The Department of Labor recently proposed a new rule that they feel will better classify workers and it is something employers should be paying close attention to.
If this rule were to pass, it would adopt a new “economic reality” test to determine what employees should be considered independent contractors and of course, which ones should not. The plan details that contractors should be in business for themselves rather than having any economic dependency on the employer they are performing work for.
There are two main factors in determining employment status:
• The nature and degree of the employer’s control over work being performed
• The worker’s potential profit and/or loss based on personal investment
If those are in question, there are additional considerations that may play a part such as the amount of skill required or utilized in the work, how permanent or long term the working relationship is, and if the work in question is integrated in a larger unit of production.
The goal of this rule is to provide clarity and consistency to both employers and employees as to who qualifies as an employees under the Fair Labor Standards Act and those, respectfully, that choose to go the entrepreneurial route of being an independent contractor.
This proposal is up for lots of discussion throughout the official comment period but should be finalized by the end of 2020.