However, as noted in the 

NPRM, the Department is not aware of 

any court that has used this as a 

standalone factor, and the Department 

declines to identify this as a standalone 

factor in this final rule. Additionally, as 

explained in the NPRM, the Department 

is concerned that facts such as whether 

the worker has incorporated or receives 

an IRS Form 1099 from a potential 

employer reflect mere labels rather than 

the economic realities and are thus not 

relevant. The Department has similar 

concerns that contractual provisions 

indicating the intent of the parties to 

establish an independent contractor 

relationship also may reflect mere labels 

rather than the economic realities and 

are thus not relevant. To the extent facts 

such as the worker having a business 

license or being incorporated may 

suggest that the worker is in business for 

themself, they may be considered either 

as an additional factor or under any 

enumerated factor to which they are 

relevant. However, consistent with an 

economic reality analysis, it is 

important to inquire into whether the 

worker’s license or incorporation are 

reflective of the worker being in 

business for themselves as a matter of 

economic reality. For example, if a 

potential employer requires a worker to 

obtain a certain license or adopt a 

certain form of business as a condition 

for performing work, this may be 

evidence of the potential employer’s 

control, rather than a worker who is 

independently operating a business.517

Finally, Flex requested that the 

Department clarify whether it still 

agrees with guidance as to the lack of 

relevance of certain factors expressed in 

WHD Fact Sheet #13. Flex urged the 

Department to ‘‘add guidance to the 

proposed rule that mirrors the 

subregulatory guidance in Fact Sheet 

#13 and make clear that the same factors 

previously deemed not relevant are still 

deemed not relevant.’’ While the 

Department declines to identify specific 

factors as never relevant to the inquiry 

of whether a worker is economically 

dependent or in business for 

themselves, the Department agrees that 

certain factors are generally immaterial 


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518WHD Fact Sheet #13 (July 2008). 

519 87 FR 62257. 

520 86 FR 1247 (§ 795.110). 

521 87 FR 62258. 

522 Id. 

523See generally 87 FR 62258. 

524 87 FR 62258. 

525 86 FR 1205. 

526Rosenwasser, 323 U.S. at 362–63. 

527 Darden, 503 U.S. at 326. 

528 87 FR 62258. 

529 Id. In Silk, the Supreme Court described this 

standard as ‘‘power of control, whether exercised or 

not, over the manner of performing service to the 

industry.’’ 331 U.S. at 713 (citing Restatement of the 

Law, Agency, sec. 220). 

in determining the existence of an 

employment relationship because they 

reflect mere labels rather than the 

economic realities, and do not indicate 

whether a worker is in business for 

themselves or is economically 

dependent on a potential employer for 

work. As it has stated previously, the 

Department continues to believe that 

‘‘such facts as the place where work is 

performed, the absence of a formal 

employment agreement, . . . whether 

an alleged independent contractor is 

licensed by State/local government,’’ 

and ‘‘the time or mode of pay’’ do not 

generally indicate whether a worker is 

economically dependent or in business 

for themself.518

The Department is finalizing the 

additional factors section 

(§ 795.110(b)(7)) as proposed with one 

minor editorial change as explained. 

D. Primacy of Actual Practice (2021 IC 

Rule § 795.110) 

The Department proposed to remove 

§ 795.110 of the 2021 IC Rule and use 

that section for the discussion of the 

economic reality factors.519 Section 

795.110 of the 2021 IC Rule provided 

that in determining economic 

dependence ‘‘the actual practice of the 

parties involved is more relevant than 

what may be contractually or 

theoretically possible.’’ 520 In the NPRM, 

the Department explained that this 

absolute rule ‘‘is overly mechanical and 

does not allow for appropriate weight to 

be given to contractual provisions in 

situations in which they are crucial to 

understanding the economic realities of 

a relationship.’’ 521 The Department 

expressed its belief that a less 

prescriptive approach is more faithful to 

the totality-of-circumstances economic 

reality analysis, such that contractual or 

other reserved rights should be 

considered like any other fact under 

each factor to the extent they indicate 

economic dependence.522

In its proposal, the Department 

acknowledged that contractual authority 

may in some instances be less relevant, 

but noted that the 2021 IC Rule’s 

position that actual practice is always 

more relevant is incompatible with an 

approach that does not apply the factors 

mechanically but looks to the totality of 

the circumstances in evaluating the 

economic realities. The Department 

explained that the focus is always on 

the economic realities rather than mere 

labels, but contractual provisions are 

not always mere labels. Instead, 

contractual provisions sometimes reflect 

and influence the economic realities of 

the relationship. The Department 

explained that within each factor of the 

test, there may be actual practices that 

are relevant, and there may also be 

contractual provisions that are relevant 

and that this examination will be 

specific to the facts of each economic 

relationship and cannot be 

predetermined.523

In the NPRM, the Department also 

discussed the 2021 IC Rule’s response to 

‘‘comments asserting that prioritizing 

actual practice would make the 

economic reality test impermissibly 

narrower than the common law control 

test.’’ 524 The 2021 IC Rule asserted that 

‘‘the common law control test does not 

establish an irreducible baseline of 

worker coverage for the broader 

economic reality test applied under the 

FLSA.’’ 525As the Department noted in 

the NPRM, this view of the FLSA’s 

scope of employment is inconsistent 

with the Supreme Court’s observations 

that ‘‘[a] broader or more comprehensive 

coverage of employees’’ than under the 

FLSA ‘‘would be difficult to frame,’’ 526

and that the FLSA ‘‘stretches the 

meaning of ‘employee’ to cover some 

parties who might not qualify as such 

under a strict application of traditional 

agency law principles.’’ 527 The 

Department further explained that the 

‘‘2021 IC Rule’s blanket diminishment 

of the relevance of the right to control 

is inconsistent with the Supreme 

Court’s observations that the FLSA’s 

scope of employee coverage is 

exceedingly broad and broader than 

what exists under the common law.’’ 528

Finally, the Department recognized that 

the fact that the employer’s right to 

control is part of the common law test 

shows that it is a useful indicator of 

employee status.529

Multiple commenters expressed 

support for the Department’s decision to 

remove the 2021 IC Rule’s provision on 

the primacy of actual practice. For 

example, the State AGs agreed with the 

NPRM’s reasoning, noting ‘‘that 

unexercised contractual powers among 

the parties may be equally as relevant to 

determining economic dependence as 

exercised powers’’ and stating that 

‘‘[t]he Department rightly recognizes 

that the parties’ actual practice is not 

more relevant than any other factor as 

to the question of economic 

dependence.’’ The LA Fed & Teamsters 

Locals stated ‘‘a worker cannot be said 

to be acting independently in running 

their own business if they are unable to 

make and effectuate certain decisions 

because another entity has reserved 

power over those decisions.’’ Similarly, 

NELP commented that the NPRM rightly 

recognized ‘‘that contractual provisions 

can be powerful silencers; a right that is 

never exercised may be more significant 

evidence of control than a right that is 

routinely ignored.’’ Justice at Work 

Pennsylvania commented that they 

support the Department’s position on 

the primacy of actual practice ‘‘which 

would restore the broad, holistic test for 

FLSA employment, as intended by 

Congress.’’ Gale Healthcare Solutions 

similarly commented that they ‘‘agree 

with DOL’s proposal to remove Section 

795.110 of the 2021 IC Rule, as every 

fact that is relevant to economic 

dependence should be considered in the 

analysis of economic dependence, and 

contractual possibilities—not just actual 

practices—should be considered.’’ 

A number of commenters, however, 

expressed disagreement with the 

Department’s proposal to remove this 

provision of the 2021 IC Rule. For 

example, FMI commented that ‘‘control 

has always been evaluated based upon 

the actual exercise of control, that is, 

what the actual practice of the business 

and worker is—not the theoretical 

reservation of control.’’ Cambridge 

Investment Research commented that 

‘‘[m]erely because an independent 

contractor elects not to take advantage 

of his or her independence or freedom 

says nothing about whether in fact the 

worker is properly classified.’’ The U.S. 

Chamber expressed concern that the 

NPRM ‘‘contradicts the principle that 

‘[i]t is not significant how one ‘‘could 

have’’ acted under the contract terms. 

The controlling economic realities are 

reflected by the way one actually acts.’ ’’ 

N/MA urged the Department to 

maintain the 2021 IC Rule’s position 

‘‘that unexercised contractual rights are 

not irrelevant, they are simply not as 

informative as the actual experience of 

the parties,’’ expressed concerns that the 

NPRM ‘‘turns the economic realities test 

into a focus on economic possibilities,’’ 

and noted that ‘‘[c]ontractual provisions 

that are truly important necessarily 

manifest in the actual experiences of the 

worker.’’ CWI similarly commented: 

‘‘To be clear, the 2021 IC Rule does not 

provide that unexercised rights are 

irrelevant. It merely states the obvious: 


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530 87 FR 62258. 

531 Id. 

532 Darden, 503 U.S. at 323 (common-law 

employment test considers ‘‘the hiring party’s right 

to control the manner and means by which the 

product is accomplished’’) (quoting Reid, 490 U.S. 

at 751–52); Restatement (Third) of Agency, sec. 

7.07, Comment (f) (2006) (‘‘For purposes of 

respondeat superior, an agent is an employee only 

when the principal controls or has the right to 

control the manner and means through which the 

agent performs work.’’). 

533 87 FR 62223. 

534 Id. 

535AI 2015–1, 2015 WL 4449086, at *11 

(withdrawn June 7, 2017). Additionally, AI 2015– 

1 cited, among other cases, Superior Care, for the 

proposition that ‘‘[a]n employer does not need to 

look over his workers’ shoulders every day in order 

to exercise control.’’ In Superior Care, even though 

the parties stipulated that actual practice of the 

parties was to have infrequent supervisory visits, 

the Second Circuit found more probative of control 

the fact that the employer ‘‘unequivocally expressed 

the right to supervise the nurses’ work, and the 

nurses were well aware that they were subject to 

such checks as well as to regular review of their 

nursing notes.’’ Superior Care, 840 F.2d at 1060. 

536See WHD Op. Ltr. (June 23, 1949) (‘‘Ordinarily 

a definite decision as to whether one is an 

employee or an independent contractor under the 

[FLSA] cannot be made in the absence of evidence 

as to his actual day-to-day working relationship 

with his principal.’’). 

537See infra n.541. 

538See discussion regarding the Seventh Circuit’s 

decision in Brant v. Schneider Nat’l, infra. 

539See Off Duty Police, 915 F.3d at 1060–61 

(finding that, among other things, officers’ 

testimony that they were disciplined for turning 

down assignments, despite having the right to do 

so, supported employee status). 

that what the control a putative 

employer actually exercises is more 

informative than the control it could 

exercise.’’ See also CWC; MEP; NRF& 

NCCR. 

Upon considering the comments, the 

Department is finalizing the removal of 

§ 795.110 of the 2021 IC Rule (Primacy 

of actual practice). Consistent with case 

law and the Department’s historical 

position prior to the 2021 IC Rule, the 

Department declines to create a novel 

bright line rule that assigns a 

predetermined and immutable weight or 

level of importance to reserved rights. 

As explained in the NPRM, the 

Department believes a less prescriptive 

approach is more faithful to the totalityof-the-circumstances, economic-reality 

analysis, and contractual or other 

reserved rights should be considered 

like any other fact under each factor to 

the extent they indicate economic 

dependence.530 The significance of each 

fact in the analysis should be informed 

by its relevance to the economic 

realities and this analysis will be 

specific to the facts of each economic 

relationship and cannot be 

predetermined. Finally, the 

Department’s approach to the reserved 

right to control is more consistent with 

the historical bounds of the control 

factor than the 2021 IC Rule’s blanket 

diminishment of the relevance of the 

right to control, which was inconsistent 

with the Supreme Court’s observations 

that the FLSA’s scope of employee 

coverage is exceedingly broad, even 

more so than under the common law.531

That the common law test includes the 

employer’s right to control shows that it 

is a useful indicator of employee 

status.532 As such, the Department 

believes that removal of this provision 

is appropriate. Specific concerns raised 

in the comments relevant to this issue 

are discussed and addressed in this 

section below. 

Several commenters expressed 

concerns that the proposed removal of 

the primacy of actual practice provision 

was inconsistent with longstanding case 

law and previous guidance issued by 

the Department. See, e.g., CWC; DSA; 

FSI; Scalia Law Clinic; U.S. Chamber. 

For example, FMI expressed concerns 

that the NPRM was inconsistent with 

‘‘the articulation of the control factor in 

Administrator’s Interpretation (AI) No. 

2015–1 (July 15, 2015)’’ which FMI 

contends ‘‘debunked the idea that 

reserved control should be a 

consideration.’’ FMI also suggested that 

the NPRM was inconsistent with case 

law cited in AI 2015–1 which expressed 

that a ‘‘worker’s control over meaningful 

aspects of the work must be more than 

theoretical—the worker must actually 

exercise it.’’ See also CWC. DSA 

commented that the 2021 IC Rule’s 

elevation of actual practice as always 

more relevant than contractual or 

theoretical possibilities was consistent 

with a 1949 Opinion Letter that stated 

‘‘ordinarily, a definite decision as to 

whether one is an employee or 

independent contractor under the 

[FLSA] cannot be made in the absence 

of evidence as to his actual day-to-day 

working relationship with his 

principal.’’ The U.S. Chamber 

commented that the NPRM was 

inconsistent with decades of court 

precedent holding that ‘‘the focus is on 

economic reality, not contractual 

language.’’ According to the U.S. 

Chamber, the NPRM ‘‘would effectively 

elevate reserved contractual rights above 

the actual practice of the parties’’ and 

the ‘‘economic realities test would be 

replaced by a contractual reservation 

test.’’ Similarly, MEP expressed its 

position that the 2021 IC Rule ‘‘ensures 

the true nature of the contractual 

relationship is considered above all but 

leaves room for theoretical possibilities 

to still be considered,’’ which it 

contended is consistent with court 

precedent. 

Contrary to these comments, the 

Department’s approach to this issue is 

consistent with both prior Departmental 

guidance as well as judicial precedent. 

As the Department explained in the 

NPRM, AI 2015–1 recognized six 

economic realities factors that followed 

the six factors used by most federal 

courts, including a control factor 

described as ‘‘the degree of control 

exercised or retained by the 

employer.’’ 533 The NPRM also noted 

‘‘AI 2015–1 further emphasized that the 

factors should not be applied in a 

mechanical fashion and that no one 

factor was determinative.’’ 534 Thus, 

contrary to FMI’s contention, the 

NPRM’s approach to the primacy of 

actual practice is consistent with AI 

2015–1’s non-mechanical, totality-ofthe-circumstances approach to the 

economic dependence inquiry and the 

potential relevance of the reserved right 

to control as an indicator of economic 

reality.535 Additionally, the 

Department’s approach to this issue is 

certainly not in tension with the notion 

that the economic reality inquiry cannot 

be made without evidence of the day-today working relationship between a 

worker and their potential employer.536

As the Department emphasizes in this 

final rule, it in no way intends to depart 

from case law which similarly 

emphasizes consideration of the actual 

behavior of the parties in deciding the 

economic reality inquiry.537 Indeed, the 

Department’s position is more 

consistent with the case law, which 

does not deem actual practice and 

reserved rights to be mutually exclusive 

and instead requires a nuanced 

consideration of all relevant facts.538

Some commenters misconstrued the 

Department’s proposal to remove the 

primacy of actual practice provision 

from the regulatory text. To be clear, the 

Department does not seek to elevate the 

weight of theoretical or contractual 

rights above the weight of actual 

practice. Rather, the Department affirms 

that actual practice is always relevant to 

the economic reality test. Further, the 

Department agrees that in many—if not 

most—circumstances the actual 

practices of the parties will be more 

relevant to the economic reality than 

reserved rights or unexercised 

contractual terms (as, for example, 

where an employer theoretically or 

contractually permits workers to decline 

work assignments, but in practice 

disciplines workers who decline 

assignments).539 And, as the Department 

explained in the NPRM, it does not 

intend to in any way minimize or 

disregard the longstanding case law that 

considers the actual behavior of the 

parties in order to determine the 


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540See, e.g., Parrish, 917 F.3d at 387 (‘‘[T]he 

analysis is focused on economic reality, not 

economic hypotheticals.’’); Saleem, 854 F.3d at 142 

(‘‘[P]ursuant to the economic reality test, it is not 

what [workers] could have done that counts, but as 

a matter of economic reality what they actually do 

that is dispositive.’’) (internal quotation marks and 

citation omitted); Sureway, 656 F.2d at 1371 (‘‘[T]he 

fact that Sureway’s ‘agents’ possess, in theory, the 

power to set prices, determine their own hours, and 

advertise to a limited extent on their own is 

overshadowed by the fact that in reality the ‘agents’ 

work the same hours, charge the same prices, and 

rely in the main on Sureway for advertising.’’). 

541See Superior Care, 840 F.2d at 1060. 

542See, e.g., Flint Eng’g, 137 F.3d at 1441 (‘‘None 

of the factors alone is dispositive; instead, the court 

must employ a totality-of-the-circumstances 

approach.’’); Superior Care, 840 F.2d at 1059 

(‘‘Since the test concerns the totality of the 

circumstances, any relevant evidence may be 

considered, and mechanical application of the test 

is to be avoided.’’). 

543See, e.g., Parrish, 917 F.3d at 388. 

544 43 F.4th 656 (7th Cir. 2022). 545 Id. at 666. 546See Superior Care, 840 F.2d at 1060 (‘‘Though 

visits to the job sites occurred only once or twice 

a month, Superior Care unequivocally expressed 

the right to supervise the nurses’ work, and the 

nurses were well aware that they were subject to 

such checks as well as to regular review of their 

nursing notes. An employer does not need to look 

over his workers’ shoulders every day in order to 

exercise control.’’) 

economic reality.540 These cases reflect 

a bedrock principle about the economic 

reality test, which looks to the reality of 

a situation rather than assuming that a 

written label, contractual arrangement, 

or form of business, is dispositive. 

This case law, however, does not 

require or even support the adoption of 

a generally applicable rule that in all 

circumstances reserved or unexercised 

rights, such as the right to control, are 

in every instance less indicative of the 

economic reality than the actual 

practices of the parties. Such a rule 

would be inconsistent with federal 

appellate court precedent recognizing 

that reserved rights may be more 

probative, such as the temporary nurse 

staffing agency in Superior Care that 

reserved the right to supervise the 

nurses even though in actuality it did so 

infrequently.541 The 2021 IC Rule’s 

mandate regarding the primacy of actual 

practice effectively established a bright 

line rule that has not been adopted by 

courts and is in tension with 

longstanding instructions from courts 

that a totality-of-the-circumstances 

analysis be applied in order to analyze 

a worker’s economic dependence. As 

such, rejecting the 2021 IC Rule’s 

prescriptive regulation is more 

consistent with a non-mechanical, factspecific approach to the economic 

dependence or independence inquiry 

that has been adopted by the courts.542

Some commenters seemingly 

conflated the terms ‘‘economic reality’’ 

and ‘‘actual practice.’’ See, e.g., FSI 

(defining ‘‘actual practice’’ as ‘‘the 

economic reality of the relationship at 

issue’’). Again, the Department’s 

position is not departing from or 

minimizing case law holding that the 

focus of the inquiry is on the ‘‘economic 

reality, not contractual language.’’ 543

Courts routinely consider both reserved 

rights and actual practice in order to 

evaluate the overall question of 

economic reality. For example, the 

Seventh Circuit recently addressed both 

in Brant.544 In that case, the court 

examined the operating agreement 

signed by the driver, which purported to 

grant the driver broad authority over 

how to conduct their work, but also 

‘‘retain[ed] the right to gather remotely 

and to monitor huge quantities of data 

about how drivers conducted their 

work.’’ The court rejected the 

company’s argument that the broad 

grant of authority in the agreement was 

dispositive of independent contractor 

status because it found that the 

company exercised complete control 

over meaningful aspects of the 

transportation business, including by 

retaining the right to gather data that 

could be used to terminate the driver for 

noncompliance, which weighed in favor 

of employee status.545

Moreover, none of the case law cited 

by commenters—and to the best of the 

Department’s knowledge, no existing 

case law—stands for the proposition 

that reserved or unexercised rights 

cannot under any circumstances be 

indicative of the economic realities, nor 

does the 2021 IC Rule’s provision state 

that reserved rights are never relevant. 

Rather, as discussed, the case law is 

more consistent with the approach the 

Department is adopting in this final 

rule, which recognizes that while mere 

contractual language is not generally 

driving the economic reality inquiry, 

reserved contractual rights, like reserved 

control, may in certain cases be equally 

as, or more, indicative of the economic 

reality than the actual practice of the 

parties. 

N/MA expressed their view that the 

Department ‘‘failed to identify any 

scenarios in which a contractual, but 

unexercised right would be more 

relevant than the parties’ actual 

practices in assessing a worker’s day-today economic realities.’’ The NPRM 

illustrated how reserved rights might be 

more indicative of the economic reality 

than actual practice where, for example, 

a potential employer reserves the right 

to supervise workers despite rarely 

making supervisory visits.546 The mere 

existence of such reserved rights to 

control the worker may strongly 

influence the behavior of the worker in 

their performance of the work even 

absent the employer actually exercising 

its contractual rights. As a result, this 

reserved right to supervise may be more 

indicative of the reality of the economic 

relationship between the worker and the 

potential employer than the potential 

employer’s apparent hands-off approach 

to supervision. 

