New Final Rule: Independent Contractor Gets a Makeover

New Final Rule: Independent Contractor Gets a Makeover

The Biden administration is finally getting its rule on what determines an independent contractor relationship. The Trump era rule, which was much broader, has been rescinded. In its place is a six part test, considering a “totality of the circumstances,” that will be more difficult for many employers to meet. Please remember that state laws on the independent contractor might be even more narrow (hello California!) and that would control.

Here are the six non-exhaustive factors the DOL will review to determine the relationship between a worker and a potential employer:

  • Worker’s opportunity for profit or loss.
  • Investments made by the worker and the employer.
  • Degree of permanence of the work relationship.
  • Nature and degree of control over performance of the work.
  • Extent to which the work performed is an integral part of the employer’s business.
  • Use of the worker’s skill and initiative.

Eagle eyed readers will notice the “control over performance of the work” right away as a tough hurdle. If the work is an” integral part of the business” is no piece of cake to overcome either. The vast majority of “independent contractors” we see are doing work necessary to the core business. The DOL prefers the employee-employer relationship and will do all it can to enforce that.

The rule is expected to take effect March 11, 2024.