Fun Socks | Are Your Independent Contractors Properly Classified?

On March 11^th, 2024, the Department of Labor (DOL) will be reverting to the previous rule for determining an individual’s status as an independent contractor.

What does that mean? Let’s start with the old/new rules. To evaluate whether an individual is an independent contractor, organizations must consider:

(1) opportunity for profit or loss depending on managerial skill;

(2) investments by the worker and the potential employer;

(3) degree of permanence of the work relationship;

(4) nature and degree of control;

(5) extent to which the work performed is an integral part of the potential employer’s business; and

(6) skill and initiative.

These are the rules that have been in place for determining status prior to 2021. In 2021, the DOL amended this list to add two “core factors” – control and opportunity for profit or loss. These new additions were deemed to be more important factors than the original six criteria.

The current update removes those two factors, returning the focus to the original six items in equal measure.

If this is confusing, here are some simple things to consider. If all of these statements are true, then you are on your way to hiring an independent contractor:

• Could they earn more or less profit if there are issues with the work?

• Do they provide their own work materials/equipment?

• Is this assignment for a specific project and not an ongoing relationship

• Do they choose when, where, and how they do the work?

• Is the work being performed not a key part of your business? Do they perform the same work for the other organizations?

• Did the individual come to you with the skills to do the work?

Want to learn more? You can read more detail on the DOL website

Have questions? Our HR team would love to hear from you!