For many years, we have tracked regulations and case law regarding the classification of independent contractors, as this is a significant concern for many of our clients, large and small.
Last September, the U.S. Department of Labor published a proposed rule that attempted to align its regulations with the tightening case law requirements for classifying workers as independent contractors. Under the new regulations, only a small subset of workers may be qualified to receive payments as independent contractors. Among other criteria, the new regulations focus on two “core” factors:
- The nature and degree of the worker’s control over the work and
- The worker’s opportunity for profit or loss based on initiative and/or investment.
In our region, the control element has always been important – if an employer “controls” the activities of a worker, for example by setting that worker’s schedule, then the worker is probably an employee rather than an independent contractor. The second element, regarding profit and loss, is new to our region.
Earlier this week, the Department of Labor’s proposed regulations became final, in essentially the same format as the proposed rules. As a result, the profit and loss potential is now a requirement for employers subject to the Department of Labor’s rules. This is important and may impact many prior determinations in this field. For example, whereas delivery drivers were often previously classified as independent contractors, it is unclear whether they are properly classified as independent contractors now.
As always, the attorneys at our firm will remain up-to-date in these important employment and labor questions. Please feel free to contact us if you have any questions or concerns about these important new updates.