The U.S. Department of Labor is implementing a significant regulation change that stands to impact employers and employees alike by amending the criteria used to classify a worker as an independent contractor or an employee. If not diligently updated on and applied by employers, this rule change could incite harsh financial penalties.
Come March 11, a six-factor balancing test will take center stage in deciding a worker’s status. This is a marked shift from the current rule, which primarily considers two aspects – the level of control exercised over the work and the degree of the worker’s opportunity for profit or loss.
Employers now face the critical task of recalibrating their operational and HR practices so as to adapt to this new rule, not least because it possesses potential financial pitfalls in light of penalties that could amount to hundreds of thousands of dollars.
As put by Todd Lebowitz, partner at Baker & Hostetler, with the new independent contractor standard, the U.S. Department of Labor seems to be intentioned towards “encouraging a finding of employment.” You can find more on this topic in an article recently published by Corporate Counsel.