Whether or not someone should be classified as an independent contractor depends upon the totality of the relationship. The Department of Labor (DOL) and state and federal courts have issued opinions over the years that have caused confusion for employers. Just recently the DOL’s Wage and Hour Division (WHD) issued a field assistance bulletin stating it will reconsider a Biden-era 2024 independent contractor rule. While the evaluation is underway, employers should consider seven factors traditionally upheld by the WHD:
- The extent to which the services rendered are an integral part of the principal's business.
- The permanency of the relationship.
- The amount of the alleged contractor's investment in facilities and equipment.
- The nature and degree of control by the principal.
- The alleged contractor's opportunities for profit and loss.
- The amount of initiative, judgment or foresight in open market competition with others required for the success of the claimed independent contractor.
- The degree of independent business organization and operation.
When a worker is incorrectly classified as an independent contractor, the worker may be entitled to backpay for minimum wage deficits and overtime hours. The company is also on the line for any Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) violations, lack of I-9 documentation and failure to remit payroll taxes. Fines and unpaid wages can quickly snowball into a financial fiasco for an organization.
Should new guidelines be issued under the Trump Administration, Bukaty Companies will communicate updates as needed.
