After much delay, the U.S. Department of Labor last month issued a final rule on how it will determine whether a worker qualifies as an “employee” (as opposed to independent contractor) under the Fair Labor Standards Act (FLSA). We first discussed the preliminary DOL rule (and its fundamental problems) in late 2022, and a good rundown of the final regulation is here. In the interest of time (and my travel schedule), I won’t bore you with those details. Instead, today we’ll discuss why the rule remains costly, why it probably won’t achieve its primary objective, and how a new and important study on a similar regulation in California shows just these very things.

Will the Rule Work as Intended?

Various news outlets and partisans have couched the DOL rule change as a victory for workers forced or tricked into engaging in contract work. Now, so the theory goes, greedy employers will finally be forced to turn these poor contractors into traditional workers, with all the perks (wages/overtime, legal protections, benefits, etc.) that said employment supposedly provides. 

The extent to which that shift actually happens, however, is far from clear.