Several commentors also expressed 

concerns that the NPRM’s approach will 

lead to an inconsistent application of 

the economic reality test and a lack of 

certainty and clarity for employers, 

workers, and factfinders. For example, 

SHRM urged the Department to retain 

the actual practice provision from the 

2021 IC Rule, noting the NPRM ‘‘implies 

that unexecuted contractual rights may 

be more important than real-world 

practices’’ and ‘‘will require HR 

professionals to speculate on how WHD 

or a court may interpret each individual 

criterion’’ which will ‘‘surely result in 

inconsistencies in application and the 

resulting confusion will lead to 

continued uncertainty for employers 

and workers.’’ NAHB expressed similar 

concerns about clarity, noting that 

‘‘actual practice is more relevant than 

what may be contractually or 

theoretically possible . . . and it 

provides a clearer and simpler federal 

test for determining worker status for 

regulated employers and small 

businesses.’’ Because the entirety of the 

economic reality must be considered in 

the analysis, the Department finds that 

it cannot reduce the inquiry to only 

actual practice and that the 2021 IC 

Rule’s predetermined elevation of actual 

practice above unexercised or reserved 

rights is not fully consistent with the 

economic reality inquiry that the 

Department and courts have followed 

for decades. 

The Coalition of Business 

Stakeholders expressed concerns that 

the Department failed to ‘‘specify just 

how important such ‘reserved control’ 

is’’ and stated that the NPRM 

exacerbates ‘‘the uncertainty with which 

the Proposed Rule may be 

implemented’’ and ‘‘apparently directs 

the factfinder to weigh the control factor 

in favor of employee classification if a 

hiring entity merely possesses the 

ability to exercise control of a worker, 

regardless of whether the hiring entity 

ever has exercised such control.’’ The 

Coalition of Business Stakeholders also 

commented that by including ‘‘the 

vague concept of ‘reserved control’, 

which is to be considered in some 

unstated capacity, the Proposed Rule 

broadens the control factor far beyond 

its historical bounds and creates such 

uncertainty that the definition of 

‘control’ under the Proposed Rule is 


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547 86 FR 1204 (‘‘As emphasized in the NPRM, 

and as the plain language of § 795.110 makes clear, 

unexercised powers, rights, and freedoms are not 

irrelevant in determining the employment status of 

workers under the economic reality test.’’). 

548 87 FR 62222; see, e.g., Scantland, 721 F.3d at 

1312 n.2 (the relative weight of each factor 

‘‘depends on the facts of the case’’) (quoting 

Santelices, 147 F. Supp. 2d at 1319); Selker Bros., 

949 F.2d at 1293 (‘‘It is a well-established principle 

that the determination of the employment 

relationship does not depend on isolated factors 

. . . neither the presence nor the absence of any 

particular factor is dispositive.’’). 

549See discussion regarding the Seventh Circuit’s 

decision in Brant v. Schneider Nat’l, supra. 

550See, e.g., Faludi 950 F.3d at 275–76 

(determining that an attorney was an independent 

contractor even though facts ‘‘point[ed] in both 

directions,’’ such as the attorney’s fairly lengthy 

tenure, even though he had the right to leave 

whenever he wanted upon giving 15 days’ notice, 

and a non-compete clause under which the attorney 

worked exclusively for the company, but which the 

court found ‘‘does not automatically negate 

independent contractor status’’). 

551See section V.C.4.a (discussing why the 

control factor is discussed from the employer’s 

perspective). 

552See Superior Care, 840 F.2d at 1059 (‘‘Since 

the test concerns the totality of the circumstances, 

any relevant evidence may be considered, and 

mechanical application of the test is to be 

avoided.’’). 

unworkable and would all but preclude 

an independent contractor finding.’’ The 

Department notes again that reserved 

control was included in the 2021 IC 

Rule.547 In any event, the Coalition of 

Business Stakeholders misconstrues the 

Department’s discussion of reserved 

control. The Department does not take 

the position that reserved rights are 

always indicative of economic 

dependence, and certainly does not 

preclude the existence of factual 

circumstances where this fact could be 

found to weigh in favor of independent 

contractor status. Moreover, the 

Department reiterates, consistent with 

decades of case law and guidance from 

the Department, that ‘‘the economic 

reality test is a multifactor test in which 

no one factor or set of factors 

automatically carries more weight and 

that all relevant factors must be 

considered.’’ 548 The notion that the 

Department’s position that the reserved 

right of control can be indicative of the 

economic reality in some circumstances 

somehow makes the economic reality 

test ‘‘unworkable’’ and ‘‘all but 

precludes an independent contractor 

finding’’ is simply inconsistent with a 

multifactor totality-of-the-circumstances 

approach in which this is but one 

potentially relevant fact under one 

factor. That a potential employer’s 

reserved right to control might indicate 

an employment relationship does not 

preclude a finding of independent 

contractor status based on other factual 

indicators of the economic reality of the 

relationship. 

IWF expressed concerns that NPRM’s 

approach to the primacy of actual 

practice was inconsistent, noting that 

‘‘even accepting the Department’s focus 

on theory, the proper application of this 

factor is far from clear. . . . The 

Proposed Rule states both that (1) ‘[i]t is 

often the case that the actual practice of 

the parties is more relevant to the 

economic dependence inquiry than 

contractual or theoretical possibilities,’ 

and (2) ‘in other cases the contractual 

possibilities may reveal more about the 

economic reality than the parties’ 

practices.’ ’’ The Department’s 

recognition that actual practice is often 

more relevant to the economic 

dependence inquiry than contractual 

possibilities is not at all inconsistent 

with its position that, in some factual 

circumstances, reserved contractual 

rights can be more or equally as 

indicative of the economic reality as the 

actual practices of the parties. The 

Department is rejecting the overly broad 

and mechanical approach that in all 

factual circumstances, for every worker 

in every industry and occupation, actual 

practice is always more indicative of the 

economic reality than reserved rights or 

contractual possibilities. The 

Department’s position is more 

consistent with the case law, which 

does not deem these two concepts to be 

mutually exclusive and instead requires 

a nuanced consideration of all relevant 

facts.549

Some commenters felt that the 

Department was focusing solely on how 

reserved rights might be used to find 

employee status. For example, IWF 

stated that the Department was 

interested in reserved rights only to the 

extent they support finding employee 

status. See also Coalition of Business 

Stakeholders. Minnesota Trucking 

Association commented that it would 

support the NPRM’s logic on the 

relevance of reserved rights to the 

economic realities test ‘‘so long as the 

analysis also considers the rights the 

worker possesses but also chooses not to 

exercise.’’ See also CLDA. The 

Department does not agree with the 

contention that its approach to actual 

practice and reserved rights would 

always only be used to indicate 

employee status.550 The inquiry should 

take every aspect of the relationship into 

account if relevant to the economic 

reality and the worker’s dependence on 

their potential employer.551

The Club for Growth Foundation 

expressed concerns with the 

Department’s statement that a reserved 

right to supervise workers, even 

unexercised, ‘‘may strongly influence 

the behavior of the worker in [his or her] 

performance of the work,’’ and this 

‘‘may be more indicative of the reality 

of the economic relationship between 

the worker and the company than the 

company’s apparent hands-off practice,’’ 

noting that ‘‘even under this example a 

company that does not intervene is 

surely exercising less control than one 

that does.’’ This comment 

misunderstands the relevant inquiry. 

The question is not whether a potential 

employer who reserves the right to 

control their workers can be said to 

exercise more control than a different 

potential employer who in actual 

practice exercises control over their 

workers. Rather, the inquiry is whether, 

as a matter of economic reality, a 

potential employer’s reserved right of 

control is probative of a worker’s 

economic dependence. The 2021 IC 

Rule mechanically provided that actual 

practice is always more relevant than 

reserved control. By removing that 

provision, this final rule takes the 

position that all relevant aspects of the 

working relationship, including 

reserved rights, should be considered, 

without placing a thumb on that scale. 

The U.S. Chamber also raised 

concerns that having ‘‘contractual 

language eclipse actual practice would 

flip the economic realities on its head’’ 

and ‘‘would also prohibit certain facts 

from being introduced into evidence: 

namely, the actual practice of the 

parties, which according to the Supreme 

Court is the touchstone of the analysis.’’ 

The Department reiterates firmly that 

this final rule neither tips the scales in 

favor of contractual language over actual 

practice nor excludes the consideration 

of any relevant facts demonstrating 

economic dependence. Rather, the 

Department is merely declining to adopt 

a bright-line rule predetermining how 

relevant facts may be considered, 

recognizing that in some factual 

circumstances reserved rights may be as 

indicative of the economic reality as the 

actual practice of the parties. 

Additionally, the Department’s final 

rule does not prohibit any subset of facts 

from being introduced into evidence 

before a factfinder, and certainly does 

not prohibit facts about the actual 

practices of the parties from being 

introduced into evidence. To the 

contrary, the purpose of eliminating the 

actual practice provision from the 2021 

IC Rule is to ensure that all facts 

relevant to inquiry of economic 

dependence or independence may be 

considered.552 Within each factor of the 

test, there may be actual practices that 

are relevant, and there may also be 


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553 87 FR 62259. 

554 Id. 

555The Department notes that it has edited the 

investment example to omit the reference to a 

‘‘freelance graphic designer.’’ While the department 

recognizes that indendent contractors may go by 

many names, its intent is to ensure that the 

examples reflect consistent terminology. Because 

the Department used the phrase ‘‘independent 

contractor’’ throughout the examples. 

556 87 FR 62253. 

557 Id. 

558 Id. 

contractual provisions that are relevant. 

The examination is specific to the facts 

of each economic relationship and 

cannot be predetermined. 

For all of the foregoing reasons, the 

Department is finalizing the removal of 

§ 795.110 of the 2021 IC Rule (Primacy 

of actual practice). As discussed in 

section V.C, § 795.110 of this rule 

contains a new provision discussing the 

economic reality test and the economic 

reality factors. 

E. Examples of Analyzing Economic 

Reality Factors (2021 IC Rule § 795.115) 

Several commenters addressed the 

examples that the Department provided 

in the proposed rule to illustrate the 

application of each factor of the 

economic reality test as applied to 

various factual scenarios. The 

Department provided these examples in 

the preamble of the proposal rather than 

in the final text of the regulations—as 

was the case with the 2021 IC Rule—to 

provide readers an application of the 

proposed factor immediately following 

the detailed description of each factor 

along with the discussion of the case 

law and rationale.553 Each example 

provided two scenarios: one where the 

facts indicated that a factor pointed 

toward employee status and one where 

the facts indicated that a factor pointed 

toward independent contractor status. 

As the Department cautioned in the 

NPRM, additional facts or alterations to 

the examples could change the resulting 

analysis.554 Moreover, no example 

attempted to determine the worker’s 

ultimate status, only which way a 

particular factor would point based on 

the described facts. 

Several commenters found the 

examples generally helpful or applied 

them to their industry practices. For 

instance, the Advisor Group applied the 

Department’s skill and initiative 

example to financial advisors. A 

freelance writer and editor found the 

examples provided in the preamble to 

be reasonable, though they suggested 

that sections describing each factor were 

narrower than the examples suggested. 

The AFL–CIO commended the 

Department’s ‘‘decision to provide 

examples of how each of the various 

factors have been applied in commonlyoccurring fact patterns.’’ 

Other commenters had concerns 

regarding the examples or suggested 

alterations to various examples. For 

instance, the CA Chamber suggested 

that the investment factor example was 

confusing since the relative investments 

of a graphic designer would be dwarfed 

by a design firm, leading to different 

outcomes depending on whether the 

graphic designer worked for a large firm 

or a sole proprietor. In addition, a 

comment from two fellows at the 

Heritage Foundation suggested that this 

example was ambiguous because it was 

unclear if all the facts in the example, 

including the worker’s investment in 

equipment, office space, and marketing, 

were required for the analysis. 

Regarding the investment factor 

example, the Department discussed 

relative investments in the first 

scenario, where a worker occasionally 

purchased and used their own drafting 

tools while working for a commercial 

design firm. These tools were minor 

investments that do not further the 

worker’s independent business beyond 

completing specific jobs for the 

commercial design firm. Regarding the 

CA Chamber’s concern that the size of 

the business would alter a relative 

investment analysis, the example was 

not intended to alter the size of the 

hypothetical employer. However, to 

avoid confusion, the Department is 

aligning the examples to ensure that 

both feature a ‘‘commercial design firm’’ 

as the hypothetical employer. 

Additionally, the regulatory text for the 

investments factor explains that, in 

addition to comparing the sizes of the 

worker’s and the employer’s 

investments, the focus should be on 

comparing the nature of their 

investments to determine whether the 

worker is making similar types of 

investments as the employer that 

suggest that the worker is operating 

independently.555

Further, commenters were concerned 

that the same facts that point toward 

independent contractor status under the 

investment prong example would point 

toward employee status under the 

integral prong. As the Department stated 

in the NPRM, however, the examples 

are intended to be aids to apply the 

discussion of each proposed factor; the 

examples are not designed to illustrate 

the application of the full totality-of-thecircumstances test. For instance, the 

Department’s investment example 

intentionally does not address whether 

the designer is integral to the 

commercial design firm, which would 

necessitate a separate analysis. 

Regarding the integral factor, IWF was 

concerned that the examples were 

unhelpful because they covered two 

different industries and did not 

illuminate what kinds of activities 

would be considered central or 

important. The Department’s intent 

regarding this factor was to illuminate 

those tasks that are core to the 

functioning of the business, e.g., jobs 

which the ‘‘employer could not function 

without the service performed by the 

workers.’’ 556 Here, a farm selling 

tomatoes could not function without the 

work of those picking the tomatoes. 

However, while a business is generally 

required to file their tax returns, failure 

to do so would not immediately halt the 

operations of the farm, suggesting that 

non-payroll accounting support is 

‘‘more peripheral to the employer’s 

business.’’ 557 The Department’s intent 

was to provide a comparison meant to 

highlight the ‘‘common-sense approach’’ 

many courts have taken when 

evaluating this factor.558

Similarly, ABC was concerned that 

the example for the opportunity for 

profit or loss factor did not differentiate 

the facts between the two workers in a 

way that would demonstrate which facts 

were determinative of the analysis. As 

they noted, even if a worker relies on 

word of mouth instead of traditional 

advertising or only works for one client 

at a time, they can still be found to be 

independent contractors. However, the 

example of the landscaper includes a 

scenario where the first landscaper does 

not actively market their services and a 

second where the landscaper does 

market their services. The inclusion of 

these facts in the example does not 

indicate that the Department believes 

that traditional marketing is required for 

a worker to be classified as an 

independent contractor, only that such 

affirmative marketing may be probative 

of the worker acting in a way consistent 

with being in business for themself. Put 

another way, the Department 

intentionally drafted the examples to 

avoid giving the impression that certain 

facts are always less or always more 

probative to the analysis of any given 

factor. 

SMACNA noted that the Department’s 

second example for skill and initiative 

featuring a welder should omit the fact 

that the welder has specialty skills, 

since that should not change the general 

analysis under this factor. Instead, it 

suggested that the example should 

clarify how the welder ‘‘ ‘markets those 

skills in a manner that evidences 

business-like initiative.’ ’’ Similarly, the 

DSA’s comment noted that the skill and 


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559 87 FR 62254. 

560 Id. at 62255. 

initiative example (featuring a welder) 

only drew a distinction between the two 

workers based on their ability to market 

their services where both workers have 

specialized skill. It proposed including 

an example where a worker has no 

specialized skill but can still market 

their services to demonstrate initiative. 

Finally, ABC objected to the same 

example, noting that the skills of the 

workers ‘‘should not have to be paired 

with independent business marketing 

skills’’ to find that a worker is an 

independent contractor. 

The Department chose to display both 

workers as having high technical skills 

to illuminate the discussion regarding 

skill in the NPRM. Specialized skills are 

required for this factor to point to 

independent contractor status, but 

specialized skills alone are not 

sufficient; it is the use of those 

specialized skills to ‘‘contribute to 

business-like initiative that is consistent 

with the worker being in business for 

themself instead of being economically 

dependent on the employer.’’ 559 As the 

Department noted in the NPRM, 

‘‘workers who lack specialized skills 

may be independent contractors even if 

this factor is very unlikely to point in 

that direction in their 

circumstances.’’ 560 Thus the existence 

of specialized skills or the marketing of 

services, while relevant to the analysis 

under this factor, would not necessarily 

resolve the ultimate inquiry of the 

worker’s classification. 

Several comments suggested that the 

Department include new industryspecific examples for various factors. 

For instance, Gale Healthcare Solutions 

requested that the Department provide 

an example that would apply to ondemand nursing staffing scenarios. 4A’s 

requested that specific industries, such 

as ‘‘video production professionals, web 

designers, freelance writers, [and] 

fashion workers’’ be included as 

examples. And NAFO requested that a 

forestry example be included in the 

section of the rule discussing the 

integral factor. 

The Department recognizes that 

examples specific to an industry can 

provide helpful guidance for that 

segment of the regulated community. As 

the Department explained, however, its 

intent is for the examples to provide 

general guidance to regulated parties in 

this rulemaking. Adding examples 

specific to commenter industries would 

reduce their general applicability to 

other parties and would require more 

facts and detail than can be included to 

create succinct, yet helpful, examples. 

The Department mentions various 

industries or occupations in the 

examples to provide recognizable 

context for the reader; the examples do 

not provide the Department’s definitive 

view on the ultimate outcome of the 

totality-of-the-circumstances analysis. 

Some commenters suggested that the 

Department add examples to capture 

newer facets of the economic reality 

factors. For instance, one commenter 

suggested that the Department should 

include an example to show how an 

employer’s collection of data related to 

how a worker performs and use of that 

data to enhance their operations could 

be part of the economic reality analysis. 

The AFL–CIO similarly suggested that 

the Department should include an 

example where an employer 

implements control using algorithms. 

In addition, commenters suggested 

that the Department should provide 

more examples of how current facets of 

the economic reality test would be 

applied. For instance, LeadingAge 

requested more examples of how the 

Department views reserved control and 

more examples regarding situations in 

which a worker’s ability to work for 

others is constrained by the number of 

hours or days they need to work. Flex 

suggested that if the Department were to 

retain language under the control factor 

related to regulatory or contractual 

control, then the Department should 

provide ‘‘a comprehensive set of 

examples to illustrate that such cases 

would be rarities.’’ And CPIE requested 

additional examples of where the 

Department would find a worker to be 

properly classified as an independent 

contractor, particularly under the 

control, investment, and skill and 

initiative factors. 

The Department agrees with 

commenters like the AFL–CIO that 

topics like control over data or 

algorithmic supervision are highly 

relevant to some workers and could 

have an impact on the economic reality 

test. However, as noted above, the 

purpose of the examples is to provide 

aids to applying the information just 

discussed in the preamble as to each 

factor. The Department intends for the 

examples to provide general guidance to 

regulated parties and not to be tied to 

the specifics of certain businesses or 

jobs. The examples reflect the 

Department’s enforcement experience in 

some of the most commonly occurring 

scenarios. 

In addition, the Department 

understands that commenters such as 

LeadingAge would prefer more context 

regarding reserved control. However, 

the Department declines to add that 

additional context to the current 

examples, which were drafted to 

address common themes regarding each 

factor to illuminate the preamble 

discussion, not present every fact or 

issue presented in the proposed rule. 

The Department is also concerned that 

additional results-oriented examples— 

such as those requested by NAHB 

specifically addressing when a worker 

would be classified as an independent 

contractor under certain factors—would 

not be helpful to the broader public. 

Such examples could leave the 

impression that the proper classification 

of workers rests on one or a handful of 

factors. To the contrary, the Department 

believes the current examples’ focus on 

illustrating the basic analysis under a 

single factor and noting that the results 

indicate potential classification under 

each factor, but not the ultimate result, 

provides more useful guidance for this 

rule. Moreover, industry- or professionspecific examples relaying how a 

worker’s ultimate classification would 

be resolved are best addressed in 

subregulatory guidance after the 

issuance of this final rule as necessary. 

Commenters suggested that the 

Department provide examples that mix 

and compare the factors together. For 

instance, Grantmakers in the Arts 

suggested that the Department include 

examples that demonstrate the 

resolution of a worker’s status after 

applying multiple factors and ArcBest 

Corporation provided an example 

applying the full economic reality test to 

an owner operator in the trucking 

industry. The Department declines to 

offer such examples in this rulemaking. 

While a multifactor example might 

appear helpful, the Department is also 

concerned that such an example could 

potentially prejudge a specific case in a 

specific industry or occupation not yet 

before the Department or a court, 

without adequate factual predicates. 

Moreover, such an example would 

undermine the Department’s efforts to 

align the economic reality analysis with 

current precedent, which requires a 

consideration of all the factors. Finally, 

any multifactor analysis would require 

a larger number of facts to be useful, 

which may be less generally useful to 

workers and businesses who may not be 

able to analogize the given example to 

their current working relationships. 

IBA commented that some examples 

were too similar to prior withdrawn 

subregulatory guidance. The 

Department notes that it assembled 

these examples, in part, by reviewing 

case law, opinion letters, the 2021 IC 

Rule, and other subregulatory guidance. 

Each source was consulted and helped 

the Department arrive at the examples 

provided. 


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561 87 FR 62275 (proposed § 795.115). 

562 Id. 

563 Id. at 62259. 

564See generally id. at 62233. 

Other commenters requested that the 

Department keep examples that were 

provided in the 2021 IC Rule. For 

instance, the Arizona Trucking 

Association suggested that the 

Department keep the trucking example 

from the 2021 IC Rule. Similarly, 

NAWBO noted how helpful the trucker 

and home repair examples were in the 

2021 IC Rule. As explained above, some 

facets of the 2021 IC Rule’s examples no 

longer align with the approach in this 

final rule. For instance, the 2021 IC 

Rule’s app-based home repair example 

discusses investment as a component of 

the opportunity for profit or loss factor. 

