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

Economics
Oct 19, 2026
Builder Sentiment Falls on Rising Rates

Builder confidence in the market for newly built single-family homes fell three points to 29 in October, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today. The reading was the lowest since June 2012.

Safety
Oct 16, 2026
The Importance of Safety Guardrails on a Home Building Site

Join NAHB and its official safety sponsor, Builders Mutual, as we celebrate the seventh annual Guardrail Safety Week, Oct. 19-23, and be part of the difference proper guardrail use makes in protecting workers and saving lives.

View all

Latest Economic News

Economics
Oct 16, 2026
Single-Family Permitting Declines Through August

Single-family permitting activity continued to soften through the first eight months of 2026, while multifamily permitting remained stronger compared with the same period last year.

Economics
Oct 16, 2026
Research Highlights the Broad Benefits of Homeownership

A rich, peer-reviewed academic literature finds that homeownership produces benefits that extend well beyond house-price appreciation.

Economics
Oct 15, 2026
Building Material Price Inflation Nears Four Year High

The Producer Price Index for final demand was up 1.3% in September, after rising 0.5% in August. Compared to a year ago, final demand prices were up 6.3%.