The New Independent Contractor May Produce Headaches for Employers

Employers, it's time to consider whether your independent contractors are really independent.

That's right, the U.S. Department of Labor released the final, new independent contractor rule, effective March 11, 2024.

Whether a worker is an employee or contractor has been a matter of hot debate over the years. We had the "economic realities" test, the core factors test, and others that seemed to focus on the control an employer wielded over a worker.

Why is this important? Well, while contractors have more freedom, i.e. independence, if you will, federal law does not protect them, and they miss out on benefits.

So what's the new rule (I know, I buried the lede)? It's a "totality of the circumstances" rule based on 6 factors, neither of which weighs heavier than others, according to the DOL's Wage & Hour Admin -

1. The degree of CONTROL an employer has over the work (i.e., what most employers consider the test). This includes the use of tech, and in-person supervision is not necessary;

2. The worker's opportunity for profit or loss;

3. The degree of permanence of the work relationship;

4. The level of skill required for the job;

5. The worker's investment in equipment or materials needed for the job; and

6. How integral the job is to the employer's business (hint: if the job is integral, the worker is more likely to be an employee).

The feds say they will issue guidance before March 11, but employers, it is time for that wage and hour audit.

What do you think of the new rule?