As proposed in the NPRM and finalized 

here, however, the two factors are 

separate and evaluated independently. 

Finally, some commenters suggested 

that the Department include examples 

in the final rule’s regulatory text, as was 

done with the 2021 IC Rule. For 

instance, the author of an independent 

contractor legal blog requested that 

more examples be provided in the 

regulatory text, including those related 

to the integral factor. 4A’s similarly 

requests that examples be included in 

the regulatory text and that they better 

correlate with modern trends in 

employment. 

The Department recognizes that 

examples are helpful to workers and 

businesses alike. The Department 

continues to believe, however, that the 

examples provided in the NPRM 

currently provide the greatest value by 

residing in the preamble to the final rule 

following the detailed discussion of the 

relevant factor. In this way, the 

examples can provide a capstone for 

each section’s discussion of the relevant 

economic reality factor, rather than 

being disconnected from that discussion 

and appearing only in regulatory text. 

The Department is confident that the 

examples initially provided in the 

NPRM preamble, as modified in the 

preamble to this final rule in response 

to comments received, serve this 

explanatory purpose. Over time, the 

Department will continue providing 

guidance where necessary through 

subregulatory guidance. 

As it did in the NPRM, the 

Department is including examples of 

each factor in the preamble to this final 

rule. As discussed above, the example of 

the investment factor has been clarified. 

In addition, non-substantive changes 

have been made to the final sentence of 

each paragraph in each example to 

clearly indicate which factor is under 

discussion and that the facts of each 

example indicate employee or 

independent contractor status under 

that factor. 

F. Severability (§ 795.115) 

The Department proposed that the 

regulatory text include a severability 

provision.561 Specifically, the 

Department proposed that, if any 

provision of its regulation ‘‘is held to be 

invalid or unenforceable by its terms, or 

as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 

unenforceability, in which event the 

provision shall be severable from [the 

regulation] and shall not affect the 

remainder thereof.’’ 562 The Department 

noted that the 2021 IC Rule contained 

a severability provision and that it was 

not proposing any edits to that 

provision.563

In addition, the Department explained 

in the NPRM that rescission of the 2021 

IC Rule would be separate from the new 

regulations regarding employee and 

independent contractor status 

promulgated to replace the 2021 IC 

Rule: ‘‘That rescission would operate 

independently of the new content in 

any new final rule, as the Department 

intends it to be severable from the 

substantive proposal for adding a new 

part 795.’’ The Department further 

explained that, even if the ‘‘substantive 

provisions’’ (i.e., the new regulations) of 

a final rule were invalidated, enjoined, 

or otherwise not put into effect, the 

Department would not intend that the 

2021 IC Rule become operative. Instead, 

in such case, for all of the separate 

reasons for rescinding the 2021 IC Rule 

set forth by the Department, the 

rescission would still take effect, and 

‘‘the Department would rely on circuit 

case law and provide subregulatory 

guidance for stakeholders through 

existing documents (such as Fact Sheet 

#13) and new documents (for example, 

a Field Assistance Bulletin).’’ As the 

Department noted, relying on federal 

appellate case law and subregulatory 

guidance consistent with that case law 

for determining whether a worker is an 

employee or independent contractor 

would accurately reflect the FLSA’s text 

and purpose as interpreted by the courts 

and offer a standard familiar to most 

stakeholders.564

Few commenters addressed 

severability, and the focus of their 

comments was more on the severability 

of the rescission of the 2021 IC Rule 

from the proposed regulations to replace 

it than the proposed severability 

provision at 29 CFR 795.115. Several 

commenters supported the Department’s 

position that the rescission of the 2021 

IC Rule is severable from the proposed 

regulations to replace it. For example, 

Farmworker Justice stated that ‘‘[b]oth 

the rescission of the 2021 IC Rule and 

the newly proposed portion of the 

[NPRM] are critical to reinstating 

stability and clarity in the Department’s 

approach to defining an employee.’’ It 

advocated that the ‘‘Department should 

expressly state that it intends for the 

rescission of the 2021 IC Rule to be 

severable from the new portion of the 

[NPRM].’’ The AFL–CIO agreed that 

‘‘the severability clause and DOL’s 

explanation of that clause in the 

preamble to the NPRM make clear that, 

in the unlikely event a court were to 

decide to enjoin some portion of the 

Final Rule addressing the economic 

reality test, DOL intends that the 

rescission of the 2021 IC Rule should 

still take effect.’’ It described this 

approach as ‘‘cautious’’ and ‘‘prudent’’ 

and added that ‘‘the severance clause 

makes clear that DOL intended that the 

rescission of the 2021 IC Rule stands on 

its own.’’ LIUNA also supported ‘‘the 

Department’s decision to render 

rescission of the 2021 IC Rule severable 

from the substantive proposal for adding 

further regulatory guidance.’’ It added 

that the Department was ‘‘correct to 

conclude that, in the unlikely event its 

substantive proposals are ‘invalidated, 

enjoined, or otherwise not put into 

effect,’ the 2021 IC Rule should still not 

become operative.’’ 

Several other commenters criticized 

the Department’s position that the 

rescission of the 2021 IC Rule is 

severable from the proposed regulations 

to replace it. For example, Freedom 

Foundation stated that ‘‘[t]he rescission 

of the [2021 IC Rule] and the adoption 

of the proposed rule should not be 

severable’’ and added that the 

Department’s ‘‘promise that in the 

absence of a regulation it would provide 

subregulatory guidance has a hollow 

ring.’’ Raymond James described the 

Department’s position as ‘‘present[ing] 

workers and business with a Hobson’s 

Choice: either accept the new 

regulations, or there will be no 

regulations at all.’’ It stated that, 

‘‘[c]onsidering that the Department will 

not even consider making discrete 

changes, it does not seem appropriate to 

require businesses and workers to 

accept a wholesale re-write or face the 

risks of having no rule at all.’’ And CWI 

asserted that the reference to 

‘‘ ‘substantive’ provisions’’ in the 

NPRM’s severability discussion were 


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565See, e.g., Carlson v. Postal Regulatory 

Comm’n, 938 F.3d 337, 351 (D.C. Cir. 2019). 

566 87 FR 62274. 

567See 88 FR 21879 (Apr. 11, 2023); 58 FR 51735, 

51741 (Oct. 4, 1993). 568See 76 FR 3821 (Jan. 21, 2011). 

inconsistent with how, ‘‘[e]lsewhere’’ in 

the NPRM, ‘‘the Department present[ed] 

the Proposed Rule as only ‘interpretive 

guidance.’ ’’ 

Having considered the comments, the 

Department is finalizing the severability 

provision in 29 CFR 795.115 as 

proposed and finalizing its proposal that 

the rescission of the 2021 IC Rule set 

forth in this final rule is separate and 

severable from the new part 795 

regulations for determining employee or 

independent contractor status under the 

FLSA set forth in this final rule. No 

commenter questioned the well-settled 

legal principle that one portion of a rule 

may remain operative if another portion 

is deemed impermissible as long as the 

agency would independently adopt the 

remaining portion and the remaining 

portion can operate sensibly without the 

impermissible portion.565 The 

Department continues to believe that 

rescission of the 2021 IC Rule is proper 

for all of the reasons stated in this final 

rule, and its intent accordingly is for the 

rescission to remain operative even if 

this final rule’s regulations replacing the 

2021 IC Rule are invalidated for any 

reason. In addition, the Department 

continues to believe that if any 

particular provision or application of 

this final rule is invalidated, the rest 

should continue in effect and can 

operate sensibly. In such case, case law 

and the Department’s subregulatory 

guidance, as appropriate, would provide 

a familiar and longstanding standard for 

businesses and workers. Freedom 

Foundation’s assertion that this ‘‘has a 

hollow ring’’ neglects the multiple 

forms of subregulatory guidance, 

including fact sheets and field 

assistance bulletins, that the Department 

may issue. And there was no ‘‘Hobson’s 

Choice’’ between the proposed rule and 

‘‘having no rule at all’’; the Department 

has carefully considered the many 

comments to the proposed rule and, as 

reflected in this final rule, has made 

numerous changes as a result of those 

comments. Finally, CWI took the 

Department’s reference to ‘‘substantive 

provisions’’ out of context. The 

Department’s reference to the proposed 

regulatory provisions as ‘‘substantive’’ 

was not a characterization of this 

rulemaking, but an effort to distinguish 

promulgating the new part 795 

regulations from rescinding the 2021 IC 

Rule. 

G. Amendments to Regulatory 

Provisions at §§ 780.330(b) and 

788.16(a) 

Finally, in addition to the proposed 

regulations at part 795, the Department 

proposed to amend existing regulatory 

provisions addressing employee or 

independent contractor status under the 

FLSA in particular contexts at 29 CFR 

780.330(b) (tenants and sharecroppers) 

and 29 CFR 788.16(a) (certain forestry 

and logging workers).566 Specifically, 

the Department proposed to replace 

these provisions with cross-references to 

the guidance provided in part 795. The 

Department did not receive commenter 

feedback regarding the proposed 

amendments of these provisions. 

Accordingly, the Department finalizes 

the amendments to these provisions as 

proposed. 

VI. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA), 44 U.S.C. 3501 et seq., and its 

attendant regulations, 5 CFR part 1320, 

require the Department to consider the 

agency’s need for its information 

collections, their practical utility, the 

impact of paperwork and other 

information collection burdens imposed 

on the public, and how to minimize 

those burdens. This final rule does not 

contain a collection of information 

subject to OMB approval under the 

PRA. 

VII. Executive Order 12866, Regulatory 

Planning and Review; Executive Order 

13563, Improved Regulation and 

Regulatory Review 

Under Executive Order 12866, as 

amended by Executive Order 14094, the 

Office of Management and Budget’s 

(OMB) Office of Information and 

Regulatory Affairs (OIRA) determines 

whether a regulatory action is 

significant and, therefore, subject to the 

requirements of the Executive Order and 

OMB review.567 Section 3(f) of 

Executive Order 12866 defines a 

‘‘significant regulatory action’’ as a 

regulatory action that is likely to result 

in a rule that may: (1) have an annual 

effect on the economy of $200 million 

or more, or adversely affect in a material 

way a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local, or tribal governments or 

communities; (2) create serious 

inconsistency or otherwise interfere 

with an action taken or planned by 

another agency; (3) materially alter the 

budgetary impact of entitlements, 

grants, user fees or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raise legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. OIRA 

has determined that this rule is a 

‘‘significant regulatory action’’ under 

section 3(f)(1) of Executive Order 12866. 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits.568 Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when appropriate and 

permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. The analysis below outlines 

the impacts that the Department 

anticipates may result from this rule and 

was prepared pursuant to the abovementioned executive orders. 

A. Introduction 

In this rule, the Department is 

rescinding and replacing regulations 

addressing the classification of workers 

as employees or independent 

contractors under the Fair Labor 

Standards Act (FLSA or Act) to be more 

consistent with judicial precedent and 

the Act’s text and purpose as interpreted 

by the courts. For decades, the 

Department and courts have applied an 

economic reality test to determine 

whether a worker is an employee or an 

independent contractor under the FLSA. 

The ultimate inquiry is whether, as a 

matter of economic reality, the worker is 

economically dependent on the 

employer for work (and is thus an 

employee) or is in business for themself 

(and is thus an independent contractor). 

To answer this ultimate inquiry of 

economic dependence, the courts and 

the Department have historically 

conducted a multifactor totality-of-thecircumstances analysis, considering 

multiple factors with no factor or factors 

being dispositive to determine whether 

a worker is an employee or an 

independent contractor under the FLSA. 

In January 2021, the Department 

published a rule titled ‘‘Independent 

Contractor Status Under the Fair Labor 

Standards Act’’ (2021 IC Rule) that 


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569See 86 FR 1168. 

570See CWI v. Walsh, 2022 WL 1073346. 

571OMB Circular A–4 notes that when agencies 

are developing a baseline, ‘‘[it] should be the best 

assessment of the way the world would look absent 

the proposed action.’’ 

572The Department uses the term 

‘‘misclassification’’ throughout this analysis to refer 

to workers who have been classified as independent 

contractors but who, as a matter of economic 

reality, are economically dependent on their 

employer for work. These workers’ legal status 

would not change under the 2021 IC Rule or this 

rule—they would properly be classified as 

employees under both rules. The Department notes 

that sources cited in this analysis may use other 

misclassification standards which may not align 

fully with the Department’s use of the term. 

provided guidance on the classification 

of independent contractors under the 

FLSA.569 As explained in sections III, 

IV, and V above, the Department 

believes that the 2021 IC Rule did not 

fully comport with the FLSA’s text and 

purpose as interpreted by the courts 

and, had it been left in place, would 

have had a confusing and disruptive 

effect on workers and businesses alike 

due to its departure from decades of 

case law describing and applying the 

multifactor economic reality test as a 

totality-of-the-circumstances test. The 

2021 IC Rule included provisions that 

were in tension with this longstanding 

case law—such as designating two 

factors as most probative and 

predetermining that they carry greater 

weight in the analysis, considering 

investment and initiative only in the 

opportunity for profit or loss factor, and 

excluding consideration of whether the 

work performed is central or important 

to the employer’s business. These and 

other provisions in the 2021 IC Rule 

narrowed the application of the 

economic reality test by limiting the 

facts that may be considered as part of 

the test, facts which the Department 

believes are relevant in determining 

whether a worker is economically 

dependent on the employer for work or 

in business for themself. The 

Department believes that retaining the 

2021 IC Rule would have had a 

confusing and disruptive effect on 

workers and businesses alike due to its 

departure from case law describing and 

applying the multifactor economic 

reality test as a totality-of-thecircumstances test. Departing from the 

longstanding test applied by the courts 

also increases the risk of misapplication 

of the economic reality test, which the 

Department believes could result in the 

increased misclassification of workers 

as independent contractors. 

Therefore, the Department is 

rescinding the 2021 IC Rule and 

replacing it with an analysis for 

determining employee or independent 

contractor status under the Act that is 

more consistent with existing judicial 

precedent and the Department’s 

longstanding guidance prior to the 2021 

IC Rule. Of particular note, the 

regulations set forth in this final rule do 

not use ‘‘core factors’’ and instead 

return to a totality-of-the-circumstances 

analysis of the economic reality test in 

which the factors do not have a 

predetermined weight and are 

considered in view of the economic 

reality of the whole activity. Regarding 

the economic reality factors, this final 

rule returns to the longstanding framing 

of investment as its own separate factor, 

and integral as an integral part of the 

potential employer’s business rather 

than an integrated unit of production. 

The final rule also provides broader 

discussion of how scheduling, remote 

supervision, price setting, and the 

ability to work for others should be 

considered under the control factor, and 

it allows for consideration of reserved 

rights to control while removing the 

provision in the 2021 IC Rule that 

minimized the relevance of retained 

rights. Further, the final rule discusses 

exclusivity in the context of the 

permanency factor, and initiative in the 

context of the skill factor. The 

Department also made several 

adjustments to the proposed regulations 

after consideration of the comments 

received, including revisions to the 

regulations regarding the investment 

factor and the control factor (specifically 

addressing compliance with legal 

obligations). 

The Department believes this rule is 

more grounded in the ultimate inquiry 

of whether a worker is in business for 

themself or is economically dependent 

on the employer for work. Workers, 

employers, and independent businesses 

should benefit from affirmative 

regulatory guidance from the 

Department further developing the 

concept of economic dependence and 

how each economic reality factor is 

probative of whether the worker is 

economically dependent on the 

employer for work or is in business for 

themself. 

When evaluating the economic impact 

of this rule, the Department has 

considered the appropriate baseline 

with which to compare changes. As 

discussed in section II.C.3., on March 

14, 2022, in a lawsuit challenging the 

Department’s delay and withdrawal of 

the 2021 IC Rule, a federal district court 

in the Eastern District of Texas issued a 

decision vacating the delay and 

withdrawal of the 2021 IC Rule and 

concluded that the 2021 IC Rule became 

effective on March 8, 2021.570 Because 

the 2021 IC Rule is in effect according 

to the district court until this final rule 

takes effect and would continue to be in 

effect in the absence of this rule, the 

Department believes that the 2021 IC 

Rule is the proper baseline to compare 

against when estimating the economic 

impact of this rule.571 Compared to the 

2021 IC Rule, the Department 

anticipates that this rule may reduce 

misclassification of employees as 

independent contractors, because this 

rule is more consistent with existing 

judicial precedent and the Department’s 

longstanding guidance. The 2021 IC 

Rule’s elevation of certain factors, 

devaluation of other factors, and its 

preclusion of consideration of relevant 

facts under several factors could result 

in misapplication of the economic 

reality test and may have conveyed to 

employers that it might be easier than it 

was prior to the 2021 IC Rule to classify 

workers as independent contractors 

rather than FLSA-covered employees. 

As discussed in section III.B., the 

Department received comments 

indicating confusion about how to apply 

the analysis in the 2021 IC Rule, which 

could lead to misclassification of 

workers as independent contractors. 

The issuance of this rule could reduce 

or prevent this type of misclassification 

from occurring. 

Because the Department does not 

have data on the number of 

misclassified workers and because there 

are inherent challenges in determining 

the extent to which the rule would 

reduce this misclassification, much of 

the analysis is presented qualitatively, 

aside from rule familiarization costs, 

which are quantified.572 The 

Department has therefore provided a 

qualitative analysis of the effects 

(transfers and benefits) that could occur 

because of this reduced 

misclassification. 

As discussed above, the 2021 IC Rule 

is the appropriate baseline to represent 

what the world could look like going 

forward in the absence of this rule. 

However, this baseline may not fully 

reflect what the world would look like 

absent this rule. Until March 2022, the 

Department had not been using the 

framework for analysis from the 2021 IC 

Rule when assessing independent 

contractor status in its enforcement and 

compliance assistance activities because 

the Department had published final 

rules delaying the effective date of, and 

subsequently withdrawing, the 2021 IC 

Rule. (As described in section II.C., a 

federal district court in March 2022 

vacated the Department’s Delay and 

Withdrawal Rules and ruled that the 

2021 IC Rule had taken effect in March 


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573 ‘‘New Study Finds Millions Could Lose Work 

if U.S. Reclassifies Contractors,’’ April 6, 2022. 

https://progresschamber.org/new-study-findsmillions-could-lose-work-if-u-s-reclassifiescontractors/. 

574The Department uses the term ‘‘independent 

contractor’’ throughout this analysis to refer to 

workers who, as a matter of economic reality, are 

not economically dependent on their employer for 

work and are in business for themselves. The 

Department notes that sources cited in this analysis 

may use other definitions of independent 

contractors that may not align fully with the 

Department’s use of the term. 

2021.) Further, as explained earlier in 

section III.B., the Department is not 

aware of any federal district or appellate 

court that has endorsed the 2021 IC 

Rule’s analysis in the course of 

resolving a dispute regarding the proper 

classification of a worker as an 

employee or independent contractor. 

Therefore, if the Department were to 

instead compare this final rule to the 

current economic and legal landscape 

that continues to reflect the courts’ 

longstanding multifactor economic 

reality test, the economic impact would 

be much smaller, because this rule is 

consistent with that landscape (i.e., the 

longstanding judicial precedent and 

guidance that the Department was 

relying on prior to March of 2022). 

The Coalition to Promote Independent 

Entrepreneurs agreed that the 2021 IC 

Rule is the correct baseline to analyze 

the recission of the rule, but not the 

separate issue of issuing new 

regulations ‘‘containing a new 

interpretation of the multifactor 

economic reality test.’’ This commenter 

appeared to disagree with the 

Department’s explanation that ‘‘under 

the current economic and legal 

landscape baseline, the economic 

impact of DOL’s proposed new iteration 

of the test might, or might not, be ‘much 

smaller.’ ’’ It asserted that the direction 

of this economic impact would be 

negative, because the rule would lead to 

increased uncertainty and confusion 

and would create an adverse economic 

impact by ‘‘denying individuals their 

right to be recognized as independent 

contractors under the FLSA.’’ The 

Department addresses claims from this 

commenter and others on the potential 

costs and benefits of this rule 

throughout this economic analysis. 

The Department does not believe, as 

reflected in this analysis, that this rule 

will result in widespread 

reclassification of workers. That is, for 

workers who are properly classified as 

independent contractors, the 

Department does not, for the most part, 

anticipate that the guidance provided in 

this rule will result in these workers 

being reclassified as employees. 

Especially compared to the guidance 

that was in effect before the 2021 IC 

Rule, the test put forth in this rule 

would not make independent contractor 

status significantly less likely. Rather, 

impacts resulting from this rule will 

mainly be due to a reduction in 

misclassification. If the 2021 IC Rule 

had been retained, the risk of 

misclassification could have increased. 

As noted previously in section III, the 

2021 IC Rule’s elevation of certain 

factors and its preclusion of 

consideration of relevant facts under 

several factors, which is a departure 

from judicial precedent applying the 

economic reality test, could result in 

misapplication of the economic reality 

test and may have conveyed to 

employers that it might be easier than it 

was prior to the 2021 IC Rule to classify 

certain workers as independent 

contractors rather than FLSA-covered 

employees. This rule could therefore 

help prevent this misclassification by 

providing employers with guidance that 

is more consistent with longstanding 

precedent. 

Many commenters who wrote in 

opposition to the proposed rule were 

concerned that, because of this rule, 

many independent contractors would be 

reclassified as employees, and that there 

would be a large negative impact 

associated with this reclassification. For 

example, a senior research fellow at the 

Mercatus Center said ‘‘DOL implicitly 

assumes that 100 percent of potential 

contracting jobs will be turned into 

employment jobs; this assumption is 

extremely optimistic and downplays 

very significant consequences in 

connection with the rule in question.’’ 

Cambridge Investment Research Inc. 

stated that the practical result of the 

Proposed Rule would be that many 

workers will be reclassified as 

employees, including those who want to 

be independent contractors. However, 

the proposed rule explicitly noted that 

the Department does not expect any 

widespread reclassification of 

independent contractors as employees, 

and at no point assumed that 100 

percent of contracting jobs would be 

turned into employment jobs. The 

Department believes that concerns about 

widespread reclassification are not 

realistic because the Department is 

adopting guidance in this rule that is 

essentially identical to the standard it 

applied for decades prior to the 2021 IC 

Rule, derived from the same analysis 

that courts have applied for decades and 

have been continuing to apply since the 

2021 IC Rule took effect. 

The Department received multiple 

comments discussing the negative 

impacts of widespread reclassification 

and citing research about potential job 

losses and loss of earnings. For example, 

Littler’s Workplace Policy Institute says, 

‘‘[A] study published last April 

concluded that widespread 

reclassification would destroy as many 

as 769,000 work opportunities and wipe 

out $9.1 billion in earnings.573 The 

proposed rule fails to take these effects 

into account.’’ The Chamber of Progress 

cites this same study, noting that, ‘‘A 

national rule reclassifying independent 

contractors as employees could result in 

approximately 4.4 million people being 

involuntarily reclassified[.]’’ However, 

the study that these data points come 

from is an analysis of the potential 

impacts of a nationwide ABC test. The 

Chamber of Progress release about the 

report states, ‘‘Specifically, the study 

examines the ‘ABC Test,’ which is used 

in a variety of state and federal 

proposals to determine whether a 

worker is an employee or an 

independent contractor.’’ The 

Department believes that the 

reclassification effects raised by these 

commenters cannot be applied to this 

rule, because the Department’s 

economic reality test is not the ABC test. 

While the Department responds 

throughout this economic analysis to 

comments about the potential negative 

impacts of the rule from those who are 

in opposition, it is important to note 

that any reclassification or job loss 

estimates associated with a nationwide 

ABC test are not appropriate to apply to 

this rule because this rule does not 

adopt an ABC test and are therefore not 

included in the Department’s estimated 

impacts. 

B. Estimated Number of Independent 

Contractors 

To provide some context on the 

prevalence of independent contracting, 

the Department first estimated the 

number of independent contractors. 

There are a variety of estimates of the 

number of independent contractors 

spanning a wide range depending on 

methodologies and how the population 

is defined.574 There is no data source on 

independent contractors that perfectly 

mirrors the definition of independent 

contractor in the Department’s 

regulations. There is also no regularly 

published data source on the number of 

independent contractors and data from 

the current year does not exist, making 

it difficult to examine trends in 

independent contracting or to measure 

how regulatory changes impact the 

number of independent contractors. 

The Department believes that the 

Current Population Survey (CPS) 

Contingent Worker Supplement (CWS) 

offers an appropriate lower bound for 


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575Bureau of Labor Statistics, ‘‘Contingent and 

Alternative Employment Arrangements—May 

2017,’’ USDL–18–0942 (June 7, 2018), https://

www.bls.gov/news.release/pdf/conemp.pdf. 

576The variables used are PES8IC=1 for selfemployed and PES7=1 for other workers. 

577While self-employed independent contractors 

are identified by the worker’s main job, other 

independent contractors answered yes to the CWS 

question about working as an independent 

contractor last week. Although the survey question 

does not ask explicitly about the respondent’s main 

job, it follows questions asked about the 

respondent’s main job. 

578Even among independent contractors, failure 

to report multiple jobs in response to survey 

questions is common. For example, Katz and 

Krueger (2019) asked Amazon Mechanical Turk 

participants the CPS-style question ‘‘Last week did 

you have more than one job or business, including 

part time, evening, or weekend work?’’ In total, 39 

percent of respondents responded affirmatively. 

However, these participants were asked the followup question ‘‘Did you work on any gigs, HITs or 

other small paid jobs last week that you did not 

include in your response to the previous question?’’ 

After this question, which differs from the CPS, 61 

percent of those who indicated that they did not 

hold multiple jobs on the CPS-style question 

acknowledged that they failed to report other work 

in the previous week. As Katz and Krueger write, 

‘‘If these workers are added to the multiple job 

holders, the percent of workers who are multiple 

job holders would almost double from 39 percent 

to 77 percent.’’ See L. Katz and A. Krueger, 

‘‘Understanding Trends in Alternative Work 

Arrangements in the United States,’’ RSF: The 

Russell Sage Foundation Journal of the Social 

Sciences 5(5), p. 132–46 (2019). 

579 K. Lim, A. Miller, M. Risch, and E. Wilking, 

‘‘Independent Contractors in the U.S.: New Trends 

from 15 years of Administrative Tax Data,’’ 

Department of Treasury, p. 61 (Jul. 2019), https:// 

www.irs.gov/pub/irs-soi/19rpindcontractorinus.pdf. 

From table 5, the total number of independent 

contractors across all categories is 13.81 million. 

The number of independent contractors in the 

categories where these workers earn the majority of 

their labor income from independent contractor 

earnings is 6.63 million. 6.63 million ÷ 13.81 

million = 0.48. 

580Washington Department of Commerce, 

‘‘Independent Contractor Study,’’ p. 21 (Jul. 2019), 

https://deptofcommerce.app.box.com/v/ 

independent-contractor-study. 

581 In any given week, the total number of 

independent contractors would have been roughly 

the same, but the identity of the individuals who 

do it for less than the full year would likely vary. 

Thus, the number of unique individuals who work 

at some point in a year as independent contractors 

would exceed the number of independent 

contractors who work within any 1-week period as 

independent contractors. 

582 D. Farrell and F. Greig, ‘‘Paychecks, Paydays, 

and the Online Platform,’’ JPMorgan Chase Institute 

(2016), https://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=2911293. The authors 

define the Online Platform Economy as ‘‘economic 

activities involving online intermediaries.’’ This 

includes ‘‘labor platforms’’ that ‘‘connect customers 

with freelance or contingent workers’’ and ‘‘capital 

platforms’’ that ‘‘connect customers with 

individuals who rent assets or sell goods peer-topeer.’’ As such, this study encompasses data on 

income sources that the Department acknowledges 

might not be a one-to-one match with independent 

contracting and could also include work that is part 

of an employment relationship. However, the 

Department believes that including data on income 

earned through online platforms is useful when 

discussing the potential magnitude of independent 

contracting. 

583B. Collins, A. Garin, E. Jackson, D. Koustas, 

and M. Payne, ‘‘Is Gig Work Replacing Traditional 

Employment? Evidence from Two Decades of Tax 

Returns,’’ IRS SOI Joint Statistical Research 

Program (2019) (unpublished paper), https://

www.irs.gov/pub/irs-soi/19rpgigworkreplacing

traditionalemployment.pdf. 

the number of independent contractors; 

however, there are potential biases in 

these data that will be noted. This was 

the estimation method used in the 2021 

IC Rule and the proposed rule, and the 

Department has not found any new data 

or analyses to indicate a need for any 

changes. Some recent data sources 

provide an indication of how COVID–19 

may have impacted the number of 

independent contractors, but this is 

inconclusive. Additionally, estimates 

from other sources will be presented to 

demonstrate the potential range. 

The U.S. Census Bureau conducts the 

CPS, and it is published monthly by the 

Bureau of Labor Statistics (BLS). The 

sample includes approximately 60,000 

households and is nationally 

representative. Periodically since 1995, 

and most recently in 2017, the CPS 

included a supplement to the May 

survey to collect data on contingent and 

alternative employment arrangements. 

Based on the CWS, there were 10.6 

million independent contractors in 

2017, amounting to 6.9 percent of 

workers.575 The CWS measures those 

who say that their independent 

contractor job is their primary job and 

that they worked at the independent 

contractor job in the survey’s reference 

week. 

The BLS’s estimate of independent 

contractors includes ‘‘[w]orkers who are 

identified as independent contractors, 

independent consultants, or freelance 

workers, regardless of whether they are 

self-employed or wage and salary 

workers.’’ BLS asks two questions to 

identify independent contractors: 576

• Workers reporting that they are selfemployed are asked: ‘‘Are you selfemployed as an independent contractor, 

independent consultant, freelance 

worker, or something else (such as a 

shop or restaurant owner)?’’ (9.0 million 

independent contractors). We refer to 

these workers as ‘‘self-employed 

independent contractors’’ in the 

remainder of the analysis. 

• Workers reporting that they are 

wage and salary workers are asked: 

‘‘Last week, were you working as an 

independent contractor, an independent 

consultant, or a freelance worker? That 

is, someone who obtains customers on 

their own to provide a product or 

service.’’ (1.6 million independent 

contractors). We refer to these workers 

as ‘‘other independent contractors’’ in 

the remainder of the analysis. 

It is important to note that 

independent contractors are identified 

in the CWS in the context of the 

respondent’s ‘‘main’’ job (i.e., the job 

with the most hours).577 Therefore, the 

estimate of independent contractors 

does not include those who may be an 

employee for their primary job, but may 

also work as an independent 

contractor.578 For example, Lim et al. 

(2019) estimate that independent 

contracting work is the primary source 

of income for 48 percent of independent 

contractors.579 Applying this estimate to 

the 10.6 million independent 

contractors estimated from the CWS, 

results in 22.1 million independent 

contractors (10.6 million ÷ 0.48). 

Alternatively, a survey of independent 

contractors in Washington found that 68 

percent of respondents reported that 

independent contract work was their 

primary source of income.580 However, 

because this survey only includes 

independent contractors in one state, 

the Department has not used this data 

to adjust its estimate of independent 

contractors. 

The CWS’s large sample size results 

in small sampling error. However, the 

questionnaire’s design may result in 

some non-sampling error. For example, 

one potential source of bias is that the 

CWS only considers independent 

contractors during a single point in 

time—the survey week (generally the 

week prior to the interview). 

These numbers will thus 

underestimate the prevalence of 

independent contracting over a longer 

timeframe, which may better capture the 

size of the population.581 For example, 

Farrell and Greig (2016) used a 

randomized sample of 1 million Chase 

customers to estimate prevalence of the 

Online Platform Economy.582 They 

found that ‘‘[a]lthough 1 percent of 

adults earned income from the Online 

Platform Economy in a given month, 

more than 4 percent participated over 

the three-year period.’’ Additionally, 

Collins et al. (2019) examined tax data 

from 2000 through 2016 and found that 

the number of workers who filed a form 

1099 grew substantially over that 

period, and that fewer than half of these 

workers earned more than $2,500 from 

1099 work in 2016. The prevalence of 

lower annual earnings implies that most 

workers who received a 1099 did not 

work as an independent contractor 

every week.583

The CWS also uses proxy responses, 

which may underestimate the number of 

independent contractors. The RAND 


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584See L. Katz and A. Krueger, ‘‘The Rise and 

Nature of Alternative Work Arrangements in the 

United States, 1995–2015,’’ (2018). 

585 Id. at 49. The estimate is 9.6 percent without 

correcting for overrepresentation of self-employed 

workers or multiple job holders. Id. at 31. 

586 Id. at Addendum (‘‘Reconciling the 2017 BLS 

Contingent Worker Survey’’). 

587Note that they estimate 6.7 percent of 

employed workers are independent contractors 

using the CWS, as opposed to 6.9 percent as 

estimated by the BLS. This difference is attributable 

to changes to the sample to create consistency. 

588 In addition to the use of proxy responses, this 

difference is also due to cyclical conditions. The 

impacts of these two are not disaggregated for 

independent contractors, but if we applied the 

relative sizes reported for all alternative work 

arrangements, we would get 0.36 percentage point 

difference due to proxy responses. Additionally, 

this may not entirely be a bias. It stems from 

differences in independent contracting reported by 

proxy respondents and actual respondents. As Katz 

and Krueger explain, this difference may be due to 

a ‘‘mode’’ bias or proxy respondents may be less 

likely to be independent contractors. Id. at 

Addendum p. 4. 

589 K. Abraham, B. Hershbein, and S. Houseman, 

‘‘Contract Work at Older Ages,’’ NBER Working 

Paper 26612 (2020), http://www.nber.org/papers/ 

w26612. 

590The Department believes that including data 

on what is referred to in some studies as ‘‘informal 

work’’ is useful when discussing the magnitude of 

independent contracting, although not all informal 

work is done by independent contractors. The 

Survey of Household Economics and Decisionmaking asked respondents whether they engaged in 

informal work sometime in the prior month. It 

categorized informal work into three broad 

categories: personal services, on-line activities, and 

off-line sales and other activities, which is broader 

than the scope of independent contractors. These 

categories include activities like house sitting, 

selling goods online through sites like eBay or 

craigslist, or selling goods at a garage sale. The 

Department acknowledges that the data discussed 

in this study might not be a one-to-one match with 

independent contracting and could also include 

work that is part of an employment relationship, 

but it nonetheless provides some useful data for this 

purpose. 

591 K. Abraham, and S. Houseman, ‘‘Making Ends 

Meet: The Role of Informal Work in Supplementing 

Americans’ Income,’’ RSF: The Russell Sage 

Foundation Journal of the Social Sciences 5(5): 

110–31 (2019), https://www.jstor.org/stable/ 

10.7758/rsf.2019.5.5.06. 

592See, e.g., U.S. Gov’t Accountability Off., GAO– 

09–717, Employee Misclassification: Improved 

Coordination, Outreach, and Targeting Could Better 

Ensure Detection and Prevention 10 (2008) 

(‘‘Although the national extent of employee 

misclassification is unknown, earlier national 

studies and more recent, though not 

comprehensive, studies suggest that employee 

misclassification could be a significant problem 

with adverse consequences.’’). 

593 Including, but not limited to: McKinsey Global 

Institute, ‘‘Independent Work: Choice, Necessity, 

and the Gig Economy’’ (2016),https://

www.mckinsey.com/featured-insights/employmentand-growth/independent-work-choice-necessityand-the-gig-economy; Kelly Services, ‘‘Agents of 

Change’’ (2015), https://www.kellyservices.com/ 

global/siteassets/3-kelly-global-services/ 

uploadedfiles/3-kelly_global_services/content/ 

sectionless_pages/kocg1047720freeagent20

whitepaper20210x21020final2.pdf; Robles and 

McGee, ‘‘Exploring Online and Offline Informal 

Work: Findings from the Enterprising and Informal 

Work Activities (EIWA) Survey’’ (2016); Upwork, 

‘‘Freelancing in America’’ (2019); Washington 

Department of Commerce, ‘‘Independent Contractor 

Study,’’ (Jul. 2019), https://deptofcommerce.app.

box.com/v/independent-contractor-study; D. Farrell 

and F. Greig, ‘‘Paychecks, Paydays, and the Online 

Platform,’’ JPMorgan Chase Institute (2016), https:// 

papers.ssrn.com/sol3/papers.cfm?abstract_

id=2911293; MBO Partners, ‘‘State of Independence 

in America’’ (2016); Abraham et al., ‘‘Measuring the 

Gig Economy: Current Knowledge and Open Issues’’ 

(2018), https://www.nber.org/papers/w24950; B. 

Collins, A. Garin, E. Jackson, D. Koustas, and M. 

Payne, ‘‘Is Gig Work Replacing Traditional 

Employment? Evidence from Two Decades of Tax 

Returns,’’ IRS SOI Joint Statistical Research 

Program (2019) (unpublished paper), https://

www.irs.gov/pub/irs-soi/19rpgigworkreplacing

traditionalemployment.pdf; Gitis et al., ‘‘The Gig 

Economy: Research and Policy Implications of 

Regional, Economic, and Demographic Trends,’’ 

American Action Forum (2017), https://www.

americanactionforum.org/research/gig-economyresearch-policy-implications-regional-economicdemographic-trends/#ixzz5IpbJp79a; Dourado and 

Koopman, ‘‘Evaluating the Growth of the 1099 

Workforce,’’ Mercatus Center (2015), https://www.

mercatus.org/publication/evaluating-growth-1099- 

workforce. 594See L. Katz and A. Krueger, ‘‘The Rise and 

Nature of Alternative Work Arrangements in the 

United States, 1995–2015,’’ (2018). 

595 ‘‘Gallup’s Perspective on The Gig Economy 

and Alternative Work Arrangements,’’ Gallup 

(2018), https://www.gallup.com/workplace/240878/ 

gig-economy-paper-2018.aspx. 

596See Abraham et al., ‘‘Measuring the Gig 

Economy: Current Knowledge and Open Issues’’ 

Continued 

American Life Panel (ALP) survey 

conducted a supplement in 2015 to 

mimic the CWS questionnaire but used 

self-responses only. The results of the 

survey were summarized by Katz and 

Krueger (2018).584 This survey found 

that independent contractors comprise 

7.2 percent of workers.585 Katz and 

Krueger identified that the 0.5 

percentage point difference in 

magnitude between the CWS and the 

ALP was due to both cyclical 

conditions, and the lack of proxy 

responses in the ALP.586 Therefore, the 

Department believes a reasonable upperbound on the potential bias due to the 

use of proxy responses in the CWS is 0.5 

percentage points (7.2 versus 6.7).587 588

Another potential source of bias in the 

CWS is that some respondents may not 

self-identify as independent contractors. 

For example, Abraham et al. (2020) 

estimated that 6.6 percent of workers in 

their study initially responded that they 

are employees but were then 

determined (by the researcher) to be 

independent contractors based on their 

answers to follow-up questions.589

Additionally, individuals who do what 

some researchers refer to as ‘‘informal 

work’’ may in fact be independent 

contractors though they may not 

characterize themselves as such.590 This 

population could be substantial. 

Abraham and Houseman (2019) 

confirmed this in their examination of 

the Survey of Household Economics and 

Decision-making. They found that 28 

percent of respondents reported doing 

‘‘informal work’’ for money over the 

past month.591

Conversely, another source of bias in 

the CWS is that some workers who selfidentify as independent contractors may 

misunderstand their status or may be 

misclassified by their employer. These 

workers may answer the survey in the 

affirmative, despite not truly being 

independent contractors. While precise 

and representative estimates of 

nationwide misclassification are 

unavailable, multiple studies suggest its 

prevalence in numerous sectors in the 

economy.592 See section VII.D.2. for a 

more thorough discussion of the 

prevalence of misclassification. 

Because reliable data on the potential 

magnitude of the biases discussed above 

are unavailable, and so the net direction 

of the biases is unknown, the 

Department has not attempted to 

calculate how these biases may impact 

the estimated number of independent 

contractors. 

As noted above, integrating the 

estimated proportions of workers who 

are independent contractors on 

secondary or otherwise excluded jobs 

produces an estimate population of 22.1 

million, representing the total number 

of workers working as independent 

contractors in any job at a given time. 

Given the prevalence of independent 

contractors who work sporadically and 

earn minimal income, adjusting the 

estimate according to these sources 

captures some of this population. It is 

likely that this figure is still an 

underestimate of the true independent 

contractor pool. This is because, in part, 

the CWS estimate represents only the 

number of workers who worked as 

independent contractors on their 

primary job during the survey reference 

week, which is why the Department 

applied the research literature and 

adjusted this measure to include 

workers who are independent 

contractors in a secondary job or who 

were excluded from the CWS estimate 

due to other factors. 

1. Range of Estimates in the Literature 

To further consider the range of 

estimates available, the Department 

conducted a literature review, the 

findings of which are presented in Table 

1. Other studies were also considered 

but are excluded from this table because 

the study populations were broader than 

just independent contractors, limited to 

one state, or include workers outside of 

the United States.593 The RAND ALP,594

the Gallup Survey,595 and the General 

Social Survey’s (GSS’s) Quality of 

Worklife (QWL) 596 supplement are 


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(2018), https://www.nber.org/papers/w24950, Table 

4. 597E. Jackson, A. Looney, and S. Ramnath, ‘‘The 

Rise of Alternative Work Arrangements: Evidence 

and Implications for Tax Filing and Benefit 

Coverage,’’ OTA Working Paper 114 (2017), https:// 

www.treasury.gov/resource-center/tax-policy/taxanalysis/Documents/WP-114.pdf. 598 K. Lim, A. Miller, M. Risch, and E. Wilking, 

‘‘Independent Contractors in the U.S.: New Trends 

from 15 years of Administrative Tax Data,’’ 

Department of Treasury, p. 61 (Jul. 2019), https:// 

www.irs.gov/pub/irs-soi/19rpindcontractorinus.pdf. 

599 In comparison to household survey data, tax 

data may reduce certain types of biases (such as 

recall bias) while increasing other types (such as 

underreporting bias). Because the Department is 

unable to quantify this tradeoff, it could not 

determine whether, on balance, survey or tax data 

are more reliable. 

600Consumer and Community Research Section 

of the Federal Reserve Board’s Division of 

Consumer and Community Affairs, ‘‘Economic 

Well-Being of U.S. Households in 2021,’’ Board of 

Governors of the Federal Reserve System (2022). 

Reports from all years available at https://www.

federalreserve.gov/publications/report-economicwell-being-us-households.htm. 

601The report defines gig work as including 

‘‘three types of non-traditional activities: offline 

service activities, such as child care or house 

cleaning; offline sales, such as selling items at flea 

markets or thrift stores; and online services or sales, 

such as driving using a ride-sharing app or selling 

items online.’’ Consumer and Community Research 

Section of the Federal Reserve Board’s Division of 

Consumer and Community Affairs, ‘‘Economic 

Well-Being of U.S. Households in 2017,’’ Board of 

Governors of the Federal Reserve System (May 

2018). 

