Businesses Brace for Tougher Independent Contractor Rule

Beth Dean 01.21.24
Graphic - Blog 2024-01-23 - Independent Contractor Rule

Big Change for Gig Work and More

The Department of Labor (DOL) has revised its rules for classifying workers as independent contractors, making it more difficult for businesses to do so. 

Effective March 11, 2024, this change impacts workers across the US and could have significant implications for businesses of all sizes. New rules make it much harder to classify someone as a contractor, potentially pushing millions into the “employee” category.

What’s different?

Before, two key factors decided the difference between an employee and independent contractor: control over the work and the chance for the worker to profit or lose. Now, it’s a six-factor test focused on “economic reality.” This means considering things like:

  • Who’s in charge? How much control does the company have over how the work is done?
  • Who takes the risk? Can the worker directly earn more or lose money based on their efforts?
  • Who makes the investment? Is the worker’s investment (example: tools) significant compared to the employer’s?
  • How permanent is the gig? Is it a one-time job or an ongoing relationship?
  • Is it core business? Is the work essential to the company’s main operation?
  • Special skills required? Does the job require unique skills or expertise?
Why the fuss?

This classification conundrum is about more than just semantics. Employees get benefits like minimum wage and overtime, while most contractors don’t. If more fall under the “employee” umbrella, companies face:

  • Higher costs: More wages, benefits, and potential payroll taxes.
  • Lawsuit risk: Misclassifying workers can be expensive if challenged.

What can companies do?

  • Check your roster: Audit current independent contractor relationships. See if anyone falls under the new “employee” definition.
  • Review policies: Update protocols for working with independent contractors to fit the new rules.
  • Train managers: Make sure everyone understands the changes and how to comply.
  • Talk to a lawyer or trusted advisor: Get expert advice on navigating the new landscape.
What’s next?

Expect legal challenges from businesses. But for now, companies need to adapt. This could have a big impact on gig work in particular and independent contractor relationships across the country.

Also on Nextep

Get ready for changes! As of July 1, 2024, a new wave of state laws are set to go into effect across the country. These updates impact everything from worker protections and minimum wage to important regulations for businesses. Whether you’re an employer, employee, or simply a resident staying informed, this article will guide you […]
Read more
Exemptions from Overtime Pay: A Guide for Employers The Department of Labor (DOL) has announced significant changes to overtime regulations for salaried employees exempt from overtime pay. Here’s a breakdown of what you need to know and how to prepare: Key Changes: Increased Salary Thresholds: Currently, salaried workers earning less than $35,568 annually are exempt […]
Read more
A Game Changer for Employers The Federal Trade Commission (FTC) recently made a significant change regarding employers’ use of non-compete agreements. The final rule issued by the FTC prohibits the use of non-compete agreements for many workers, which is a departure from the longstanding practices of many companies. This decision is already facing legal challenges, […]
Read more
Key Points for Employers About the Latest Harassment Guidance The Equal Employment Opportunity Commission (EEOC) has recently updated its guidelines on workplace harassment enforcement. This was the EEOC’s first update in more than 30 years. The updates are intended to clarify and modernize existing standards. These changes take into account recent legal developments and the […]
Read more
What You Need to Know About PWFA The Equal Employment Opportunity Commission (EEOC) recently released the final regulations for the Pregnant Workers Fairness Act (PWFA). These regulations, taking effect on June 18, 2024, update the PWFA rules put into place in 2023 and significantly impact how employers with at least 15 employees accommodate workers with […]
Read more
When Addiction Strikes at Work The issue of addiction in the workplace presents a complex challenge for both employers and employees. The Americans with Disabilities Act (ADA) protects qualified individuals with disabilities, but active addiction itself isn’t necessarily covered. Here’s a breakdown of rights and responsibilities: Employee Rights Under the ADA Generally Not Covered: The […]
Read more
What is Considered “Reasonable”? What happens when an employee with a disability needs an adjustment to perform their job effectively? This is where reasonable accommodations come in. However, the question often arises: what exactly is considered “reasonable” under the Americans with Disabilities Act (ADA)? Striking a Balance The key is to find a balance between […]
Read more
It’s time for an ADA refresher! The Americans with Disabilities Act (ADA) is a cornerstone of civil rights legislation, ensuring equal employment opportunities for people with disabilities. As an employer, understanding your obligations under the ADA is crucial. Here’s a breakdown of the key points: What qualifies as a disability? The ADA defines a person […]
Read more
Forced to listen? Imagine this: Your boss calls a mandatory meeting. Instead of discussing work tasks, they spend the time telling you why you should support a political candidate or a particular religious view. That’s a captive audience meeting, and it’s becoming a hot-button issue. A captive audience meeting is a mandatory work meeting where […]
Read more
At some point during the election cycle, you may encounter employees wanting to display political propaganda at work.  This can range from flags and posters to social media posts and even conversations, and it can create a tense and uncomfortable atmosphere for colleagues with differing viewpoints. So, how do you maintain a respectful workplace while […]
Read more
As a presidential election year unfolds, employers must navigate the complex landscape of voting leave laws to uphold employees’ rights while ensuring compliance with state regulations. While federal law does not mandate time off to vote, many states have enacted specific provisions. Here’s what employers need to know to navigate this terrain effectively. Understanding State […]
Read more
An Employer’s Guide to Politics in the Workplace The current political climate can be divisive, and tension can easily spill over into the workplace. When employees hold vastly different political views, it can lead to arguments, hurt feelings, and a fractured work environment. So, what’s an employer’s responsibility when it comes to politics in the […]
Read more

Download Our App

Download the Nextep Mobile App in Apple iOS or Google Play