Original DOL Test for Independent Contractor Status Reinstated - Maybe
The Biden administration is attempting to reinstate the test being used prior to the Trump administration to determine whether a person was actually an independent contractor. This test is considered to be more “worker-friendly” than the one it is replacing and supposedly relies on “economic reality.” The following six factors are considered:
The worker’s opportunity for profit or loss
The relative investments by the worker and the employer
The degree of permanence of the work relationship
The nature and degree of control an employer has over the person’s work
Whether the work the person does is essential to the employer’s business
The worker’s skill and initiative
This version of the test is to be effective March 11, 2024, but at least two lawsuits against it are making their way through the courts. One case, brought by a coalition of businesses succeeded at the district court level, so the administration appealed to the 5th Circuit Court of appeals. That court held up the case because the administration had not completed the final rules needed. The plaintiffs then asked the appeals court to send it back to the district court to answer the question of whether it even complied with the Administrative Procedures Act. Their contention is that the criteria in the “new” rule are vague enough to cast doubt on the accuracy of any determination made using them, and that the rule “improperly treats independent contractor status as disfavored and harmful to workers, contrary to longstanding Department policy under the FLSA, all in violation of the APA.” The administration has asked the 5th Circuit to vacate the district court’s ruling. That request is pending.
Concurrently, a group of freelance writers and editors in Georgia filed suit based (as above) on the vagueness of the rules and on the ability it gives unelected DOL administrators and trial lawyers to label anyone as an “employee” regardless of circumstances.
The current advice is to abide by the proposed rule unless the courts officially put it on hold.
Beyond that, a few states, like California, of course, have more stringent regulations that must be met to ensure independent contractor status.