On May 1, 2025, the United States Department of Labor (“DOL”) published FAB Np. 2025-1, providing guidance for analyzing whether a worker is an employee or independent contractor. While the economic realities test remains the standard, with the new guidance the focus has shifted with specific reliance on older guidance, including Fact Sheet #13 (July 2008) and Opinion Letter FLSA2019-6.
Fact Sheet #13 provides a broader perspective of the concept of “employment relationship.” It specifically states that an employee under the FLSA in “one who . . . follows the usual path of an employee and is dependent on the business he or she serves.” Pursuant to Fact Sheet #13, factors to consider in the economic realities test include: (1) the extent to which the services rendered are an integral part of the principal’s business; (2) the permanency of the relationship; (3) the amount of the worker’s investment in facilities and equipment; (4) the nature and degree of control by the principal; (5) the worker’s opportunities for profit and loss; (6) the amount of initiative, judgment and foresight by the worker; and (7) the degree of independent business organization and operation.
Importantly, factors which are irrelevant include (1) where the work is performed; (2) the absence of a formal employment agreement; and (3) whether the worker is licensed.