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Decoding Independent Contractor Status

Navigating the U.S. Department of Labor's Latest Rule

The U.S. Department of Labor (DOL) recently shook things up with a new rule, altering the landscape of worker classification. Let's unpack what this means for you.

The New Rule: A Tougher Test

Effective as of March 11, 2024, the DOL's latest ruling tightens the screws on companies trying to classify workers as independent contractors. It introduces a six-factor test, with each factor carrying equal weight.

Purpose Behind the Test

The purpose is to assess whether a worker is dependent on a company for their livelihood or if they operate more autonomously. Being classified as an employee means dependence, while being an independent contractor suggests a higher level of independence and entrepreneurship.

Changes in Focus

Unlike the previous rule, which mainly honed in on control and financial aspects, the new rule broadens the scope. 

Here's a breakdown of what the new rule examines:

1. Profit/Loss Potential: Can the worker's earnings fluctuate based on their skills and decisions?

2. Investments: What investments have both the worker and the company made in the work relationship?

3. Duration of Relationship: How long has the worker been engaged with the company?

4. Control Over Work: How much control does the company exert over the worker's tasks?

5. Integral Work: Is the work performed by the worker essential to the company's core operations?

6. Skills and Initiative: To what extent does the worker demonstrate skill and entrepreneurial drive?

Taking Action

For companies, the new rule necessitates a thorough review of independent contractor agreements. Non-compliance could result in penalties and legal issues. Seeking legal counsel to navigate these changes could prevent problems down the road. Feel free to reach out to us to review and update your independent contractor agreements. 


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