Department of Labor Changing Criteria Defining "Independent Contractor"

Washington, DC, July 24, 2015—The Department of Labor (DOL) is currently working to correct what it believes to be an increasing number of employees who are misclassified by their employers as being independent contractors and are, therefore, ineligible for benefits, overtime pay, workers compensation and other perks of being an employee.

To that end, the DOL is substantially changing the factors set to determine whether a worker is an employee or an independent contractor.

The old test was essentially one of control: To what extent did the employer control the means and methods of the work? Did the employer set the work schedule, instruct the worker on how to do the work, provide the tools for doing the work?

The new test is called the "economic realities" test and hinges on whether the worker is economically dependent on the entity paying them or truly an independent business. 

Factors in the new test are as follow: Is the work an integral part of the employer’s business? Does the worker’s managerial skill affect his or her opportunity for profit or loss? How does the worker’s relative investment compare to the employer’s investment? Does the work require special skill and initiative? Is the relationship permanent or indefinite? What is the nature and degree of the employer’s control? 

The DOL stresses that a worker's status is not dependent on a single characteristic, and that the goal of the criteria is to determine if an individual is or is not financially dependent on the institution for which they are working.