Misclassifying a worker as an independent contractor can come at a huge cost to your organization. With the recent U.S. Department of Labor (DOL) rule on independent contractor classification, the risk of misclassification could be even higher.
Let’s dive into what’s changing, when it’s changing, and how you can utilize the Populus Group’s contract through OMNIA Partners to help your organization mitigate misclassification risk.
On March 11th, 2024 -
The DOL’s final rule revising the guidance on independent contractor classification under the Fair Labor Standards Act (FLSA) adopts a six-factor test to determine if the worker has an economic dependency on the employer or if they are an independent contractor. Under this rule all six factors will be considered with the same weight, relying on a totality of the circumstances where no single factor is determinative.
so, what are the 6 factors?
1. Opportunity for profit or loss based on managerial skill
Does the worker have an opportunity for profit or loss based on factors such as business acumen or judgment? If not, they’re more likely to be classified as an employee and not an Independent Contractor.
2. Investments by the worker and the potential employer
This factor considers whether the worker’s investments are capital or entrepreneurial in nature. If the investments of the worker serve a business-like function and suggest that the worker is operating independently, that would indicate independent contractor status.
3. Degree permanence of the relationship
If the work relationship has a definite duration, is project-based, or is non-exclusive, that tips in favor of the worker being classified as an independent contractor. If the work is indefinite in duration, continuous, or exclusive, then that tips in favor of the worker being an employee
4. Nature and degree of control
If the employer has more control, that favors employee status. If the worker has more control, that favors independent contractor status. Relevant examples of control include setting the worker’s schedule, supervision of performance, and control over economic factors such as rates and services provided.
5. The extent to which the work performed is an integral part of the potential employer's business
If the work being done is critical to business functioning, that favors employee status. If the work being done is not critical or central to business function, that favors independent contractor status.
6. Skill and initiative
Both employees and independent contractors may use specialized skills to perform the work they’re tasked with. If the worker does not have specialized skills or depends on training from the employer, that’s indicative of an employee. If the specialized skills are used with a business-like initiative, that indicates the worker is an independent contractor.
Learn more about Populus Group and OMNIA Partners
Populus Group connects organizations with the right people to help them grow, and vice versa, through people-first employment solutions for your non-permanent workforce through OMNIA Partners.