NEW PROPOSED INDEPENDENT CONTRACTOR RULE
A new proposed rule has been issued by the U.S. Department of Labor (DOL) to clarify who qualifies as an independent contractor under the federal wage and hour law. The federal rule concerning independent contractors has been confusing in recent years because it has periodically been revised depending upon whether a Democratic or Republican presidential administration has been in power. The new proposed rule will make it more difficult to classify workers as independent contractors.
The new proposed rule focuses on an economic realities test which may include several factors such as:
- The amount of skill required for the work.
- The degree of permanence of the working relationship.
- The worker's investment in equipment or materials required for the task.
- The extent to which the service rendered is an integral part of the employer's business.
The rule directs employers to include exclusivity as a consideration under the permanency factor, but it acknowledges that simply having multiple jobs does not necessarily weigh in favor of independent contractor status.
Virginia has its own rule to assess whether a worker is an employee or an independent contractor. The Virginia rule creates a presumption that the worker is an employee unless the employer can show that the IRS guidelines dictate otherwise. The IRS has established 20 factors to be considered in determining whether there is an employer-employee relationship.
The proposed DOL rule can be found here 2022-21454.pdf (federalregister.gov) and is scheduled to be published in the Federal Register today, Oct. 13. Employers and employees may comment on the proposal for 45 days after the published date.
Feel free to contact us if you have questions about this matter.
John E. Falcone
P.O. Box 1080
Lynchburg, Virginia 24505
(434) 846-2768
