The proposed rule previously issued by the U.S. Department of Labor (DOL) to clarify who qualifies as an independent contractor under the federal wage and hour law was issued as a final rule today, January 9. The rule will take effect on March 11. The federal rule concerning independent contractors has been confusing in recent years because it has periodically been revised depending upon whether a Democratic or Republican presidential administration has been in power. The new rule will make it more difficult to classify workers as independent contractors.
The new rule focuses on an economic realities test which includes six factors:
1. The degree to which the employer controls how the work is done.
2. The worker’s opportunity for profit or loss.
3. The amount of skill and initiative required for the work.
4. The degree of permanence of the working relationship.
5. The worker’s investment in equipment or materials required for the task.
6. The extent to which the service rendered is an integral part of the employer’s business.
The rule directs employers to use a totality of the circumstances analysis of the working relationship. Exclusivity is a consideration under the permanency factor, but it acknowledges that simply having multiple jobs does not necessarily weigh in favor of independent contractor status.
Virginia has its own rule to assess whether a worker is an employee or an independent contractor. The Virginia rule creates a presumption that the worker is an employee unless the employer can show that the IRS guidelines dictate otherwise. The IRS has established 20 factors to be considered in determining whether there is an employer-employee relationship.
John Falcone, Steven Gould, Luke Malloy and Holly Trent handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.
