In January 2024, the U.S. Department of Labor (DOL) published its
Final Rule on Employee or Independent Contractor Classification - a
rule that took effect on March 11th. This rule provides guidance for
employers in determining worker classification under the Fair Labor
Standards Act (FLSA).
Acting Secretary of Labor Julie Su said this rule would "ensure a
level playing field for workers," particularly vulnerable workers
who can be misclassified and lose out on minimum wage, overtime pay,
and other protections ensured under the FLSA.
But what does this mean for employers? Are there risks - or
opportunities - associated with this new ruling? Keep reading to get
the facts about worker misclassification and protect your company.
Companies use independent contractors (ICs) for several reasons,
including cost control, access to specialized skill sets, and adding
flexibility to their workforce. But the penalties for misclassifying
employees as ICs, or vice versa, can be steep.
The DOL's new 2024 rule will retain the multifactor,
"totality-of-the-circumstances" approach for analyzing IC's status
from their 2022 proposed rule on the same subject. In this approach,
the DOL considers six factors when examining whether a worker is
classified correctly:
The rule also indicates that additional factors could be considered if
they illustrate the economic dependence between a worker and potential
employer. You're probably asking yourself: what does all this mean for employers? If the rule goes into effect - it's currently being challenged, with
some lawmakers gunning for a repeal - it will be more likely that
certain workers currently classified as ICs will need to be reclassified
as employees. This means those reclassified employees will be eligible
for minimum wage and overtime protections. They could also be eligible
for employer benefits like health coverage and even retirement benefits. The gig economy is likely to be strongly affected. App-based platforms
(Uber, DoorDash, etc.) have traditionally classified their workers as
ICs, and that may have to change. Other industries like construction,
transportation, logistics, and media could also see ramifications. In general, the ruling could make companies more wary of hiring
short-term independent contractors. Small business, especially, may
decide it's not worth the worry or money to deal with potential
compliance issues. Misclassification of independent contractors and employees can be
difficult - and it's not getting any easier. If the risks of
misclassification are keeping you up at night, turn to your staffing
partner. Temporary staffing services are a viable alternative to bringing on
independent contractors. Temporary workers are employed by the staffing
firm, not your business. These workers are not independent contractors,
and they're not your employees, either. Plus, because the staffing firm acts as the Employer of Record, they're
responsible for meeting PPACA requirements and maintaining compliance.
This lets you mitigate risks and get important work done, all without
the headaches. Get in touch with your staffing partner to get started. This article offers a general perspective and does not constitute legal
advice. If you have a specific legal question, consult an attorney
licensed to practice law in your area. The Risks of Misclassification
Factors the DOL Will Consider
Implications for Employers
Worried About Misclassification? Your Staffing Partner Can Help!
Need flexible access to skilled candidates? Give Davis Staffing a call, and we'll deliver
the people and solutions you need.
Concerned about using contract workers?
Give Davis Staffing a call, and we'll provide flexible access to
talented people - without the risks.