By: Amber Thompson, HR Advisor
Effective March 11, 2024, all organizations must comply with the newly enacted Department of Labor (DOL) rules regarding the proper classification of independent contractors. The new rule will now require all employers to evaluate six factors when classifying workers as an independent contractor, making the burden of classifying a worker as an independent contractor much more difficult to meet.
The six factors that must be considered in the new test include the following:
Opportunity for profit or loss depending on managerial skill.
Investments by workers and the potential employer.
The degree of permanence of the work relationship.
The nature and degree of control.
The extent to which the work performed is an integral part of the potential employer’s business.
Skill and initiative
If a worker does not meet all six factors of the test and is misclassified as an independent contractor, the consequences for misclassification could be severe. Employers who misclassify workers will be potentially liable for unpaid overtime going back up to three years, double damages, and attorneys’ fees and costs incurred. In light of the new rule, employers who use independent contractors should review their classifications as soon as possible to ensure such workers are properly classified under the DOL’s new rule to prevent financial penalties and loss.
The team at HR Solutions Group appreciates how the post-pandemic work environment has allowed organizations to ‘think outside the box’ when it comes to employment strategies. However, now more than ever, it is important that organizations get it right when it comes to properly classifying workers. Our team is well versed in the new rule and the strategy of working through each of the six factors to ensure proper worker classification. We are available to support your organization as you evaluate existing independent contractors’ employment status, as well as help you navigate the consideration of future worker employment relationships.