With less than a month to go before the implementation of the new independent contractor rule, what have you done to make sure you are compliant?

What IS the new rule you ask? Well, in case you missed it, on January 10, the Department of Labor issued its final rule on how to analyze whether your workers are employees or independent contractors under the Fair Labor Standards Act. The new final rule could arguably make the classification of Pennsylvania workers more reality-based but could also shift the status of some independent contractors to employees.

Under the new rule, a worker is an employee if they are financially dependent on an employer for work. To make this determination, the DOL will use what is known as the Economic Realities Test. This test examines six factors to analyze the relationship between worker and employer – none of which are dispositive: including (1) whether the work performed is integral to the employer’s business; (2) how long the individual has worked for the company; (3) the skill and initiative of the worker; (4) the degree of control the worker has over such things as their hours, pay, and manner of work; (5) the amount the worker has invested in the materials necessary to perform the work; and (6) the worker’s opportunity for profit and loss.

Is there any hope that the rule will not be implemented?

Well, maybe. A week after the final rule was announced, a group of freelance writers and editors filed this lawsuit in federal court to block enforcement. The gist of their lawsuit is exactly the position I took in authoring NAWBO’s objection to the proposed rule, which is: Hey, some of us really want to be independent entrepreneurs and stop forcing us into employer relationships.

But alas, as an employer, the penalty falls on you. It’s important to remember that a worker cannot voluntarily waive their employee classification so companies will need to carefully examine the current relationships they have with their independent contractors and ensure that those workers are being classified properly.

Find this all so overwhelming? Starting to panic? We can help. If you would like more information about this rule and how it may impact your business, contact Loutel at (215) 464-6007.

But don’t delay since the final rule will go into effect March 11, 2024.

Christina Reger, Esq., Law & Compliance Counselor/Founder

Christina, the founding partner of Loutel, handles employment litigation and counseling maters for corporate, entrepreneurial, and start-up enterprises. Tina counsels businesses on how to comply with the barrage of new employment laws, regulations, opinions, and guidance from federal and state agencies. Tina is a regular keynote presenter both regionally and nationally on employment law topics and legal ethics.

Jacqui Hopkins, Workplace Culture and Legal Consultant

Jacqui Hopkins is a multifaceted and strategic attorney and consultant with expertise in employment law, Human Resources Compliance, Diversity and Inclusion strategy, business operations, and successful collaboration with partners, teams, and governmental agencies. While building solid relationships with stakeholders, clients, employees, and teams, she diligently maintains knowledge of current case law, regulations, and legislation to ensure continuous compliance observance.