602MBO partners, ‘‘The Great Realization: 11th 

Annual State of Independence,’’ (2021). Annual 

reports are available at https://www.mbopartners.

com/state-of-independence/previous-reports/. 

widely cited alternative estimates. 

However, the Department chose to use 

sources with significantly larger sample 

sizes and/or more recent data for the 

primary estimate. 

Jackson et al. (2017) 597 and Lim et al. 

(2019) 598 use tax information to 

estimate the prevalence of independent 

contracting. In general, studies using tax 

data tend to show an increase in 

prevalence of independent contracting 

over time. The use of tax data has some 

advantages and disadvantages over 

survey data. Advantages include large 

sample sizes, the ability to link 

information reported on different 

records, the reduction in certain biases 

such as reporting bias, records of all 

activity throughout the calendar year 

(the CWS only references one week), 

and inclusion of both primary and 

secondary independent contractors. 

Disadvantages are that independent 

contractor status needs to be inferred; 

there is likely an underreporting bias 

(i.e., some workers do not file taxes); 

researchers are generally trying to match 

the IRS definition of independent 

contractor, which does not mirror the 

scope of independent contractors under 

the FLSA; and the estimates include 

misclassified independent 

contractors.599 A major disadvantage of 

using tax data for this analysis is that 

the detailed source data are not publicly 

available and thus the analyses cannot 

be directly verified or adjusted as 

necessary (e.g., to describe 

characteristics of independent 

contractors, etc.). 

TABLE 1—SUMMARY OF ESTIMATES OF INDEPENDENT CONTRACTING

Source Method a Definition b Percent of 

workers Sample size Year 

CPS CWS ....... Survey .... Independent contractor, consultant or freelance worker (main 

only).

6.9 50,392 ............................ 2017 

ALP ................. Survey .... Independent contractor, consultant or freelance worker (main 

only).

7.2 6,028 .............................. 2015 

Gallup ............. Survey .... Independent contractor .............................................................. 14.7 5,025 .............................. 2017 

GSS QWL ....... Survey .... Independent contractor, consultant or freelancer (main only) ... 14.1 2,538 .............................. 2014 

Jackson et al ... Tax data Independent contractor, household worker ............................... c 6.1 ∼5.9 million d .................. 2014 

Lim et al .......... Tax data Independent contractor .............................................................. 8.1 1% of 1099–MISC and 

5% of 1099–K.

2016 

aThe CPS CWS and the GSS QWL are nationally representative, and the ALP CWS is approximately nationally representative. The Gallup 

poll is demographically representative but does not explicitly claim to be nationally representative. Lastly, the two tax data sets are very large 

random samples and consequently are likely to be nationally representative, although the authors do not explicitly claim so. bThe survey data only identify independent contractors on their main job. Jackson et al. include independent contractors as long as at least 15 

percent of their earnings were from self-employment income; thus, this population is broader. If Jackson et al.’s estimate is adjusted to exclude 

those who are primary wage earners, the rate is 4.0 percent. Lim et al. include independent contractors on all jobs. If Lim et al.’s estimate is adjusted to only those who receive a majority of their labor income from independent contracting, the rate is 3.9 percent. cSummation of (1) 2,132,800 filers with earnings from both wages and sole proprietorships and expenses less than $5,000, (2) 4,125,200 primarily sole proprietorships and with less than $5,000 in expenses, and (3) 3,416,300 primarily wage earners. dEstimate based on a 10 percent sample of self-employed workers and a 1 percent sample of W–2 recipients. 

2. COVID–19 Adjustment to the 

Estimated Number of Independent 

Contractors 

The Department’s estimate of the 

number of independent contractors, 

22.1 million, is based primarily on 2017 

data. Because COVID–19 has had a 

substantial impact on the labor market, 

it is possible that this estimate is not 

currently appropriate. The Department 

conducted a search for more recent data 

to indicate any trends in the number of 

independent contractors since 2017. 

The findings are inconclusive but 

generally do not indicate an increase. 

The Federal Reserve Board’s annual 

Survey of Household Economics and 

Decisionmaking (SHED) provides 

measures of the economic well-being of 

U.S. households. The Federal Reserve 

Board publishes a report ‘‘Economic 

Well-Being of U.S. Households’’ 

summarizing the findings of each 

survey.600 One subsection of the 

Employment section describes the 

results of the questions related to ‘‘The 

Gig Economy.’’ While the survey 

questions about work in the ‘‘gig 

economy’’ include more types of work 

scenarios than just independent 

contracting, a decrease from 30 percent 

to 20 percent of adults answering ‘‘yes’’ 

from 2017 to 2020 may indicate that the 

number of independent contractors in 

this industry also decreased during that 

time period.601 The report summarizing 

the 2021 data is available, but 

unfortunately the gig economy 

questions were revised substantially, so 

a comparable value is not available for 

2021. Moreover, trends of potential 

independent contractors in one industry 

are not necessarily indicative of trends 

across the economy. 

MBO Partners, a company with the 

goal of connecting enterprise 

organizations and top independent 

professionals, also conducts an annual 

survey and prepares a research report of 

the findings.602 In all groups of 

‘‘independent workers,’’ MBO Partners 


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603 ‘‘Upwork Study Finds 59 Million Americans 

Freelancing Amid Turbulent Labor Market,’’ 

Upwork, December 8, 2021. https://www.upwork.

com/press/releases/upwork-study-finds-59-millionamericans-freelancing-amid-turbulent-labormarket. Full study available at https://www.upwork.

com/research/freelance-forward-2021. 

604Their report defines freelancers as 

‘‘[i]ndividuals who have engaged in supplemental, 

temporary, project- or contract-based work, within 

the past 12 months.’’ While many of these workers 

could be independent contractors, some workers 

engaged in supplemental or temporary work could 

likely be considered employees. 

605The Department used the generational 

breakdown used in the MBO Partners 2017 report, 

‘‘The State of Independence in America.’’ 

‘‘Millennials’’ were defined as individuals born 

1981–1996, ‘‘Generation X’’ were defined as 

individuals born 1965–1980, and ‘‘Baby Boomers 

and Matures’’ were defined as individuals born 

before 1965. 

606 K. Abraham, and S. Houseman, ‘‘Making Ends 

Meet: The Role of Informal Work in Supplementing 

Americans’ Income,’’ RSF: The Russell Sage 

Foundation Journal of the Social Sciences 5(5): 

110–31 (2019), https://www.aeaweb.org/conference/ 

2019/preliminary/paper/QreAaS2h. Note that this 

informal work may be broader than what would be 

considered independent contracting and includes 

activities like babysitting/housesitting and selling 

goods online through sites like eBay and Craigslist. 

607This data comes from the 2021 edition of the 

MBO Partners report, ‘‘The State of Independence 

in America.’’ While maintaining the generational 

breakdown used in the 2017 edition, ‘‘Generation 

Z’’ was additionally defined as individuals born 

1997–2012. https://info.mbopartners.com/rs/mbo/ 

images/MBO_2021_State_of_Independence_

Research_Report.pdf. 

608 Garin, A. and Koustas, D., ‘‘The Distribution 

of Independent Contractor Activity in the United 

States: Evidence from Tax Filings,’’ (2021). https:// 

www.irs.gov/pub/irs-soi/21-rp-independentcontractor-activity.pdf. 

609 Id. 

610These numbers are calculated by the 

Department and based on the CWS respondents 

who state that their race is ‘‘white only’’ or ‘‘black 

only’’ as opposed to identifying as multi-racial. 

611 K. Abraham, and S. Houseman, ‘‘Making Ends 

Meet: The Role of Informal Work in Supplementing 

Americans’ Income,’’ RSF: The Russell Sage 

Foundation Journal of the Social Sciences 5(5): 

110–31 (2019), https://www.aeaweb.org/conference/ 

2019/preliminary/paper/QreAaS2h. 

612 Id. 

similarly found a decrease in the 

number from 2017 to 2020. Conversely, 

in total, the 2021 report shows a large 

increase from 2020, enough that the 

number of independent workers in 2021 

is larger than the 2017 number. 

However, this increase occurs only in 

the ‘‘occasional independent’’ workers 

category, described as those who work 

part-time and regularly, but without set 

hours. Comparing the number of parttime and full-time independent workers 

yields similar values in 2017 and 2021, 

so the Department believes that no 

adjustments are needed to the 2017 

estimate of 22.1 million independent 

contractors. 

A few commenters said that the 

Department underestimated the number 

of independent contractors in the U.S. 

because the estimate is based on 

outdated data. Commenters such as the 

Coalition for Workforce Innovation 

referenced a more recent study from 

Upwork, which found that ‘‘59 million 

workers performed freelance work in 

the past 12 months, representing 36%— 

or more than one-third—of the entire 

U.S. workforce.’’ 603 As discussed above, 

the Department acknowledges that its 

estimate of independent contractors 

could be an underestimate. However, 

the estimates presented in the Upwork 

study could be an overestimate because 

their definition of ‘‘freelancer’’ likely 

also includes some workers who would 

be classified as employees under the 

FLSA in addition to those who would 

be classified as independent 

contractors.604 Furthermore, the 

Department was unable to verify 

whether their sample of 6,000 workers 

was representative of all workers in the 

U.S. While the Department appreciates 

this additional context on the potential 

scope of independent contracting in the 

U.S., the estimate of independent 

contractors in this analysis has not been 

revised. 

3. Demographics of Independent 

Contractors 

The Department reviewed 

demographic information on 

independent contractors using the CWS, 

which, as stated above, only measures 

those who say that their independent 

contractor job is their primary job and 

that they worked at the independent 

contractor job in the survey’s reference 

week. According to the CWS, these 

primary independent contractors are 

most prevalent in the construction and 

professional and business services 

industries. These two industries 

comprise 44 percent of primary 

independent contractors. Independent 

contractors tend to be older and 

predominately male (64 percent). 

Millennials (defined as those born 

1981–1996) have a significantly lower 

prevalence of primary independent 

contracting than older generations: 4.2 

percent for Millennials compared to 7.2 

percent for Generation X (defined as 

those born 1965–1980) and 10.2 percent 

for Baby Boomers and Matures (defined 

as individuals born before 1965).605

However, other surveys that capture 

secondary independent contractors, or 

those who did informal work as 

independent contractors show that the 

prevalence of informal work is lower 

among older workers. Abraham and 

Houseman (2019), find that among 18- 

to 24-year-olds, 41.3 percent did 

informal work over the past month. The 

rate fell to 25.7 percent for 45- to 54- 

year-olds, and 13.4 percent for those 75 

years and older.606 According to MBO 

partners, the COVID–19 pandemic may 

have accelerated this trend; when 

accounting for both primary and 

secondary independent work, 2021 

marked the first year that Millennials 

and members of Generation Z (34 

percent and 17 percent of independent 

workers respectively) outnumbered 

members of Generation X and Baby 

Boomers (23 percent and 26 percent 

respectively) as part of the independent 

workforce.607

According to the CWS, 64 percent of 

primary independent contractors are 

men. Additionally, Garin and Koustas 

(2021) find that men comprise both a 

larger share of independent contractors 

who perform work through traditional 

contracting arrangements and those who 

secure work through online 

platforms.608 This study also found that 

a greater share of men than women who 

earn income in this way are primarily 

self-employed; women who perform 

online platform work are more likely to 

use that work to supplement other 

income.609

According to the CWS, white workers 

are somewhat overrepresented among 

primary independent contractors; they 

comprise 85 percent of this population 

but only 79 percent of the population of 

workers. Conversely, Black workers are 

somewhat underrepresented 

(comprising 8 percent and 13 percent, 

respectively).610 The opposite trends 

emerge when evaluating the broader 

category of ‘‘informal work’’, where 

racial minorities participate at a higher 

rate than white workers.611 Primary 

independent contractors are spread 

across the educational spectrum, with 

no group especially overrepresented. 

The same trend in education attainment 

holds for workers who participate in 

informal work.612


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613Annabel Utz, Julie Yixia Cai, & Dean Baker, 

‘‘The Pandemic Rise in Self-Employment: Who is 

Working for Themselves Now,’’ Center for 

Economic and Policy Research. (August 2022). 

https://cepr.net/the-pandemic-rise-in-selfemployment-who-is-working-for-themselves-now/. 

TABLE 2—CHARACTERISTICS OF WORKERS, ALL WORKERS AND INDEPENDENT CONTRACTORS

Demographic 

Number of 

workers 

(millions) 

Percent of 

workers 

Number of 

independent 

contractors 

(primary job) 

(millions) 

Percent of 

independent 

contractors 

Total ....................................................................................................................... 158.9 100 10.6 100 

By Age 

16–20 (Generation Z) ............................................................................................ 8.2 5.1 0.1 0.7

21–37 (Millennials) ................................................................................................. 59.2 37.3 2.5 23.4 

38–52 (Generation X) ............................................................................................ 49.8 31.3 3.6 33.8 

53+ (Baby Boomers and Matures) ........................................................................ 43.6 27.5 4.5 42.1 

By Sex 

Female ................................................................................................................... 75.4 47.4 3.8 35.7 

Male ....................................................................................................................... 85.4 53.7 6.8 64.3 

By Race 

White only .............................................................................................................. 125.6 79.1 9.0 84.6 

Black only .............................................................................................................. 20.3 12.8 0.9 8.3 

All other races ........................................................................................................ 14.9 9.4 0.8 7.1 

By Ethnicity 

Hispanic ................................................................................................................. 27.0 17.0 1.6 14.8 

Not Hispanic .......................................................................................................... 133.8 84.2 9.0 85.2 

By Industry 

Agr, forestry, fishing, and hunting ......................................................................... 2.6 1.6 0.2 2.0 

Mining .................................................................................................................... 0.8 0.5 0.0 0.1 

Construction ........................................................................................................... 11.0 6.9 2.0 19.3 

Manufacturing ........................................................................................................ 16.5 10.4 0.2 2.2 

Wholesale and retail trade ..................................................................................... 20.5 12.9 0.8 7.9 

Transportation and utilities .................................................................................... 8.0 5.1 0.6 5.7

Information ............................................................................................................. 3.0 1.9 0.2 2.2 

Financial activities .................................................................................................. 10.9 6.9 1.0 9.6 

Professional and business services ...................................................................... 19.3 12.2 2.7 25.1 

Educational and health services ............................................................................ 36.2 22.8 1.0 9.6 

Leisure and hospitality ........................................................................................... 15.1 9.5 0.7 6.2 

Other services ........................................................................................................ 7.8 4.9 1.0 9.7 

Public administration .............................................................................................. 7.2 4.6 0.0 0.4 

By Education 

Less than high school diploma .............................................................................. 14.3 9.0 1.0 9.3 

High school diploma or equivalent ........................................................................ 41.9 26.4 2.6 24.4 

Less than Bachelor’s degree ................................................................................. 45.3 28.5 2.8 26.5 

Bachelor’s degree .................................................................................................. 37.3 23.5 2.7 25.5 

Master’s degree or higher ..................................................................................... 21.9 13.8 1.5 14.5 

Note: Estimates based on the 2017 CPS Contingent Worker Survey. 

An individual commenter wrote that 

because the COVID–19 pandemic 

created specific burdens for women and 

people of color and resulted in the 

increased participation of both groups 

in self-employment, the use of 2017 data 

reduces the inclusion of these workers. 

The commenter cited a study from the 

Center for Economic Policy and 

Research (CEPR), which found ‘‘[t]he 

share of employed women who report 

being self-employed rose from 7.5 

percent in the pre-pandemic period to 

8.2 percent: an increase of 0.7 

percentage points. By contrast, the share 

of employed men who report being selfemployed rose by just 0.3 percentage 

points (from 12.1 percent to 12.4 

percent).’’ 613 The study also found 

‘‘[t]he share of employed Blacks who 

reported being self-employed rose from 

5.8 percent to 6.8 percent: an increase 

of 1.0 percentage point. . . . For 

Hispanics, there was a 1.5 percentage 

point rise in shares from 8.4 percent to 

9.9 percent . . . . By contrast, the rise 

in self-employment among whites was 

just 0.2 percent, from 11.3 to 11.5 

percent.’’ While the Department 

acknowledges that the demographic 

makeup of independent contractors 

could have shifted following the 

COVID–19 pandemic, the data cited in 

the CEPR study includes all selfemployed persons, which is a broader 

population than independent 

contractors. It is possible that this data 

may also reflect the demographic trends 

of the more specific population of 


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614An establishment is commonly understood as 

a single economic unit, such as a farm, a mine, a 

factory, or a store, that produces goods or services. 

Establishments are typically at one physical 

location and engaged in one, or predominantly one, 

type of economic activity for which a single 

industrial classification may be applied. An 

establishment contrasts with a firm, or a company, 

which is a business and may consist of one or more 

establishments. See BLS, ‘‘Quarterly Census of 

Employment and Wages: Concepts,’’ https://

www.bls.gov/opub/hom/cew/concepts.htm. 

615U.S. Census Bureau, 2019 SUSB Annual 

Datasets by Establishment Industry. https://

www.census.gov/data/datasets/2019/econ/susb/ 

2019-susb.html. 

616U.S. Census Bureau, 2017 Census of 

Governments. https://www.census.gov/data/tables/ 

2017/econ/gus/2017-governments.html. 

617Lim et al., supra n.512, Table 10: Firm sample 

summary statistics by year (2001–2015), https://

www.irs.gov/pub/irs-soi/19rpindcontractorinus.pdf. 

618A Compensation/Benefits Specialist ensures 

company compliance with federal and state laws, 

including reporting requirements; evaluates job 

positions, determining classification, exempt or 

non-exempt status, and salary; plans, develops, 

evaluates, improves, and communicates methods 

and techniques for selecting, promoting, 

compensating, evaluating, and training workers. See 

BLS, ‘‘13–1141 Compensation, Benefits, and Job 

Analysis Specialists,’’ https://www.bls.gov/oes/ 

current/oes131141.htm. 

619The 2021 IC Rule used the mean wage rate to 

calculate rule familiarization costs, but the 

Department has used the median wage rate here, 

because it is more consistent with cost analyses in 

other Wage and Hour Division rulemakings. The 

Department used the median wage rate in the 

Withdrawal Rule. 86 FR 24321. Generally, the 

Department uses median wage rates to calculate 

costs, because the mean wage rate has the potential 

to be biased upward by high-earning outlier wage 

observations. 

620Calculated using BLS Employer Costs for 

Employee Compensation data. The Department took 

the average of the most recent four quarters of Total 

Benefits per Hour Worked for Civilian Workers 

(Series ID CMU1030000000000D) divided it by the 

average of the most recent four quarters of Wages 

and Salaries Cost per Hour Worked for Civilian 

Workers (Series ID CMU1020000000000D). https:// 

www.bls.gov/ncs/data.htm. 

621Based on Department calculations using the 

individual level data. The Department also 

calculated the mean hourly wage for independent 

contractors using the CWS data and found that the 

mean wage in 2017 was $27.29, which would be 

$32.92 updated to 2022 dollars using the GDP 

deflator. 

622 In the 2021 IC rule the Department included 

an additional 45 percent for benefits and 17 percent 

for overhead. These adjustments have been 

removed here, because independent contractors do 

not usually receive employer-provided benefits and 

generally have overhead costs built into their 

hourly rate. 

independent contractors, but the 

Department has not made any 

adjustments to its overall estimate of the 

number of independent contractors. 

C. Costs 

1. Rule Familiarization Costs 

Regulatory familiarization costs 

represent direct costs to businesses and 

current independent contractors 

associated with reviewing the new 

regulation. To estimate the total 

regulatory familiarization costs, the 

Department used (1) the number of 

establishments and government entities 

using independent contractors, and the 

current number of independent 

contractors; (2) the wage rates for the 

employees and for the independent 

contractors reviewing the rule; and (3) 

the number of hours that it estimates 

employers and independent contractors 

will spend reviewing the rule. This 

section presents the calculation for 

establishments first and then the 

calculation for independent contractors. 

Regulatory familiarization costs may 

be a function of the number of 

establishments or the number of 

firms.614 Presumably, the headquarters 

of a firm will conduct the regulatory 

review for businesses with multiple 

locations and may require some 

locations to familiarize themselves with 

the regulation at the establishment level. 

Other firms may either review the rule 

to consolidate key takeaways for their 

affiliates or they may rely entirely on 

outside experts to evaluate the rule and 

relay the relevant information to their 

organization (e.g., a chamber of 

commerce). The Department used the 

number of establishments to estimate 

the fundamental pool of regulated 

entities—which is larger than the 

number of firms. This assumes that 

regulatory familiarization occurs at both 

the headquarters and establishment 

levels. 

To estimate the number of 

establishments incurring regulatory 

familiarization costs, the Department 

began by using the Statistics of U.S. 

Businesses (SUSB) to define the total 

pool of establishments in the United 

States.615 In 2019, the most recent year 

available, there were 7.96 million 

establishments. These data were 

supplemented with the 2017 Census of 

Government that reports 90,075 local 

government entities, and 51 state and 

federal government entities.616 The total 

number of establishments and 

governments in the universe used for 

this analysis is 8,049,229. 

This universe is then restricted to the 

subset of establishments that engage 

independent contractors. In 2019, Lim 

et al. used extensive IRS data to model 

the independent contractor market and 

found that 34.7 percent of firms hire 

independent contractors.617 These data 

are based on annual tax filings, so the 

dataset includes firms that may contract 

for only parts of a year. Multiplying the 

universe of establishments and 

governments by 35 percent results in 2.8 

million entities. 

