U.S. Department of Labor Issues Final Independent Contractor Rule

This week, the U.S. Department of Labor issued the final independent contractor rule assessing how workers should be classified under the Fair Labor Standards Act (FLSA) given the department’s concerns with worker misclassification. The FLSA is the law that sets standards for minimum wage, overtime pay, recordkeeping, youth employment standards and other rules impacting employees in the private sector. The final rescinds the 2021 independent contractor rule and applies a multi-factor economic reality test for determining whether workers should be classified as independent contractors or employees. The six factors include:

1. opportunity for profit or loss depending on managerial skill;
2. investments by the worker and the employer;
3. the degree of permanence of the work relationship;
4. the nature and degree of control;
5. the extent to which the work performed is an integral part of the employer’s business;
6. and the skill and initiative.

One factor is not dispositive and the DOL determined that other factors may also be considered.

Real estate professionals generally are not subject to the FLSA, if they are independent contractors; however, there are concerns that application of this rule may lead to the misclassification of real estate professionals as employees. NAR is concerned about the unintended consequences of the law and its impacts for real estate professionals. NAR has worked with Congress to introduce H.R. 5419, the Direct Seller and Real Estate Harmonization Act, which is legislation to amend the FLSA to clarify the definition of employee as it relates to direct sellers and real estate agents, and for other purposes.

NAR will continue its advocacy efforts on this issue to ensure that real estate professionals are classified as independent contractors.