Are Your Independent Contractors Properly Classified?
The Department of Labor (DOL) has recently reassessed their interpretation of the independent contractor classification with an emphasis on a new set of criteria, and in order to ensure continued compliance with the Fair Labor Standards Act (FLSA), small businesses that have classified workers as independent contractors will now need to review and possibly reassess whether or not those classifications are still valid.
According to the Society for Human Resource Management (SHRM), the DOL previously relied on a number of tests to determine how much control an employer had over an individual’s work; now, the DOL has deemphasized that test in favor of the “economic realities” test, which instead determines how economically dependent the worker is on the employer. According to attorney Allan Bloom, “Businesses worried about staying under the DOL radar on this issue should make sure that they are doing business with established independent service providers.”
When reassessing the status of your workers currently classified as independent contractors, it is now vitally important to carefully consider how much control and even influence your business has over each worker. Independent contractors should be “independent” in regards to how and when work is performed, and a contractor must have the freedom to work for others.
The DOL now requires employers to review the following six factors:
- The extent to which the work performed is an integral part of the employer’s business.
- The worker’s opportunity for profit or loss depending on his or managerial skill.
- The extent of the relative investments of the employer and the worker.
- Whether the work performed requires special skills and initiative.
- The permanency of the relationship.
- The degree of control exercised or retained by the employer.
If you are unsure whether or not your worker classifications are still valid and in compliance with the FLSA, one of our HR professionals will be happy to provide further guidance and advisement. Feel free to contact us for more information!