New potential DOL classification for independent contractors: What employers need to know

U.S. Department of Labor building in Washington, D.C, on January 12, 2022. Photo: Diego M. Radzinschi/ALM

The issue for businesses of whether workers are properly classified as independent contractors or employees has long been a challenge. The rules regarding such classification (or at least the manner in which the rules are enforced) seem to change with each administration in Washington and also vary by federal agency as well as by each state government. After unsuccessfully attempting to delay the implementation of the rule issued by the Department of Labor (DOL) in the last hours of the Trump administration in early 2021, the Biden DOL now intends to issue its own rule.

Federal and state agencies, and the courts, have for many years relied on a number of factors to determine whether a worker is an employee or an independent contractor with some describing the ultimate issue being who is in control of the work being done and others articulating the ultimate issue as the “economic realities.”  Regardless of the label, the analysis involves the consideration of a number of factors (at one time the IRS used a 20 factor test), which the Trump administration in January 2021 described as follows: