DOL’s final independent contractor rule returns to six-factor test

The U.S. Department of Labor (DOL) has published its final rule on the classification of workers as either employees or independent contractors (ICs). Under the rule, the DOL returns to the “totality of the circumstances test,” with a focus on workers’ economic dependency on their employers.

Why properly determining worker status is important

Whether a worker is considered an employee or an IC is a legal distinction with significant employment ramifications. Employers don’t contribute to workers’ compensation or unemployment insurance for, withhold taxes from, provide benefits to, or comply with federal and state overtime and minimum wage requirements for ICs.

In short, many of the laws designed to protect employees from unfair or even bad acts by employers—such as minimum wage and overtime laws or discrimination in the workplace—don’t apply to ICs.

Yet ICs are an integral part of the nation’s workforce and perform work employers typically wouldn’t ask or expect their employees to do. For example, a retail store wouldn’t expect its employees to resurface its parking lot.

Getting the distinction right is important. Employers that improperly classify employees as ICs can be liable for back payments of workers’ compensation and unemployment insurance and penalized by both the DOL and state agencies.