Department of Labor Releases Final Independent Contractor Rule

Labor
Published

The U.S. Department of Labor (DOL) announced a final rule clarifying the definition of employee under the Fair Labor Standards Act (FLSA) as it relates to independent contractors. While the rule will make it easier for businesses to classify workers as independent contractors, it is still unclear if it will ultimately be implemented by the incoming Biden administration.

The final rule would provide more clarity to employers in determining whether a worker is an independent contractor or an employee under the FLSA. NAHB has called on DOL to take steps to provide greater clarity to employers and workers in light of the often conflicting federal tests that exist, and has urged further action to harmonize the definition of “employee” across all relevant statutes.

NAHB is pleased that at our request the new rule includes specific examples of how it would relate to the construction industry.

Though the rule is intended to take effect 60 days after it is published in the Federal Register, the DOL under the new Biden administration could delay the effective date and support legal challenges to keep the rule from being implemented.

The DOL’s final independent contractor rule as issued today still relies on an economic realities test to determine employment status, but adopts a more streamlined five-factor approach.

Two “core factors” are given greater weight in making this determination -- the nature and degree of the employer’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself.

The three other factors that may serve as additional guideposts in the analysis are 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.

The final rule will be published in the Federal Register on Jan. 7 and be effective on March 8, 2021.

For more information contact NAHB’s David Jaffe at 800-368-5242 x8317 or Alexis Moch at x8407.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Safety

May 21, 2025

New Resources on the Safe Use of Mobile Elevated Work Platforms (MEWP)

Mobile Elevated Work Platforms (MEWPs) are vehicle-mounted machine lifts used to help workers complete tasks more efficiently in an elevated position. They are commonly used across the construction industry because of their ability to reach and maneuver around elevated areas.

Advocacy | Tax Reform

May 20, 2025

Podcast: One Big, Beautiful Podcast – NAHB Talks Tax Bill

On the latest episode of NAHB’s podcast, Housing Developments, CEO Jim Tobin and COO Paul Lopez are joined by AVP of Government Affairs J.P. Delmore to dive into the “big, beautiful” tax bill that’s been introduced.

View all

Latest Economic News

Economics

May 21, 2025

Gains for Multifamily Missing Middle over Last Year

The missing middle construction sector includes development of medium-density housing, such as townhouses, duplexes and other small multifamily properties.

Economics

May 20, 2025

Single-Family Home Size Trending Higher

An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower.

Economics

May 20, 2025

Slight Gains for Townhouse Construction

Townhouse construction expanded more than 2 percent on a year-over-year basis per data from the first quarter of 2025.