On January 10, 2024, the U.S. Department of Labor (DOL) published its Final Rule amending the criteria used to determine whether a worker qualifies as an employee or an independent contractor under the Fair Labor Standards Act (FLSA). The Final Rule is available here. While the Final Rule goes into effect March 11, 2024, legal challenges are expected and may impact when or if the Final Rule takes effect.

The Final Rule rescinds the preceding 2021 rule and replaces it with six-factor test focused on the “economic reality” of the relationship between a potential employer and a worker to determine whether a worker is economically dependent on an employer. Historically, both courts and the DOL applying the economic realities test have analyzed multiple factors to determine whether a worker is an employee or an independent contractor, with no factor or factors having predetermined weight.

The Final Rule provides six, non-exhaustive factors to be used as part of the economic reality test, which are:

1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the potential employer;
3. Degree of permanence of the work relationship;
4. Nature and degree of control;
5. Extent to which the work performed is an integral part of the potential employer’s business; and
6. Skill and initiative.

No one factor is determinative; rather, the court and/or DOL will evaluate all the circumstances of the relationship. The courts and the DOL have applied these factors, or some similar variation of them, for more than 70 years, which provides ample basis for understanding each factor. In addition to the caselaw, 29 CFR 795.110 (available here) will, effective March 11, 2024, also include additional information intended to assist in the independent contractor classification analysis under the economic realities test. The DOL has also published frequently asked questions, available here.

While the Final Rule may be subject to legal challenges, DOL investigators may rely upon the Final Rule in conducting their audit and/or investigation. As such, employers should carefully review and evaluate their classification practices.

If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.

The Corporate Transparency Act (“CTA”) takes effect in two stages, January 1, 2024, and January 1, 2025. The CTA is particularly aimed at beneficial ownership reporting by “small” businesses.

In January 2021, Congress enacted the Corporate Transparency Act (“CTA”), which is intended to bring the U.S. into compliance with international anti-money laundering standards.

Under the CTA, certain entities will be required to register themselves (“Reporting Companies”), the individuals that are the direct or indirect “beneficial owners” of such Reporting Companies and the individuals that undertook the actual creation/formation of the Reporting Company (the “Company Applicants”).

For purposes of the CTA, “Beneficial Owners” include “senior officers” of the Reporting Company as well as individuals determined to have substantial control over the Reporting Company or 25% or more control over the ownership interests in the Reporting Company. The concept of who is a Beneficial Owner is intentionally broad.

The CTA will be implemented by the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The reporting under the CTA will be through a FinCEN operated website and will include basic information about the Reporting Company and basic information (but personal information) about the Beneficial Owners and the Company Applicants, including legal name, date of birth, street address of legal residence (for Beneficial Owners), work address (for Company Applicants), government issued identification information and a copy of such government issued identification.

The information submitted to FinCEN will be subject to strict confidentiality requirements (not available to the general public). FinCEN may only disclose such information to a statutorily defined group of domestic and international governmental authorities and financial institutions.

Effective Dates

The CTA goes into effect in two phases:

• January 1, 2024 for companies formed or registered from January 1, 2024 onward; and
• January 1, 2025 for companies already formed or registered before January 1, 2024.

Please let the Smith, Gambrell & Russell attorneys assist you with navigating whether the CTA applies to you or your company and if so, how to comply with the CTA. Please regularly check our website, https://www.sgrlaw.com/insights/webinars/, for upcoming webinars about the CTA.

To have us assist you with CTA matters, please contact your SGR relationship attorney or reach out to our corporate heads in each of our offices:

Tom Hong and Brett Lockwood (Atlanta/Austin/Charlotte)

Marc Latman (New York/Washington D.C.)

Ken Crane (Chicago)

Adam Buss (Jacksonville/Miami/Tampa)

Elizabeth (Betsy) Blakely (Los Angeles)

Ben Graham-Evans (London)

Wie findet man qualifizierte Führungkräfte in den USA? Personalberater Tilman Bender kennt sich aus und spricht aus Erfahrung in diesem neuen Interview mit dem Markt und Mittelstand-Magazin, „Der Kampf um Topleute in den USA ist härter“ (Februar 2024). Sie finden das Interview hier: https://www.marktundmittelstand.de/personal/der-kampf-um-topleute-ist-in-den-usa-haerter

Beispielsweise erklärt Tilman auf die Frage ob es ein Patentrezept dafür gäbe, „Die herausfordernden Stellen- und Persönlichkeitsprofile, der niedrige Bekanntheitsgrad der Niederlassungen und die geringe Bereitschaft, den Wohnort zu wechseln, machen es notwendig, eine große Menge von potenziellen Kandidaten zu identifizieren und persönlich anzusprechen. Stellenanzeigen, auch auf den bekannten digitalen Plattformen, produzieren wesentlich weniger qualifizierte Bewerber wie vergleichbare Ansätze in Deutschland. Gute Leute wollen direkt angesprochen werden und müssen überzeugt werden, dass Arbeit bei einem Mittelständler eine nachhaltige Karrierechance darstellt.“