DOL Issues Final Rule on Employee vs. Independent Contractor Status

 Posted on January 30, 2024 in Employee Misclassification

The issue of whether or not a worker is an actual employee or an independent contractor has long been an issue for many companies. The distinction between an employee and an independent contractor holds significant implications for both employers and workers. It is a crucial determination that affects tax obligations, legal responsibilities, and the overall dynamics of the working relationship. The U.S. Labor Department (DOL) has a stringent stance on this topic, stressing to companies that when an employee is misclassified as an independent contractor, it deprives that individual of basic rights and protections.

Earlier this month the DOL released its final rule that revises a provision in the Fair Labor Standards Act that specifies what classifies a worker as an employee or an independent contractor. If your company is having problems over this issue, it is important to contact an Illinois employment lawyer.

New Provision

The new rule rescinds the current rule issued in 2021. Under the new rule – which goes into effect March 11, 2024, there are six factors that determine the status of a worker:

• The degree of permanence for the work

• How much control the employer has over the worker’s work

• Whether the work being performed by the worker is essential to the business

• The financial stake and type of resources the worker has invested in the work they are doing

• If there is any opportunity for a profit or a loss for the worker regarding the work they are performing

• How the worker’s initiative and skill factor into the work they are performing

It is anticipated that the industries that will be the most impacted by the new rule are construction, delivery services, home health care, ride-share, and trucking.

Classifications 

Classifying someone as an employee typically involves a higher level of control by the employer. The employer dictates the work hours, provides the necessary tools and equipment, and may offer benefits such as health insurance, retirement plans, and paid time off. Employees often receive regular salaries or hourly wages and are subject to tax withholding.

Independent contractors usually control their work schedules and use their own tools and resources. They are also responsible for their own taxes, insurance, and benefits, as they are not considered employees of the hiring company.

Misclassifying workers can have legal and financial consequences. Some of these consequences include:

• Wage and hour violations

• Back taxes and penalties

• Liability for failure to provide employment benefits and protections

• Government audits and investigations

• Legal action and lawsuits filed by the misclassified worker

Contact an Illinois Employment Lawyer to Ensure Your Company Is Protected

If you are having legal issues because of employee misclassification – or any other employment issue – make sure you speak with a skilled Schaumburg, IL employment attorney. Call The Miller Law Firm, P.C. at 847-995-1205 to schedule a free and confidential consultation.