On January 9, the U.S. Department of Labor (DOL) announced a new rule that changes how to tell if someone is an independent contractor or an employee. This rule, starting on March 11, is similar to what was proposed earlier. It requires companies to consider a variety of factors equally to decide if a worker is an employee or a contractor. This is important for gig economy companies like Uber or Lyft and for freelancers like writers and musicians. Employees generally receive benefits like minimum wage and overtime, while contractors don't but have more schedule flexibility and can work with multiple companies. The rule is aimed at ensuring fair treatment for workers and making sure companies are on a level playing field.
The new rule replaces a 2021 version where two main factors – control over the work and the worker's chance to make a profit or face a loss – were most important. Now, no single factor is more important than another. The rule looks at things like how much control a company has over the work, the worker's opportunity for profit or loss, the skill required for the job, how permanent the work relationship is, if the worker invests in equipment, and how crucial the worker's role is to the company's business. The DOL aims to make it clearer when someone should be classified as an employee or contractor. More guidelines are expected soon to help companies understand and apply this new rule.
If you're navigating the complexities of the new independent contractor classification rules and seeking to ensure compliance, don't go it alone. Contact us today for legal guidance tailored to your unique business needs.