The Department assumes that a 

Compensation, Benefits, and Job 

Analysis Specialist (SOC 13–1141) (or a 

staff member in a similar position) will 

review the rule.618 According to the 

Occupational Employment and Wage 

Statistics (OEWS), these workers had a 

median wage of $32.59 per hour in 2022 

(most recent data available).619

Assuming benefits are paid at a rate of 

45 percent of the base wage,620 and 

overhead costs are 17 percent of the 

base wage, the reviewer’s effective 

hourly rate is $52.80. The Department 

assumes that it will take on average 

about 1 hour to review the rule. In the 

proposed rule, the Department assumed 

a review time of 30 minutes, but has 

increased this estimate in response to 

concerns from commenters that the 

regulatory familiarization costs were 

understated. The Department has 

provided a discussion of these 

comments at the end of this section. The 

Department believes that 1 hour, on 

average, is appropriate, because while 

some establishments will spend longer 

to review the rule, many establishments 

may rely on third-party summaries of 

the changes or spend little or no time 

reviewing the rule. Furthermore, the 

analysis outlined in this rule aligns with 

existing judicial precedent and previous 

guidance released by the Department, 

with which much of the regulated 

community is already familiar. Total 

regulatory familiarization costs to 

businesses in Year 1 are estimated to be 

$148,749,744 ($52.80 × 1 hour × 

2,817,230) in 2022 dollars. 

For regulatory familiarization costs for 

independent contractors, the 

Department used its estimate of 22.1 

million independent contractors and 

assumed each independent contractor 

will spend 30 minutes to review the 

regulation. In the proposed rule, the 

Department assumed that it would take 

independent contractors an average of 

15 minutes to review the regulation but 

has also increased this estimate in the 

final rule in response to commenters’ 

concerns. The average time spent by 

independent contractors is estimated to 

be shorter than for establishments and 

governments. This difference is in part 

because the Department believes 

independent contractors are likely to 

rely on summaries of the key elements 

of the rule change published by the 

Department, worker advocacy groups, 

media outlets, and accountancy and 

consultancy firms, as has occurred with 

other rulemakings. This time is valued 

at $23.46, which is the median hourly 

wage rate for independent contractors in 

the CWS of $19.45 updated to 2022 

dollars using the gross domestic product 

(GDP) deflator.621 622 Therefore, 

regulatory familiarization costs to 


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623 86 FR 1228 (‘‘The Department assumes that a 

Compensation, Benefits, and Job Analysis Specialist 

(SOC 13–1141) (or a staff member in a similar 

position) will review the rule.’’). 

independent contractors in Year 1 are 

estimated to be $259,233,000 ($23.46 × 

0.5 hour × 22.1 million). 

The total one-time regulatory 

familiarization costs for establishments, 

governments, and independent 

contractors are estimated to be $408 

million. Regulatory familiarization costs 

in future years are assumed to be de 

minimis. Employers and independent 

contractors would continue to 

familiarize themselves with the 

applicable legal framework in the 

absence of the rule, so this rulemaking 

is not expected to impose costs after the 

first year. This amounts to a 10-year 

annualized cost of $56.4 million at a 

discount rate of 3 percent or $54.3 

million at a discount rate of 7 percent. 

Multiple commenters said that they 

were concerned that the Department’s 

rule familiarization cost estimate was 

too low. Commenters asserted that the 

Department’s initial estimate of 30 

minutes to review the rule was too 

short, and that it would take firms much 

longer to read and understand the final 

rule. For example, a comment from two 

fellows at the Heritage Foundation 

estimated that ‘‘[e]ven individuals with 

very high rates of reading and 

comprehension’’ would need more than 

two hours to read the full proposal. The 

Coalition for Workforce Innovation said 

that while a person could simply read 

the rule in 30 minutes, it wouldn’t be 

enough time to understand the rule and 

translate the understanding into advice 

to be communicated within the 

organization. The U.S. Chamber of 

Commerce commented, ‘‘[a]n 

economically appropriate approach for 

gauging the scale of familiarization costs 

is to assume no less than one hour of 

familiarization time for both affected 

workers and hiring establishments.’’ 

The Modern Economy Project 

commented that the complexity of the 

rulemaking and of the issue of worker 

classification necessitates more time for 

review. Other commenters echoed 

similar sentiments. In response to all the 

comments received on this topic, the 

Department reconsidered the time for 

rule familiarization and doubled its 

original estimates, increasing them to 1 

hour for potentially affected firms and 

30 minutes for independent contractors. 

The Department believes that a longer 

time estimate would not be appropriate 

because this estimate represents an 

average of the firms who may spend 

more time for review, and those who 

will not spend any time reviewing the 

rule. 

Some commenters also expressed 

concerns with the Department’s 

assumption that the rule would be read 

by a Compensation, Benefits, and Job 

Analysis Specialist. For example, the 

Coalition for Workforce Innovation 

stated, ‘‘businesses task their high-level, 

well-trained human resources workers, 

in-house attorneys, and outside counsel 

with this responsibility at an hourly rate 

well exceeding $50.’’ The U.S. Chamber 

of Commerce wrote that the 

‘‘Department’s selection of 

‘Compensation, Benefits and Job 

Analysis Specialist’ as the model 

reviewer for its calculation of 

familiarization costs misunderstands 

and misrepresents the seriousness and 

complexity of the regulation being 

proposed.’’ The Department 

acknowledges that in some cases, 

higher-paid senior workers could be 

charged with reading this rule, but 

believes that the use of the 

Compensation, Benefits, and Job 

Analysis Specialist hourly wage is 

consistent with other rules released by 

the Wage and Hour Division and the 

Department, including the 2021 IC 

Rule.623 The Department notes that it 

did not receive any comments objecting 

to the use of this occupation in its rule 

familiarization calculation in the 2021 

IC Rule. 

2. Comments Received on the 

Department’s Cost Analysis 

Some commenters asserted that the 

Department did not properly consider 

all of the potential costs of the 

regulation. For example, commenters 

such as the Financial Services Institute 

said that the Department did not 

consider substantial costs of the rule, 

such as the cost that will arise from 

businesses being forced to provide 

health insurance and other benefits to 

their former independent contractors or 

the indirect costs of higher taxes. The 

Department notes that these costs would 

be considered transfers and are 

discussed in section VII.E of this 

economic analysis. Other commenters 

mentioned that the rule would lead to 

significant compliance costs for firms. 

For example, two fellows from the 

Heritage Foundation commented that in 

addition to familiarizing themselves 

with the rule, the firm would have to 

perform an individualized assessment of 

the economic relationship with each of 

their contractors, renegotiate or cancel 

existing contracts, spend time 

converting independent contractors into 

employees, engage with labor unions 

and elections, and deal with 

enforcement actions. The Cetera 

Financial Group said that the ongoing 

cost of compliance for employers is 

considerable. They stated that applying 

this rule only to independent financial 

professionals would create an obligation 

for employers to track the earnings and 

hours worked for more than 140,000 

independent financial professionals in 

the U.S. As discussed above, the 

Department does not believe that this 

rule will lead to widespread 

reclassification (and additional tracking 

of hours and earnings), and for the 

limited cases in which reclassification 

could occur, many of these costs should 

already be incurred by firms. For 

example, as a matter of good practice, 

firms should already be assessing the 

economic relationship of contractors 

when they engage in business with 

them. 

Other commenters wrote that the rule 

would actually reduce compliance 

costs. For example, the Laborers’ 

International Union of North America 

(LIUNA) urged the Department to 

consider reduced compliance costs as 

an important impact of the rule. They 

stated that the rule will improve public 

understanding of legal obligations 

because it codifies judicial precedent in 

a comprehensive, accessible, and 

reliable format. 

D. Benefits and Transfers 

1. Increased Consistency 

This rule presents a detailed analysis 

for determining employee or 

independent contractor status under the 

Act that is more consistent with existing 

judicial precedent and the Department’s 

longstanding guidance prior to the 2021 

IC Rule. This analysis will provide more 

consistent guidance to employers in 

properly classifying workers as 

employees or independent contractors, 

as well as useful guidance to workers on 

whether they are correctly classified as 

employees or independent contractors. 

The analysis will provide a consistent 

approach for those businesses that 

engage (or wish to engage) independent 

contractors, who the Department 

recognizes play an important role in the 

economy. The rule’s consistency with 

judicial precedent could also help to 

reduce legal disputes. 

2. Reduced Misclassification 

This rule will provide consistent 

guidance to employers in properly 

classifying workers as employees or 

independent contractors, as well as 

useful guidance to workers on whether 

they are correctly classified as 

employees or independent contractors. 

This clear guidance could help reduce 

the occurrence of misclassification. 


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624NELP, ‘‘Independent Contractor 

Misclassification Imposes Huge Costs on Workers 

and Federal and State Treasuries,’’ (Oct. 2020), 

https://www.nelp.org/publication/independentcontractor-misclassification-imposes-huge-costsworkers-federal-state-treasuries-update-october2020. 

625Lalith de Silva, Adrian Millett, Dominic 

Rotondi, and William F. Sullivan, ‘‘Independent 

Contractors: Prevalence and Implications for 

Unemployment Insurance Programs’’ Report of 

Planmatics, Inc., for U.S. Department of Labor 

Employment and Training Administration (2000), 

https://wdr.doleta.gov/owsdrr/00-5/00-5.pdf. 

626NELP, Independent Contractor 

Misclassification Imposes Huge Costs on Workers 

and Federal and State Treasuries, (Oct. 2020) 

(describing how misclassification rates are higher in 

certain industries such as construction, trucking, 

janitorial, and home care work), https://

www.nelp.org/publication/independent-contractormisclassification-imposes-huge-costs-workersfederal-state-treasuries-update-october-2020. 

627Marina Zhavoronkova et al., Occupational 

Segregation in America, Center for American 

Progress (Mar. 29, 2022), https://www.american

progress.org/article/occupational-segregation-inamerica/. 

628Risa Gelles-Watnick & Monica Anderson, 

Racial and Ethnic Differences Stand Out in the U.S. 

Gig Workforce, PEW RSCH. CTR. (Dec. 15, 2021), 

https://www.pewresearch.org/fact-tank/2021/12/15/ 

racial-and-ethnic-differencesstand-out-in-the-u-sgig-workforce/. 

629NELP analysis of March 2022 Current 

Population Survey Annual Social and Economic 

Supplement microdata. For underlying data, see 

CPS Annual Social and Economic Supplement, U.S. 

Census Bureau, https://data.census.gov/mdat/#/ 

search?ds=CPSASEC2022. 

630 29 U.S.C. 202(a), (b). 

631 Id. 

632Russel Ormiston, Dale Belman, & Mark Erlich, 

‘‘An Empirical Methodology to Estimate the 

Incidence and Costs of Payroll Fraud in the 

Construction Industry,’’ (Jan. 2020), available at 

https://stoptaxfraud.net/wp-content/uploads/2020/ 

03/National-Carpenters-Study-Methodology-forWage-and-Tax-Fraud-Report-FINAL.pdf. 

633 Ken Jacobs, Kuichih Huang, Jenifer 

MacGillvary and Enrique Lopezlira, ‘‘The Public 

Cost of Low-Wage Jobs in the US Construction 

Industry,’’ UC Berkeley Labor Center (January 

2022), https://laborcenter.berkeley.edu/the-publiccost-of-low-wage-jobs-in-the-us-constructionindustry/. 

The prevalence of misclassification of 

employees as independent contractors is 

unclear, but the literature indicates it is 

substantial. A 2020 National 

Employment Law Project (NELP) report, 

for example, reviewed state audits and 

concluded that ‘‘these state reports 

show that 10 to 30 percent of employers 

(or more) misclassify their employees as 

independent contractors.’’ 624 Similarly, 

a 2000 Department of Labor study also 

found that among audits from nine 

states, ‘‘employers with misclassified 

workers ranged from approximately 

10% to 30%.’’ 625 This same report 

found that depending on the state, 

between 1 percent and 9 percent of 

workers are misclassified as 

independent contractors. 

Misclassification disproportionately 

affects Black, indigenous, and people of 

color (BIPOC) because of the disparity 

in occupations affected by 

misclassification.626 Commenters 

echoed these concerns and provided 

additional supporting information. For 

example, a joint comment from the 

Lawyers Committee for Civil Rights 

Under Law (LCCRUL) and The 

Washington Lawyer’s Committee for 

Civil Rights and Urban Affairs (WLC) 

stated, ‘‘[d]ue to occupational 

segregation, the sectors in which 

misclassification is most prevalent are 

comprised disproportionately [of] 

BIPOC workers, especially Black and 

immigrant workers.’’ 627 Looking at 2021 

BLS data, LCCRUL and WLC noted that 

41% of workers in the construction 

industry identify as Black, Asian, or 

Hispanic. As discussed in the section 

below, research has shown that 

misclassification is prevalent in the 

construction industry. LCCRUL and 

WLC also point out, ‘‘[i]n gig-based jobs, 

where the classification of workers as 

independent contractors is a defining 

characteristic of the industry, people of 

color and immigrants are also 

overrepresented: 30% of Latinx adults, 

20% of Black adults, and 19% of Asian 

adults work in such jobs, compared to 

12% of white adults.’’ 628 NELP also 

agreed, stating, ‘‘[i]ndependent 

contractor misclassification by 

companies is also strikingly racialized, 

occurring disproportionately in 

occupations in which people of color, 

including Black, Latinx, and Asian 

workers, are overrepresented.’’ NELP 

analyzed the March 2022 Current 

Population Survey Annual Social and 

Economic Supplement (CPS ASEC) data 

and found that workers of color 

comprise just over a third of workers 

overall but comprise between 47 and 91 

percent of workers in industries such as 

construction, trucking, delivery, home 

care, agricultural, personal care, ridehail, and janitorial and building 

service.629

Misclassification contravenes one of 

the purposes of the FLSA: eliminating 

‘‘unfair method[s] of competition in 

commerce.’’ 630 When employers 

misclassify employees as independent 

contractors, they illegally cut labor 

costs, undermining law-abiding 

competitors.631 While the services 

offered may be comparable at face value, 

the employer engaging in 

misclassification is able to offer lower 

estimates and employers following the 

rules are left at a disadvantage. 

Multiple commenters also provided 

data on the prevalence and harms of 

misclassification, specifically in the 

construction industry. For example, the 

Illinois Economic Policy Institute 

(ILEPI), the National Electrical 

Contractors Association (NECA) and the 

International Brotherhood of Electrical 

Workers (IBEW), the United 

Brotherhood of Carpenters and Joiners 

(UBC), and North America’s Building 

Trades Unions (NABTU), among others, 

all cite to a study from Russell Ormiston 

et al., which found that between 12 and 

21 percent of the construction industry 

workforce were either misclassified as 

independent contractors or working 

‘‘off-the-books.’’ 632 The paper notes that 

these results suggest that ‘‘between 1.30 

and 2.16 million workers were 

misclassified or working in cash-only 

arrangements.’’ Although the impacts 

discussed in this study involve broader 

labor violations than independent 

contractor misclassification, its results 

are still useful for understanding the 

extent of the problem. Commenters 

asserted that not only is 

misclassification prevalent in the 

construction industry, but it is also 

harmful to workers and to employers 

who do not misclassify their workers. 

For example, SWACCA noted that when 

construction companies misclassify 

their workers, they avoid costs such as 

overtime, workers’ compensation, 

unemployment insurance, employment 

taxes, and compliance with health and 

safety requirements. They explained 

that when ‘‘high road’’ employers are 

unable to compete with contractors who 

are misclassifying their workers, it leads 

to a ‘‘race to the bottom,’’ which further 

degrades working conditions in 

construction. UBC discussed a report on 

the number of construction worker 

families in the U.S. enrolled in safety 

net programs, such as Medicaid, 

Temporary Assistance for Needy 

Families (TANF), and the Supplemental 

Nutrition Assistance Program (SNAP). 

UBC noted that the report found, 

‘‘[s]hockingly, 3 million families, or 39 

percent of construction worker families, 

are enrolled in at least one safety net 

program, costing state and federal 

taxpayers $28 billion a year.’’ 633 They 

further explained that ‘‘[t]he authors of 

the report attributed the high degree of 

reliance on public assistance to a 

number of factors. Chief among those 

were low pay, wage theft, 

misclassification as independent 

contractors, off-the-books payments, and 

‘payroll fraud.’ ’’ While the costs 

discussed in that report reflect a variety 

of factors, if misclassification 

contributes to just a share of this overall 

cost, the costs of misclassification could 

still be significant, especially for just 

one industry. If this final rule s then 

able to reduce a fraction of overall 

misclassification in the U.S., the 


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634To measure if the difference between these 

proportions is statistically significant, the 

Department used the replicate weights for the CWS. 

At a 0.05 significance level, the proportion of 

Hispanic independent contractors with any health 

insurance is lower than the proportion for all 

independent contractors. 

635BLS Employer Costs for Employee 

Compensation—December 2022. https://

www.bls.gov/news.release/pdf/ecec.pdf. 

636 Jackson, E., Looney, A., & Ramnath, S., 

Department of Treasury, The Rise of Alternative 

Work Arrangements: Evidence and Implications for 

Tax Filing and Benefit Coverage, Working Paper 

#114 (Jan. 2017), https://home.treasury.gov/system/ 

files/131/WP-114.pdf. As discussed in the 2021 IC 

Rule, this study defines retirement accounts as 

‘‘employer-sponsored plans,’’ which may not 

encompass all of the possible long-term saving 

methods. See 86 FR 1217. 

637See 86 FR 1218. 

Department would anticipate benefits 

for affected workers and businesses in 

competition. 

E. Additional Discussion of Transfers 

1. Employer-Provided Fringe Benefits 

Misclassification of independent 

contractors culminates in a reduced 

social safety net starting with the 

individual and cascading out through 

the local, state, and federal programs. 

Employees who are misclassified as 

independent contractors generally do 

not receive employer-sponsored health 

and retirement benefits, potentially 

resulting in or contributing to long-term 

financial insecurity. 

Employees are more likely than 

independent contractors to have health 

insurance. According to the CWS, 75.4 

percent of independent contractors have 

health insurance, compared to 84.0 

percent of employees. This gap between 

independent contractors and employees 

is also true for low-income workers. 

Using CWS data, the Department 

compared health insurance rates for 

workers earning less than $15 per hour 

and found that 71.0 percent of 

independent contractors have health 

insurance compared with 78.5 percent 

of employees. Lastly, the Department 

considered whether this gap could be 

larger for traditionally underserved 

groups or minorities. Considering the 

subsets of independent contractors who 

are female, Hispanic, or Black, only the 

Hispanic independent contractors have 

a statistically significant difference in 

the percentage of workers with health 

insurance (estimated to be about 18 

percentage points lower).634

Additionally, a major source of 

retirement savings is employersponsored retirement accounts. 

According to the CWS, 55.5 percent of 

employees have a retirement account 

with their current employer; in 

addition, the BLS Employer Costs for 

Employee Compensation (ECEC) found 

that in 2022, employers paid 5.1 percent 

of employees’ total compensation in 

retirement benefits on average ($2.16/ 

$42.48).635 A 2017 Treasury study found 

that in 2014, while forty two percent of 

wage earners made contributions to an 

individual retirement account (IRA) or 

employer plan, only eight percent of 

self-employed individuals made any 

retirement contribution.636 Smaller 

retirement savings could result in a 

long-term tax burden to all Americans 

due to increased reliance upon social 

assistance programs. 

To the extent that this rule would 

reduce misclassification, it could result 

in transfers to workers in the form of 

employer-provided benefits like health 

care and retirement benefits. The 

National Retail Federation questioned 

this assumption, asserting that ‘‘it does 

not take into account the myriad of 

insurance arrangements that are 

available to individuals and their 

families.’’ While some independent 

contractors do have health insurance, as 

evidenced in the data discussed above, 

they are insured at a lower rate than 

employees. 

As shown in Table 3 below, using 

data from BLS Employer Costs for 

Employee Compensation, the 

Department has calculated the average 

cost to employers for various benefits as 

a percentage of the average cost to 

employers for wages and salaries. This 

share was then applied to the median 

weekly wage of both full-time and parttime independent contractors to 

estimate the value of these benefits to an 

average independent contractor if they 

were to begin receiving these benefits. 

The Department estimated that the 

value of these benefits could average 

more than $15,000 annually for fulltime independent contractors and more 

than $6,000 annually for part-time 

independent contractors. This example 

transfer estimate could be reduced if 

there is a downward adjustment in the 

worker’s wage rate to offset a portion of 

the employer’s cost associated with 

these new benefits. 

TABLE 3—POTENTIAL TRANSFERS ASSOCIATED WITH EMPLOYER-PROVIDED FRINGE BENEFITS

Employer-provided benefit 

Employer cost 

for benefit as a 

share of employer 

cost for wages 

and salaries 

(%) 

(Q4 2022) a

Value of benefit 

for the median 

weekly wage 

of a full-time 

independent 

contractor 

($1017) d

Value of benefit 

for the median 

weekly wage 

of a part-time 

independent 

contractor 

($398) d

Health Insurance ................................................................................................ 11.2 $113.90 $44.58 

Retirement b ....................................................................................................... 7.4 75.26 29.45 

Paid Leave c ....................................................................................................... 10.8 109.84 42.98 

Total Annual Value of Benefits ................................................................... .................................. 15,547.90 6,084.62 

aThe share for each benefit is calculated as the cost per hour for civilian workers divided by the wages and salaries cost per hour for civilian 

workers. Series IDs CMU1150000000000D, CMU1180000000000D, and CMU1040000000000D divided by Series ID CMU1020000000000D. b Includes defined benefit and defined contribution retirement plans. 

c Includes vacation, holiday, sick and personal leave. 

dEarnings data from the 2017 CWS (https://www.bls.gov/news.release/conemp.t13.htm) were inflated to Q3 2022 using GDP Deflator. 

