Navigating Proposed Changes to Independent Contractors

Big news from the U.S. Department of Labor on January 9, 2024 – they've just rolled out their final rule on what makes someone an independent contractor. This is set to hit the Federal Register on January 10 and will kick in on March 11, 2024.

So, what's all the fuss about? Well, this new rule is shaking things up from the Trump administration's 2021 rule. Remember that one? It was all about two main things: how much control the company has over the work and the worker's chances to make a profit or take a loss. It was kind of a big deal because it made it simpler for people to be considered independent contractors.

The Department of Labor isn't just sitting around, though. They're replacing the old rule with a new "totality of the circumstances" approach. This means looking at six different factors without putting too much emphasis on just one.

 
Let's break these down:

Making Money with Managerial Skills

The DOL is saying, "Hey, just because you work more hours or take more jobs, doesn't mean you're showing off managerial skills." They're looking for signs like setting your own rates, picking the jobs you want, marketing yourself, and maybe even hiring others.

Investments by the Worker and the Employer

Here it's about whether your investments are really for running your own business. Buying tools for a specific job? That might not count. But broader investments that help you take on more or different types of work? That's more like it.

How Permanent is the Work Relationship?

If you're in a long-term or exclusive gig, you might lean more towards being an employee. But if your work is project-based or you're not tied down to one employer, that's more contractor-style.

Control Factor

This one's all about who's calling the shots. If the employer sets your schedule, supervises your work, or demands exclusivity, they're probably in control. If you're setting your own prices and marketing yourself, you've got more independence.

Is the Work Central to the Business?

If what you do is key to the business's main game, you might be seen as an employee. If not, you're likely a contractor.

Skills and Initiative

It's not just about having skills, but how you use them. Using your skills in a business-savvy way? That's a point for being a contractor.

Now, it's important to remember that the DOL's rule isn't the final word in court, but it does set the tone for how they enforce things.

Misclassifying workers can lead to a heap of issues for businesses, like tax problems, and not meeting employment laws.

Even though there might be some legal tussles over this new rule, employers shouldn't just sit tight and hope for the best. It's a good idea to chat with an expert to make sure your independent contractor relationships are on the up-and-up with this new standard.

Reach out to FutureSense and we can help your organization to navigate employee classification?