The Department of Labor has issued a new final rule that will make it harder for employers to classify workers as independent contractors, not employees. Effective March 11, employers must begin applying what the DOL calls an “economic realities test” to determine if someone should be classified as a contractor or an employee.

Key distinction: Independent contractors are in business for themselves, while employees are economically dependent on the employer for work.

The test considers six factors:

  1. The worker’s opportunity for profit or loss.
  2. The financial stake a worker has invested in the work.
  3. The degree of performance of the work relationship.
  4. The degree of control the employer has over the person’s work.
  5. The extent to which the work is integral fo the employer’s business.
  6. The skill and initiative required of the worker.

A DOL statement said no single factor is more important than the others when determining a worker’s classification.

Source: The HR Specialist: Employment Law | February 2024