2. Tax Liabilities 

As self-employed workers, 

independent contractors are legally 

obligated to pay both the employee and 

employer shares of the Federal 

Insurance Contributions Act (FICA) 

taxes. Thus, if workers’ classifications 

change from independent contractors to 

employees, there could be a transfer in 

federal tax liabilities from workers to 

employers.637 Although this rule only 

addresses whether a worker is an 

employee or an independent contractor 

under the FLSA, the Department 

assumes in this analysis that employers 

are likely to keep the status of most 

workers the same across all benefits and 

requirements, including for tax 


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638Courts have noted that the FLSA has the 

broadest conception of employment under federal 

law. See, e.g., Darden, 503 U.S. at 326. To the extent 

that businesses making employment status 

determinations base their decisions on the most 

demanding federal standard, a rulemaking 

addressing the standard for determining 

classification of worker as an employee or an 

independent contractor under the FLSA may affect 

the businesses’ classification decisions for purposes 

of benefits and legal requirements under other 

federal laws. 

639 Internal Revenue Service, ‘‘Publication 15, 

(Circular E), Employer’s Tax Guide’’ (2023 https:// 

www.irs.gov/publications/p15. The social security 

tax has a wage base limit of $160,200 in 2023. There 

is no wage base limit for Medicare Tax. 

640See, e.g., Lisa Xu and Mark Erlich, Economic 

Consequence of Misclassification in the State of 

Washington, Harvard Labor and Worklife Program, 

2 (2019), https://lwp.law.harvard.edu/files/lwp/ 

files/wa_study_dec_2019_final.pdf; Karl A. Racine, 

Issue Brief and Economic Report, Illegal Worker 

Misclassification: Payroll Fraud in the District’s 

Construction Industry, 13 (September 2019), 

https://oag.dc.gov/sites/default/files/2019-09/OAGIllegal-Worker-Misclassification-Report.pdf. 641Treasury Inspector General for Tax Inspection 

2013, Employers Do Not Always Follow Internal 

Revenue Service Worker Determination Rulings, 

https://www.oversight.gov/sites/default/files/oigreports/TIGTA/201330058fr_0.pdf. 642Adjusted for inflation using the CPI–U, the 

current value of this tax loss would be $4.5 billion. 643NELP, supra n.553. 

644The Department based this calculation on the 

percentage of workers in the CWS data who 

respond to the PEHRUSL1 variable (‘‘How many 

hours per week do you usually work at your main 

job?’’) with hours greater than 40. Workers who 

answer that hours vary were excluded from the 

calculation. The Department also applied the 

exclusion criteria used by Katz and Krueger 

(exclude workers reporting weekly earnings less 

than $50 and workers whose calculated hourly rate 

(weekly earnings divided by usual hours worked 

per week) is either less than $1 or more than 

$1,000). 

purposes.638 These payroll taxes include 

the 6.2 percent employer component of 

the Social Security tax and the 1.45 

percent employer component of the 

Medicare tax.639 In sum, independent 

contractors are legally responsible for an 

additional 7.65 percent of their earnings 

in FICA taxes (less the applicable tax 

deduction for this additional payment). 

Some of this increased tax liability may 

be partially or wholly paid for by the 

individuals and companies that engage 

independent contractors, to the extent 

that the compensation paid to 

independent contractors accounts for 

this added tax liability. However, 

changes in compensation are discussed 

separately below. Changes in benefits, 

tax liability, and earnings must be 

considered in tandem to identify how 

the standard of living may change. 

The Coalition to Promote Independent 

Entrepreneurs contended that the 

Department’s analysis of transfers is 

problematic and that the claim that 

employers are likely to keep the status 

of most workers the same across all 

benefits and requirements is legally 

incorrect. In the Department’s 

enforcement experience, employers 

generally classify workers as employees 

or independent contractors for all 

purposes. The Department is not making 

any statement regarding employers’ 

compliance with other laws that use 

different standards for employee 

classification than the FLSA. 

In addition to affecting tax liabilities 

for workers, this rule could have an 

impact on state tax revenue and 

budgets. Misclassification results in lost 

revenue and increased costs for states 

because states receive less tax revenue 

than they otherwise would from payroll 

taxes, and they have reduced funds to 

unemployment insurance, workers’ 

compensation, and paid leave 

programs.640 Although it has not been 

updated more recently, the IRS 

conducted a comprehensive worker 

misclassification estimate in 1984 using 

data collected by auditors. At the time, 

the IRS found misclassification resulted 

in an estimated total tax loss of $1.6 

billion in Social Security taxes, 

Medicare taxes, Federal unemployment 

taxes, and Federal income taxes (for Tax 

Year 1984).641 642 To the extent workers 

were incorrectly classified due to 

misapplication of the 2021 IC Rule, that 

could have led to reduced tax revenues. 

Generally, employer requirements 

pertaining to unemployment insurance, 

disability insurance, or worker’s 

compensation are on behalf of 

employees, therefore independent 

contractors do not have access to those 

benefits. Reduced unemployment 

insurance, disability insurance, and 

worker’s compensation contributions 

result in reduced disbursement 

capabilities. Misclassification of 

employees as independent contractors 

thus impacts the funds paid into such 

state programs. Even if the misclassified 

worker is unaffected because they need 

no assistance, the employer has not paid 

into the programs as required. As a 

result, the state has diminished funds 

for those who require the benefits. For 

example, in Tennessee, from September 

2017 to October 2018, the Uninsured 

Employers Fund unit ‘‘assessed 234 

penalties against employers for not 

maintaining workers’ compensation 

insurance, for a total assessment amount 

of $2,730,269.60.’’ 643 This amount 

represents only what was discovered by 

the taskforce in thirteen months and in 

just one state. By rescinding the 2021 IC 

Rule, this rule could prevent this 

increased burden on government 

entities. 

3. FLSA Protections 

When workers are properly classified 

as independent contractors, the 

minimum wage, overtime pay, and other 

requirements of the FLSA no longer 

apply. The 2017 CWS data indicate that 

independent contractors are more likely 

than employees to report earning less 

than the FLSA minimum wage of $7.25 

per hour (8 percent for self-employed 

independent contractors, 5 percent for 

other independent contractors, and 2 

percent for employees). Concerning 

overtime pay, not only do independent 

contractors not receive the overtime pay 

premium, but the number of overtime 

hours worked (more than 40 hours in a 

workweek) by independent contractors 

is also higher. Analysis of the CWS data 

indicated that, before conditioning on 

covariates, primary self-employed 

independent contractors are more likely 

to work overtime at their main job than 

employees, as 29 percent of selfemployed independent contractors 

reported working overtime versus just 

17 percent for employees.644

Additionally, independent contractors 

who work overtime tend to work more 

hours of overtime than employees. 

According to the Department’s analysis 

of CWS data, among those who usually 

work overtime, the mean usual number 

of overtime hours for independent 

contractors is 15.4 and the mean for 

employees is 11.8 hours. Independent 

contractors are also not protected by 

other provisions in the FLSA that are 

centered on ensuring that women are 

treated fairly at work, including 

employer-provided accommodations for 

breastfeeding workers and protections 

against pay discrimination. 

As discussed above, compared to the 

2021 IC Rule, this rule could result in 

reduced misclassification of employees 

as independent contractors. Any 

reduction in misclassification that 

occurs because of this rule would lead 

to an increase in the applicability of 

these FLSA protections for workers and 

subsequently may result in transfers 

relating to minimum wage and overtime 

pay. Specifically, to the extent 

misclassified workers were not earning 

the minimum wage, reduced 

misclassification would increase hourly 

wages for these workers to the federal 

minimum wage. Similarly, to the extent 

misclassified workers were not 

receiving the applicable overtime pay, 

reduced misclassification would 

increase overtime pay for any overtime 

hours they continued to work. However, 

compared to the current economic and 

legal landscape where courts and parties 

outside the Department are not 

necessarily using the 2021 IC Rule’s 

framework for analyzing employee or 

independent contractor classification 


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645The discussion of data on the differences in 

earnings between employees and independent 

contractors in the 2021 IC Rule was potentially 

confusing and included some evidence that was not 

statistically significant, so the findings and 

methodology are discussed again here. 

646L. Katz and A. Krueger, ‘‘The Rise and Nature 

of Alternative Work Arrangements in the United 

States, 1995–2015,’’ (2018). 

647On-call workers, temporary help agency 

workers, and workers provided by contract firms 

are excluded from the base group of ‘‘traditional’’ 

employees. 

648 In both Katz and Krueger’s regression results 

and the Department’s calculations, the following 

outlying values were removed: workers reporting 

earning less than $50 per week, less than $1 per 

hour, or more than $1,000 per hour. Choice of 

exclusionary criteria from Katz and Krueger (2018). 

649See top of page 20, ‘‘Given the imprecision of 

the estimates, we recommend caution in 

interpreting the estimates from the [ALP].’’ The 

standard error on the estimated coefficient on the 

independent contractor variable in Katz and 

Kreuger’s regression based on the 2015 ALP is more 

than 2.5 times larger than the standard error of the 

coefficient using the 2017 CWS. 

650The coefficient for Black independent 

contractors was negative and statistically significant 

at a 0.10 level (with a p-value of 0.067). However, 

a significance level of 0.05 is more commonly used. 

651This analysis can also be found at: https://oracfo.dc.gov/blog/self-employment-income-drop. 

652 ‘‘Upwork Study Finds 59 Million Americans 

Freelancing Amid Turbulent Labor Market,’’ 

Upwork, December 8, 2021, https://

www.upwork.com/press/releases/upwork-studyfinds-59-million-americans-freelancing-amidturbulent-labor-market. Full study available at 

https://www.upwork.com/research/freelanceforward-2021. 653E.O. 12866 section 6(a)(3)(C)(iii), 58 FR 51741. 654See 86 FR 1238. 

and are instead continuing to use 

longstanding judicial precedent and 

guidance that the Department was 

relying on prior to March of 2022, these 

transfers (and the other transfers 

discussed above) would be less likely to 

occur. 

4. Hourly Wages, Bonuses, and Related 

Compensation 

In addition to increased compliance 

with minimum wage and overtime pay 

requirements, potential transfers may 

also result from this rulemaking as a 

consequence of differences in earnings 

between employees and independent 

contractors.645 Independent contractors 

are generally expected to earn a wage 

premium relative to employees who 

perform similar work to compensate for 

their reduced access to benefits and 

increased tax liability. However, this 

may not always be the case in practice. 

The Department compared the average 

hourly wages of current employees and 

independent contractors to provide 

some indication of the impact on wages 

of a worker who is reclassified from an 

independent contractor to an employee. 

The Department used an approach 

similar to Katz and Krueger (2018).646

Both regressed hourly wages on 

independent contractor status 647 and 

observable differences between 

independent contractors and employees 

(e.g., occupation, sex, potential 

experience, education, race, and 

ethnicity) to help isolate the impact of 

independent contractor status on hourly 

wages. Katz and Krueger used the 2005 

CWS and the 2015 RAND American Life 

Panel (ALP) (the 2017 CWS was not 

available at the time of their analysis). 

The Department used the 2017 CWS.648

Both analyses found similar results. A 

simple comparison of mean hourly 

wages showed that independent 

contractors tend to earn more per hour 

than employees (e.g., $27.29 per hour 

for all independent contractors versus 

$24.07 per hour for employees using the 

2017 CWS). However, when controlling 

for observable differences between 

workers, Katz and Krueger found no 

statistically significant difference 

between independent contractors’ and 

employees’ hourly wages in the 2005 

CWS data. Although their analysis of 

the 2015 ALP data found that primary 

independent contractors earned more 

per hour than traditional employees, 

they recommended caution in 

interpreting these results due to the 

imprecision of the estimates.649 The 

Department found no statistically 

significant difference between 

independent contractors’ and 

employees’ hourly wages in the 2017 

CWS data. 

Based on these results, the 

Department believes it is inappropriate 

to conclude independent contractors 

generally earn a higher hourly wage 

than employees. The Department ran 

another hourly wage rate regression 

including additional variables to 

determine if independent contractors in 

underserved groups are impacted 

differently by including interaction 

terms for female independent 

contractors, Hispanic independent 

contractors, and Black independent 

contractors. The results indicate that in 

addition to the lower wages earned by 

Black workers in general, Black 

independent contractors also earn less 

per hour than independent contractors 

of other races; however, this is not 

statistically significant at the most 

commonly used significance level.650

A group of DC economists provided a 

comment discussing an analysis they 

performed using aggregate data and 

analysis from individual-level IRS tax 

data from Washington, DC.651 In their 

study, they found that taxpayers who 

switched from employment to selfemployment saw a decrease in income 

and vice versa. They found, ‘‘[b]etween 

2013–2018 switching from a typical 

wage-earning job to self-employment, 

was associated with a 20–50 percent 

drop in income, while switching away 

from self-employment was associated 

with an income increase of 65–85 

percent.’’ They also note that lowincome tax filers who switched from 

self-employment to a wage-earning job 

approximately doubled their income 

from 2013–2018. However, this analysis 

is specifically focused on workers in 

Washington, DC, and the definition of 

self-employment may differ from 

independent contractor classification 

under the FLSA. 

The Coalition for Workforce 

Innovation asserted that the Department 

failed to consider additional studies 

reconfirming that independent 

contractors earn more than traditional 

employees. They cite the Upwork study, 

saying ‘‘[t]he number of freelancers who 

earn more by freelancing than in their 

traditional jobs continues to grow: 44% 

of freelancers say they earn more 

freelancing than with a traditional job in 

2021, . . . up from 39% in 2020 and 

32% in 2019.’’ 652 The Department notes 

that even if 44% of freelancers say that 

they earn more than they would under 

traditional employment, that would still 

mean that a larger share of freelancers 

(56%) either report earning the same or 

less than with traditional employment. 

Also, as discussed in section VII.B.1, the 

nature of this study and its definition of 

freelancing may not be applicable to 

how independent contracting is 

discussed in this rule. 

The Economic Policy Institute (EPI) 

also submitted a comment with a 

quantitative analysis of the difference in 

the value of a job to a worker who is 

classified as an independent contractor 

rather than as an employee. Their 

analysis reviewed data for workers in 11 

occupations identified as particularly 

vulnerable to misclassification: 

construction workers, truck drivers, 

janitors and cleaners, home health and 

personal care aides, retail sales workers, 

housekeeping cleaners, landscaping 

workers, call center workers, security 

guards, light truck delivery drivers, and 

manicurists and pedicurists. 

F. Analysis of Regulatory Alternatives 

Pursuant to its obligations under 

Executive Order 12866,653 the 

Department assessed four regulatory 

alternatives to this rule. 

The Department had previously 

considered and rejected two of these 

alternatives in the 2021 IC Rule— 

adopting either a common law or ABC 

test for determining employee or 

independent contractor status.654 The 

Department reaches the same 


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conclusion in this final rule. Section IV 

above discusses why legal constraints 

prevent the Department from adopting 

either of these alternatives and the 

comments received regarding these 

alternatives. 

For a third alternative, the 

Department considered a rule that 

would not fully rescind the 2021 IC 

Rule and instead retain some aspects of 

that rule. As the Department has noted 

throughout this final rule, there are 

multiple instances in which it is 

consistent or in agreement with the 

2021 IC Rule. However, the numerous 

ways in which the 2021 IC Rule 

described the factors were in tension 

with judicial precedent and 

longstanding Department guidance and 

narrowed the economic reality test by 

limiting the facts that may be 

considered as part of the test, facts 

which the Department believes are 

relevant in determining whether a 

worker is economically dependent on 

the employer for work or in business for 

themself. For these reasons, and as 

discussed in sections III and IV above, 

the Department has ultimately 

concluded that a complete recission and 

replacement of the 2021 IC Rule is 

needed. 

For a fourth alternative, the 

Department considered rescinding the 

2021 IC Rule and providing guidance on 

employee and independent contractor 

classification through subregulatory 

guidance. For more than 80 years prior 

to the 2021 IC Rule, the Department 

primarily issued subregulatory guidance 

in this area and did not have generally 

applicable regulations on the 

classification of workers as employees 

or independent contractors. The 

Department considered rescinding the 

2021 IC Rule and continuing to provide 

subregulatory guidance for stakeholders 

through existing documents (such as 

Fact Sheet #13) and new documents (for 

example a Field Assistance Bulletin). 

Rescinding the 2021 IC Rule without 

issuing a new regulation would have 

lowered the regulatory familiarity costs 

associated with this rulemaking. As 

explained in sections III, IV, and V 

above, however, the Department 

continues to believe that replacing the 

2021 IC Rule with regulations 

addressing the multifactor economic 

reality test that more fully reflect the 

case law and continue to be relevant to 

the modern economy will be helpful for 

both workers and employers. 

Specifically, issuing regulations with an 

explanatory preamble allows the 

Department to provide in-depth 

guidance. Additionally, issuing 

regulations allowed the Department to 

formally collect and consider a wide 

range of views from stakeholders by 

electing to use the notice-and-comment 

process. Finally, because courts are 

accustomed to considering relevant 

agency regulations, providing guidance 

in this format may further improve 

consistency among courts regarding this 

issue. Therefore, the Department is not 

rescinding the 2021 IC Rule and 

providing only subregulatory guidance. 

VIII. Final Regulatory Flexibility Act 

(FRFA) Analysis 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., as amended 

by the Small Business Regulatory 

Enforcement Fairness Act of 1996, 

Public Law 104–121 (March 29, 1996), 

requires Federal agencies engaged in 

rulemaking to consider the impact of 

their rules on small entities, consider 

alternatives to minimize that impact, 

and solicit public comment on their 

analyses. The RFA requires the 

assessment of the impact of a regulation 

on a wide range of small entities, 

including small businesses, not-for 

profit organizations, and small 

governmental jurisdictions. Agencies 

must perform a review to determine 

whether a proposed or final rule would 

have a significant economic impact on 

a substantial number of small entities. 

A. Need for Rulemaking and Objectives 

of the Rule 

As discussed in section II.C.3., on 

March 14, 2022, a district court in the 

Eastern District of Texas issued a 

decision vacating the Department’s 

delay and withdrawal of the 2021 IC 

Rule and concluding that the 2021 IC 

Rule became effective on March 8, 2021. 

The Department believes that the 2021 

IC Rule does not fully comport with the 

FLSA’s text and purpose as interpreted 

by the courts and, had it been left in 

place, would have had a confusing and 

disruptive effect on workers and 

businesses alike due to its departure 

from decades of case law describing and 

applying the multifactor economic 

reality test. Therefore, the Department 

believes it is appropriate to rescind the 

2021 IC Rule and set forth an analysis 

for determining employee or 

independent contractor status under the 

Act that is more consistent with existing 

judicial precedent and the Department’s 

longstanding guidance prior to the 2021 

IC Rule. 

The Department is rescinding and 

replacing regulations addressing 

whether workers are employees or 

independent contractors under the 

FLSA. Of particular note, the 

regulations set forth in this final rule do 

not use ‘‘core factors’’ and instead 

return to a totality-of-the-circumstances 

analysis of the economic reality test in 

which the factors do not have a 

predetermined weight and are 

considered in view of the economic 

reality of the whole activity. Regarding 

the economic reality factors, this final 

rule returns to the longstanding framing 

of investment as a separate factor, and 

integral as an integral part of the 

potential employer’s business rather 

than an integrated unit of production. 

The final rule also provides broader 

discussion of how scheduling, remote 

supervision, price setting, and the 

ability to work for others should be 

considered under the control factor, and 

it allows for consideration of reserved 

rights while removing the provision in 

the 2021 IC Rule that minimized the 

relevance of retained rights. Further, the 

final rule discusses exclusivity in the 

context of the permanency factor, and 

initiative in the context of the skill 

factor. The Department also made 

several adjustments to the proposed 

regulations after consideration of the 

comments received, including revisions 

to the regulations regarding the 

investment factor and the control factor 

(specifically addressing compliance 

with legal obligations). 

The Department believes that 

rescinding the 2021 IC Rule and 

replacing it with regulations addressing 

the multifactor economic reality test—in 

a way that both more fully reflects the 

case law and continues to be relevant to 

the evolving economy—will be helpful 

for both workers and employers. The 

Department believes this rule will help 

protect employees from 

misclassification while at the same time 

providing a consistent approach for 

those businesses that engage (or wish to 

engage) independent contractors as well 

as for those who wish to work as 

independent contractors. 

B. Significant Issues Raised in Public 

Comments, Including by the Small 

Business Administration Office of 

Advocacy 

Several commenters submitted 

feedback in response to the NPRM’s 

Initial Regulatory Flexibility Analysis 

(IRFA) or otherwise addressing the 

potential impact of this rulemaking on 

small entities. Commenters, including 

the Small Business Administration 

Office of Advocacy (SBA) contended 

that the Department has severely 

underestimated the economic impacts of 

this rule on small businesses and 

independent contractors. For example, 

several commenters criticized the rule 

familiarization time estimates 

referenced in the IRFA, with the 

Independent Electrical Contractors, the 

Small Business & Entrepreneurship 


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655See, e.g., Rutherford, 331 U.S. at 724 (noting 

that the slaughterhouse involved in the case ‘‘had 

one hourly paid employee’’ prior to hiring the 

alleged independent contractors at issue); Silk, 331 

U.S. at 706 (describing the employer at issue as an 

individual named ‘‘Albert Silk, doing business as 

the Albert Silk Coal Co.,’’ who ‘‘owns no trucks 

himself, but contracts with workers who own their 

own trucks to deliver coal’’). 

656SBA, Summary of Size Standards by Industry 

Sector, 2017, https://www.sba.gov/sites/default/ 

files/2018-05/Size_Standards_Table_2017.xlsx. The 

most recent size standards were issued in 2022. 

