Recently, the U.S. Department of Labor has issued new guidance on classifying workers as Employees or Independent Contractors under the Federal Fair Labor Standards Act., Administrator’s Interpretation No. 2015-1, 7/15/2015.
It appears that the Department of Labor is taking a very different attitude towards the definition of an Independent Contractor versus many of the States. The Department of Labor’s 15-page memo review of their 6-part test between an Independent Contractor and what they consider to be a true employee is a tough one to swallow.
Of course we understand that an Independent Contractor must be in business for him or herself. However, that’s not really the whole story for the Department of Labor. Resulting “economic realities” have forced the Department of Labor to figure out a scheme to encapsulate more individuals as employees because of the loss of revenue to the US Treasury.
I urge you to read their blog as the six parts are very important, such as:
- Is the work an integral part of the employer’s business?
- Does the worker’s managerial skill affect the worker’s opportunity for a profit or loss?
- How does a worker’s relative investment compare to the employer’s investment?
- Does the work performed require skill and initiative?
- Is the relationship between the worker and employer permanent or indefinite?
- What is the nature and degree of the employer’s control?
Suffice it to say, we as employers are not only subject to our State’s test for Independent Contractor status, but also the Department of Labor. The latter whose test is so biased that you may pass the State test but easily flunk the Federal test.
Not complying with both tests places today’s employers at risk for past penalties, past taxes, assessment of worker’s compensation premiums and so on.
Read the Federal Guide and weep.
That’s how we do it at Bone Robertson McBride Inc.,
With good health to you,