by Mention independent contractor in our business and most people will immediately think of independent reps.
And while they would not be wrong, stop for a moment and think about how many other independent contractors who are not furniture reps serve our sector.
There are designers, photographers, marketers, graphic artists, those in the food service business and hosts of other service providers.
I make that point because as of March 11, new rules from the Department of Labor determining whether workers are employees or independent contractors took hold.
Earlier this year, on Jan. 10, to be specific, the DOL published what it called a “final rule” that mandates a six-factor test to determine if a worker is an employee or an independent contractor.
Under the new rule, which overrides the previous independent contractor rule set in 2021 under former President Trump, gives equal weight to the six factors. Trump’s version assigned greater importance to two of the conditions, specifically the nature and degree of control over the work, and the worker’s opportunity for profit and loss.
Additionally, the 2021 rule to determine if someone was an independent contractor did not take into consideration any investment by the worker or whether or not the work performed was integral to the employer’s business.
According to most observers, the new rule takes a shot at the 2021 rule which was more streamlined and opted to return to the six-factor criteria.
Under the 2024 rule, the DOL’s six factors are:
- The opportunity for profit or loss depending on managerial skill.
- Investments by the worker and potential employer.
- The degree of permanence of the work relationship.
- The nature and degree of control over performance of the work and working relationship.
- The extent to which the work performed is an integral part of the potential employer’s business.
- The skill and initiative of the worker.
According to the DOL, the 2024 rule is intended to “reduce the risk that employees are misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves.”
However, a number of legal experts, including Adam Maxwell with a leading Chicago-based law firm SFBBG, maintain that, “The IRS, the Department of Labor and state agencies all use separate tests and classify workers as independent contractors for purposes of employment, tax purposes, wage and hour laws, and for other reasons. And it is possible that a worker can be classified as an independent contractor by one agency. And classified as an employee by another. So that is complicated, confusing and frustrating.”
The firm has additional information regarding this topic, which can be seen on their website at https://www.sfbbg.com/.
