Employer Risks from the Revised Independent Contractor Rule

Employer Risks from the Revised Independent Contractor Rule | Property & Casualty

Many organizations rely significantly on independent contractors to keep their business running. Millions are employed in “gig” positions, as this form of labor is essential for U.S. industries (e.g., transportation, construction, health care). The U.S. Department of Labor (DOL) is set to enact a transformative final rule on March 11, 2024, redefining the classification criteria for contractors.

Overview of the New DOL Independent Contractor Rule

The regulation reintroduces a multifactor totality-of-the-circumstances analysis to determine a worker’s economic dependence on their employer. When establishing a worker’s status, the rule equally weighs these factors:

  • Control a worker has over their job performance
  • Potential to expand their earnings with new services
  • Expertise required for the role
  • Stability of the working relationship
  • Worker’s investment in equipment or tools
  • Significance of the work performed to the employer’s business

Workers found economically dependent on an employer would likely be considered employees. This change is significant as employees are entitled to certain benefits and protections (e.g., minimum wage, overtime, workers’ compensation, unemployment). While generally considered worker-friendly, the rule may greatly impact companies and service providers that primarily classify workers as independent contractors.

Preparing for DOL Independent Contractor Rule Compliance

Employers can better ensure compliance with the DOL’s final rule by taking the following steps:

  • Conduct comprehensive audits of current contractual relationships.
  • Evaluate worker classification considering the DOL’s updated criteria.
  • Revise employment policies and procedures to align with regulatory expectations.
  • Train managers on the FLSA’s worker classification requirements.

While the DOL’s final rule only applies to the FLSA, individual states may have unique regulations. Employers must understand and comply with all relevant laws to avoid any violations or penalties. Companies are encouraged to seek legal counsel to address specific issues and concerns related to employee classification requirements.

We’re Here to Help Prevent Employment Practice Risks

Potential legal challenges and ongoing litigations, especially surrounding the 2021 Independent Contractor Rule, may influence the final implementation timeline. Regardless, employers must understand the regulatory update and its potential consequences on their operations, expenses related to compliance and potential litigation risks. The U.S. Department of Labor has released guidance to help employers comply with the final rule. If you have questions about the proposal or additional employment practices liabilities concerns, connect with a member of our team

Employer Risks from the Revised Independent Contractor Rule | Property & Casualty https://www.cbiz.com/Portals/0/Images/GettyImages-1292209273.jpg?ver=pGzqBCLDji_TKUTFDFvWKw%3d%3d“Gig” workers’ rules might be changing under a recent DOL ruling. Learn the difference between classifying a worker as an employee or independent contractor. 2024-01-24T18:00:00-05:00

“Gig” workers’ rules are changing under a recent DOL ruling. Learn the difference between classifying a worker as an employee or independent contractor.

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