In an article published Feb. 29, 2024, Constangy partner Brooke Nixon shared her insights on the U.S. Department of Labor’s new rules for classifying independent contractors in HR.com’s HR Excellence Magazine.
Brooke’s article examines the US Department of Labor’s new rule that demands more scrutiny in determining whether an individual should be classified as an employee or an independent contractor. The new rule replaces the previous rule issued in 2021, which was considered more business friendly. Under the new rule, six factors will be considered in determining whether an individual should be classified as an employee or an independent contractor. Namely, the opportunity for profit or loss depending on managerial skill, investments by the worker and the potential employer, degree of permanence of the working relationship, nature, and degree of control, the extent to which the work performed is an integral part of the potential employer's business, and skill and initiative.
Brooke explained that the new rule makes it harder for employers to classify workers as independent contractors, as it ends businesses' easy path under the previous rule. The return to a "totality of the circumstances" test, where no factor is more important, makes it essential for employers to consult experienced legal counsel and analyze all independent contractor relationships. Though the new rule becomes effective on March 11, 2024, several lawsuits seeking to stop it from going into effect are already underway. As such, Brooke encouraged employers to act swiftly to avoid unnecessary legal battles in the future.
“Employers should begin analyzing all independent contractor relationships using the factors enumerated in the final rule and consult experienced legal counsel for guidance,” Brooke concluded.
For the full article, please click here.