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DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.

DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.

DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.

DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.

DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.

DOL's New Independent Contractor Rule Makes Misclassification More Likely

On January 10, 2024, the Department of Labor (“DOL”) finalized a new independent contractor rule that returned to an independent contractor test which is more difficult for employers to meet. The DOL’s change will likely cause an increase in misclassification claims and result in more monetary exposure for businesses that classify a worker as an independent contractor.

The new rule, which takes effect on March 11, 2024, sets forth a six-factor test focused on the economic realities of work with an employer to determine independent contractor status. The six factors are: (1) the opportunity for profit or loss depending on managerial skill; (2) investments made by the worker and the potential employer; (3) degree of permanence of the work relationship; (4) the nature and degree of control; (5) the extent to which the work performed is an integral part of the potential employer’s business; and (6) the skill and initiative required for the work performed.

This new independent contractor rule not only changes the factors to be considered from five to six factors, but also changes the weight previously given to the factors, making workers more likely to be classified as employees under the new rule.

Misclassifying an employee as an independent contractor can implicate many laws, including rights to minimum wage and overtime payments, which the DOL oversees and can cause substantial liability to employers. A misclassification of an employee as an independent contractor can constitute a violation of multiple laws.

Before this independent contractor rule becomes effective in March, employers should have all workers currently classified as independent contractors analyzed under the new rule to determine whether their classification needs to be changed and should seek legal guidance regarding the changes necessary to convert an independent contractor to an employee, which can provide a whole host of additional hurdles.