However, the Department used the 2017 standards 

for consistency with the older Economic Census 

data. 

657The 2017 data are the most recently available 

with revenue data. 

658For this analysis, the Department excluded 

independent contractors who are not registered as 

small businesses, and who are generally not 

captured in the Economic Census, from the 

calculation of small establishments. 

659 2017 Census of Governments. https://

www.census.gov/data/tables/2017/econ/gus/2017- 

governments.html. 

Council (‘‘SBE Council’’), and SBA 

citing the length of the NPRM as 

evidence that the Department was 

providing an underestimate. By 

contrast, the SWACCA asserted that the 

‘‘well understood framework’’ of the 

NPRM’s proposed guidance would 

reduce regulatory familiarization costs 

for stakeholders ‘‘compared to the 

January 2021 Rule’s novel, untested 

weighted framework.’’ 

As explained in section VII.C., the 

Department considered all of the 

comments received on this topic and 

has increased the regulatory 

familiarization cost estimate for this rule 

to 1 hour for firms and 30 minutes for 

independent contractors, who may be 

small businesses themselves. The 

Department believes that this time 

estimate is appropriate because it 

represents an average, in which some 

small businesses will spend more time 

reviewing the rule and others will spend 

no time reviewing. 

Some commenters asserted that the 

Department failed to identify other 

potential costs of this rulemaking. For 

example, SBA wrote that ‘‘DOL has 

failed to estimate any costs for small 

businesses and independent contractors 

to reclassify workers as independent 

contractors, for lost work, and for 

business disruptions.’’ Similarly, SBE 

Council wrote that the IRFA did ‘‘not 

include the cost to a small business or 

small entity if an independent 

contractor is determined to be 

‘misclassified,’ or if a small business or 

small entity loses business revenue due 

to the loss of human capital, or the cost 

to comply with the new rule, or if an 

independent contractor loses business 

due to potential or actual 

misclassification.’’ As discussed in 

greater detail in section III(C) and 

VII(A), the Department does not believe 

that this rule will lead to widespread 

reclassification. 

SBA claimed that the IRFA for failed 

to address certain employment-related 

costs related to the reclassification of 

independent contractors as employees 

(e.g., payroll tax obligations, 

employment benefits costs, etc.) that 

were mentioned in the NPRM’s 

Regulatory Impact Analysis; see also 

American First Legal Foundation 

(‘‘AFL’’) (‘‘The Department failed to 

consider that small businesses 

reclassifying independent contractors as 

employees under the Proposed Rule will 

substantially increase their respective 

tax burdens.’’); Engine (asserting that 

‘‘startups that err on the side of caution 

and hire or shift to full-time workers’’ 

may have to ‘‘offer more robust 

compensation packages’’ to compete 

with larger competitors). The 

Department’s Regulatory Impact 

Analysis only provides a qualitative 

discussion of these potential transfers 

and explains that these transfers may 

result from reduced misclassification 

resulting from this rule. The Department 

does not believe that coming into 

compliance with the law would be a 

‘‘cost’’ for the purposes of the economic 

analyses of this rulemaking. 

SBA also commented that ‘‘many 

independent contractors or freelance 

workers, who may also be small 

businesses, believe they will lose work 

because of this rule.’’ The Department 

does not believe that this rule will lead 

to job losses because most workers who 

were properly classified as independent 

contractors before the 2021 IC Rule will 

continue to retain their status as 

independent contractors. 

Finally, AFL was concerned about the 

Department ‘‘treating small businesses 

the same as all other entities’’ and 

asserted that Section 223 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (‘‘SBREFA’’) 

requires the Department to creation an 

exemption waiving the application of 

civil money penalties for small entities 

‘‘that will inevitably misapply the 

confusing and inconsistent ‘economic 

reality’ test.’’ See also Engine (‘‘It is 

unclear how the proposed rule, if 

implemented, will be enforced 

consistent with SBREFA, if the 

Department does not accommodate 

differing compliance requirements by 

waiving or reducing penalties when 

circumstances warrant.’’). In response to 

these comments, the Department notes 

that courts apply the same economic 

reality test when evaluating the FLSA 

employment status of any worker 

alleged to be an independent contractor, 

regardless of the size of the potential 

employer.655 Similarly, the Department 

is striving to provide a generallyapplicable regulation in this 

rulemaking. As with other enforcementrelated requests from commenters 

described in section II.E., whether the 

Department should reduce or waive 

certain civil money penalties for small 

entities found to have violated the FLSA 

is an enforcement issue that is beyond 

the scope of this rulemaking. 

C. Estimating the Number of Small 

Businesses Affected by the Rulemaking 

The Department used the Small 

Business Administration size standards, 

which determine whether a business 

qualifies for small-business status, to 

estimate the number of small entities.656

The Department then applied these 

thresholds to the U.S. Census Bureau’s 

2017 Economic Census to obtain the 

number of establishments with 

employment or sales/receipts below the 

small business threshold in the 

industry.657 These ratios of small to 

large establishments were then applied 

to the more recent 2019 Statistics of 

United States Businesses (SUSB) data 

on number of establishments.658 Next, 

the Department estimated the number of 

small governments, defined as having 

population less than 50,000, from the 

2017 Census of Governments.659 In 

total, the Department estimated there 

are 6.5 million small establishments or 

governments who could potentially 

have independent contractors, and who 

could be affected by this rulemaking. 

However, not all of these establishments 

will have independent contractors, and 

so only a share of this number will 

actually be affected. The impact of this 

rule could also differ by industry. As 

shown in Table 2 of the regulatory 

impact analysis, the industries with the 

highest number of independent 

contractors are the professional and 

business services and construction 

industries. 

Additionally, as discussed in section 

VII.B., the Department estimates that 

there are 22.1 million independent 

contractors. Some of these independent 

contractors may be considered small 

businesses and may also be impacted by 

this rule. 

D. Compliance Requirements of the 

Final Rule, Including Reporting and 

Recordkeeping 

This rule provides guidance for 

analyzing employee or independent 

contractor status under the FLSA. It 

does not create any new reporting or 


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660 5 U.S.C. 603(c). 

recordkeeping requirements for 

businesses. 

In the Regulatory Impact Analysis, the 

Department estimates that regulatory 

familiarization to be one hour per entity 

and one-half hour per independent 

contractor. The per-entity cost for small 

business employers is the regulatory 

familiarization cost of $52.80, or the 

fully loaded median hourly wage of a 

Compensation, Benefits, and Job 

Analysis Specialist multiplied by 1 

hour. The per-entity rule familiarization 

cost for independent contractors, some 

of whom would be small businesses, is 

$11.73 or the median hourly wage of 

independent contractors in the CWS 

multiplied by 0.5 hour. 

E. Steps the Department Has Taken To 

Minimize the Significant Economic 

Impact on Small Entities 

The RFA requires agencies to discuss 

‘‘any significant alternatives to the 

proposed rule which accomplish the 

stated objectives of applicable statutes 

and which minimize any significant 

economic impact of the proposed rule 

on small entities.’’ 660 As discussed 

earlier in section VII.F., the Department 

does not believe that it has the legal 

authority to adopt either a common law 

or ‘‘ABC’’ test to determine employee or 

independent contractor status under the 

FLSA, foreclosing the consideration of 

these alternatives for purposes of the 

RFA. 

As explained in section VII.F., the 

Department considered two other 

regulatory alternatives: a rule that 

would not fully rescind the 2021 IC 

Rule and instead retain some aspects of 

that rule in the new rule; and 

completely rescinding the 2021 IC Rule 

and providing guidance on employee or 

independent contractor classification 

through subregulatory guidance, as the 

Department had done for over 80 years 

prior to the 2021 IC Rule. The 

Department believes that the overall 

economic impact of retaining some 

portions of the 2021 IC Rule while 

issuing a rule to revise other portions of 

the rule would not minimize the 

economic impact on small entitles as 

they would incur costs to familiarize 

themselves with the new regulation. 

Similarly, the Department believes that 

the overall economic impact of fully 

rescinding the 2021 IC Rule and 

providing subregulatory guidance, 

would not necessarily minimize the 

economic impact on small entities as 

they would incur some costs to 

familiarize themselves with any 

subregulatory guidance. Moreover, as 

explained in sections III, IV, and V 

above, the Department believes that 

replacing the 2021 IC Rule with 

regulations addressing the multifactor 

economic reality test that more fully 

reflect the case law and continue to be 

relevant to the modern economy will be 

helpful for both workers and employers, 

particularly over the long term. 

IX. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995, 2 U.S.C. 1532, requires agencies 

to prepare a written statement, which 

includes an assessment of anticipated 

costs and benefits, before proposing any 

unfunded Federal mandate that may 

result in excess of $100 million 

(adjusted annually for inflation) in 

expenditures in any one year by State, 

local, and tribal governments in the 

aggregate, or by the private sector. 

Adjusting the threshold for inflation 

using the GDP deflator, using a recent 

annual result (2021), yields a threshold 

of $165 million. Therefore, this 

rulemaking is expected to create 

unfunded mandates that exceed that 

threshold. See section VII for an 

assessment of anticipated costs and 

benefits. 

X. Executive Order 13132, Federalism 

The Department has reviewed this 

rule in accordance with Executive Order 

13132 regarding federalism and 

determined that it does not have 

federalism implications. The rule will 

not have substantial direct effects on the 

States, on the relationship between the 

National Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. 

XI. Executive Order 13175, Indian 

Tribal Governments 

This rule will not have tribal 

implications under Executive Order 

13175 that require a tribal summary 

impact statement. The rule will not have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

List of Subjects 

29 CFR Part 780 

Agriculture, Child labor, Wages. 

29 CFR Part 788 

Forests and forest products, Wages. 

29 CFR Part 795 

Employment, Wages. 

For the reasons set out in the 

preamble, the Wage and Hour Division, 

Department of Labor amends Title 29 

CFR chapter V, as follows: 

PART 780—EXEMPTIONS 

APPLICABLE TO AGRICULTURE, 

PROCESSING OF AGRICULTURAL 

COMMODITIES, AND RELATED 

SUBJECTS UNDER THE FAIR LABOR 

STANDARDS ACT 

■ 1. The authority citation for part 780 

continues to read as follows: 

Authority: Secs. 1–19, 52 Stat. 1060, as 

amended; 75 Stat. 65; 29 U.S.C. 201–219. 

Pub. L. 105–78, 111 Stat. 1467. 

■ 2. Amend § 780.330 by revising 

paragraph (b) to read as follows: 

§ 780.330 Sharecroppers and tenant 

farmers. 

* * * * * 

(b) In determining whether such 

individuals are employees or 

independent contractors, the criteria set 

forth in §§ 795.100 through 795.110 of 

this chapter are used. 

* * * * * 

PART 788—FORESTRY OR LOGGING 

OPERATIONS IN WHICH NOT MORE 

THAN EIGHT EMPLOYEES ARE 

EMPLOYED 

■ 3. The authority citation for part 788 

continues to read as follows: 

Authority: Secs. 1–19, 52 Stat. 1060, as 

amended; 29 U.S.C. 201–219. 

■ 4. Amend § 788.16 by revising 

paragraph (a) to read as follows: 

§ 788.16 Employment relationship. 

(a) In determining whether 

individuals are employees or 

independent contractors, the criteria set 

forth in §§ 795.100 through 795.110 of 

this chapter are used. 

* * * * * 

■ 5. Add part 795 to read as follows: 

PART 795—EMPLOYEE OR 

INDEPENDENT CONTRACTOR 

CLASSIFICATION UNDER THE FAIR 

LABOR STANDARDS ACT 

Sec. 

795.100 Introductory statement. 

795.105 Determining employee or 

independent contractor classification 

under the FLSA. 

795.110 Economic reality test to determine 

economic dependence. 

795.115 Severability. 

Authority: 29 U.S.C. 201–219. 

§ 795.100 Introductory statement. 

This part contains the Department of 

Labor’s (the Department) general 

interpretations for determining whether 

workers are employees or independent 


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contractors under the Fair Labor 

Standards Act (FLSA or Act). See 29 

U.S.C. 201–19. These interpretations are 

intended to serve as a ‘‘practical guide 

to employers and employees’’ as to how 

the Department will seek to apply the 

Act. Skidmore v. Swift & Co., 323 U.S. 

134, 138 (1944). The Administrator of 

the Department’s Wage and Hour 

Division will use these interpretations 

to guide the performance of their duties 

under the Act, unless and until the 

Administrator is otherwise directed by 

authoritative decisions of the courts or 

the Administrator concludes upon 

reexamination of an interpretation that 

it is incorrect. To the extent that prior 

administrative rulings, interpretations, 

practices, or enforcement policies 

relating to determining who is an 

employee or independent contractor 

under the Act are inconsistent or in 

conflict with the interpretations stated 

in this part, they are hereby rescinded. 

The interpretations stated in this part 

may be relied upon in accordance with 

section 10 of the Portal-to-Portal Act, 29 

U.S.C. 251–262, notwithstanding that 

after any act or omission in the course 

of such reliance, the interpretation is 

modified or rescinded or is determined 

by judicial authority to be invalid or of 

no legal effect. 29 U.S.C. 259. 

§ 795.105 Determining employee or 

independent contractor classification under 

the FLSA. 

(a) Relevance of independent 

contractor or employee status under the 

Act. The Act’s minimum wage, overtime 

pay, and recordkeeping obligations 

apply only to workers who are covered 

employees. Workers who are 

independent contractors are not covered 

by these protections. Labeling 

employees as ‘‘independent 

contractors’’ does not make these 

protections inapplicable. A 

determination of whether a worker is an 

employee or independent contractor 

under the Act focuses on the economic 

realities of the worker’s relationship 

with the worker’s potential employer 

and whether the worker is either 

economically dependent on the 

potential employer for work or in 

business for themself. 

(b) Economic dependence as the 

ultimate inquiry. An ‘‘employee’’ under 

the Act is an individual whom an 

employer suffers, permits, or otherwise 

employs to work. 29 U.S.C. 203(e)(1), 

(g). ‘‘Employer’’ is defined to ‘‘include[ ] 

any person acting directly or indirectly 

in the interest of an employer in relation 

to an employee.’’ 29 U.S.C. 203(d). The 

Act’s definitions are meant to 

encompass as employees all workers 

who, as a matter of economic reality, are 

economically dependent on an 

employer for work. A worker is an 

independent contractor, as 

distinguished from an ‘‘employee’’ 

under the Act, if the worker is, as a 

matter of economic reality, in business 

for themself. Economic dependence 

does not focus on the amount of income 

the worker earns, or whether the worker 

has other sources of income. 

§ 795.110 Economic reality test to 

determine economic dependence. 

(a) Economic reality test. (1) In order 

to determine economic dependence, 

multiple factors assessing the economic 

realities of the working relationship are 

used. These factors are tools or guides 

to conduct a totality-of-thecircumstances analysis. This means that 

the outcome of the analysis does not 

depend on isolated factors but rather 

upon the circumstances of the whole 

activity to answer the question of 

whether the worker is economically 

dependent on the potential employer for 

work or is in business for themself. 

(2) The six factors described in 

paragraphs (b)(1) through (6) of this 

section should guide an assessment of 

the economic realities of the working 

relationship and the question of 

economic dependence. Consistent with 

a totality-of-the-circumstances analysis, 

no one factor or subset of factors is 

necessarily dispositive, and the weight 

to give each factor may depend on the 

facts and circumstances of the particular 

relationship. Moreover, these six factors 

are not exhaustive. As explained in 

paragraph (b)(7) of this section, 

additional factors may be considered. 

(b) Economic reality factors—(1) 

Opportunity for profit or loss depending 

on managerial skill. This factor 

considers whether the worker has 

opportunities for profit or loss based on 

managerial skill (including initiative or 

business acumen or judgment) that 

affect the worker’s economic success or 

failure in performing the work. The 

following facts, among others, can be 

relevant: whether the worker determines 

or can meaningfully negotiate the charge 

or pay for the work provided; whether 

the worker accepts or declines jobs or 

chooses the order and/or time in which 

the jobs are performed; whether the 

worker engages in marketing, 

advertising, or other efforts to expand 

their business or secure more work; and 

whether the worker makes decisions to 

hire others, purchase materials and 

equipment, and/or rent space. If a 

worker has no opportunity for a profit 

or loss, then this factor suggests that the 

worker is an employee. Some decisions 

by a worker that can affect the amount 

of pay that a worker receives, such as 

the decision to work more hours or take 

more jobs when paid a fixed rate per 

hour or per job, generally do not reflect 

the exercise of managerial skill 

indicating independent contractor status 

under this factor. 

(2) Investments by the worker and the 

potential employer. This factor 

considers whether any investments by a 

worker are capital or entrepreneurial in 

nature. Costs to a worker of tools and 

equipment to perform a specific job, 

costs of workers’ labor, and costs that 

the potential employer imposes 

unilaterally on the worker, for example, 

are not evidence of capital or 

entrepreneurial investment and indicate 

employee status. Investments that are 

capital or entrepreneurial in nature and 

thus indicate independent contractor 

status generally support an independent 

business and serve a business-like 

function, such as increasing the 

worker’s ability to do different types of 

or more work, reducing costs, or 

extending market reach. Additionally, 

the worker’s investments should be 

considered on a relative basis with the 

potential employer’s investments in its 

overall business. The worker’s 

investments need not be equal to the 

potential employer’s investments and 

should not be compared only in terms 

of the dollar values of investments or 

the sizes of the worker and the potential 

employer. Instead, the focus should be 

on comparing the investments to 

determine whether the worker is making 

similar types of investments as the 

potential employer (even if on a smaller 

scale) to suggest that the worker is 

operating independently, which would 

indicate independent contractor status. 

(3) Degree of permanence of the work 

relationship. This factor weighs in favor 

of the worker being an employee when 

the work relationship is indefinite in 

duration, continuous, or exclusive of 

work for other employers. This factor 

weighs in favor of the worker being an 

independent contractor when the work 

relationship is definite in duration, nonexclusive, project-based, or sporadic 

based on the worker being in business 

for themself and marketing their 

services or labor to multiple entities. 

This may include regularly occurring 

fixed periods of work, although the 

seasonal or temporary nature of work by 

itself would not necessarily indicate 

independent contractor classification. 

Where a lack of permanence is due to 

operational characteristics that are 

unique or intrinsic to particular 

businesses or industries and the workers 

they employ, this factor is not 

necessarily indicative of independent 

contractor status unless the worker is 


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exercising their own independent 

business initiative. 

(4) Nature and degree of control. This 

factor considers the potential 

employer’s control, including reserved 

control, over the performance of the 

work and the economic aspects of the 

working relationship. Facts relevant to 

the potential employer’s control over 

the worker include whether the 

potential employer sets the worker’s 

schedule, supervises the performance of 

the work, or explicitly limits the 

worker’s ability to work for others. 

Additionally, facts relevant to the 

potential employer’s control over the 

worker include whether the potential 

employer uses technological means to 

supervise the performance of the work 

(such as by means of a device or 

electronically), reserves the right to 

supervise or discipline workers, or 

places demands or restrictions on 

workers that do not allow them to work 

for others or work when they choose. 

Whether the potential employer controls 

economic aspects of the working 

relationship should also be considered, 

including control over prices or rates for 

services and the marketing of the 

services or products provided by the 

worker. Actions taken by the potential 

employer for the sole purpose of 

complying with a specific, applicable 

Federal, State, Tribal, or local law or 

regulation are not indicative of control. 

Actions taken by the potential employer 

that go beyond compliance with a 

specific, applicable Federal, State, 

Tribal, or local law or regulation and 

instead serve the potential employer’s 

own compliance methods, safety, 

quality control, or contractual or 

customer service standards may be 

indicative of control. More indicia of 

control by the potential employer favors 

employee status; more indicia of control 

by the worker favors independent 

contractor status. 

(5) Extent to which the work 

performed is an integral part of the 

potential employer’s business. This 

factor considers whether the work 

performed is an integral part of the 

potential employer’s business. This 

factor does not depend on whether any 

individual worker in particular is an 

integral part of the business, but rather 

whether the function they perform is an 

integral part of the business. This factor 

weighs in favor of the worker being an 

employee when the work they perform 

is critical, necessary, or central to the 

potential employer’s principal business. 

This factor weighs in favor of the worker 

being an independent contractor when 

the work they perform is not critical, 

necessary, or central to the potential 

employer’s principal business. 

(6) Skill and initiative. This factor 

considers whether the worker uses 

specialized skills to perform the work 

and whether those skills contribute to 

business-like initiative. This factor 

indicates employee status where the 

worker does not use specialized skills in 

performing the work or where the 

worker is dependent on training from 

the potential employer to perform the 

work. Where the worker brings 

specialized skills to the work 

relationship, this fact is not itself 

indicative of independent contractor 

status because both employees and 

independent contractors may be skilled 

workers. It is the worker’s use of those 

specialized skills in connection with 

business-like initiative that indicates 

that the worker is an independent 

contractor. 

(7) Additional factors. Additional 

factors may be relevant in determining 

whether the worker is an employee or 

independent contractor for purposes of 

the FLSA, if the factors in some way 

indicate whether the worker is in 

business for themself, as opposed to 

being economically dependent on the 

potential employer for work. 

§ 795.115 Severability. 

If any provision of this part is held to 

be invalid or unenforceable by its terms, 

or as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 

unenforceability, in which event the 

provision shall be severable from this 

part and shall not affect the remainder 

thereof. 

Signed this 2nd day of January, 2024. 

Jessica Looman, 

Administrator, Wage and Hour Division. 

[FR Doc. 2024–00067 Filed 1–9–24; 8:45 am] 

BILLING CODE 4510–27–P 


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