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The LEAP Letter: Use Independent Contractors? Rethink Those Classifications After New DOL Rules

The 12th Annual Labor & Employment Law
Advanced Practices (LEAP) Symposium

March 16-18, 2016 • Bellagio
Las Vegas


Use Independent Contractors? Rethink Those Classifications After New DOL Rules

Continuing its crackdown on the misclassification of employees, the U.S. Department of Labor last week released new interpretive guidelines to clarify how your business should distinguish between employees and independent contractors.

The bottom line: The DOL has narrowed the definition and, thus, made using independent contractors more legally risky for employers. The DOL's conclusion: "In sum, most workers are employees under the FLSA's broad definitions.”

The new guidelines are the latest move in the IRS' and DOL's massive "Misclassification Initiative” that targets employers with more audits and closer scrutiny if they use independent contractors. States have also begun cracking down on employers that use contractors to save on taxes, overtime and legal liability.


Discover how to get in compliance with this and other timely employment law issues at our 12th annual Labor and Employment Law Advanced Practices (LEAP) conference, March 16-18, 2016 at the legendary Bellagio in Las Vegas. Take advantage now of our Early Bird special and save $200.00!


The DOL's 15-page interpretive guidance isn't a change in federal policy, which would require several more regulatory steps. But courts often use such DOL interpretations when deciding lawsuits.

The guidance stresses that the Fair Labor Standards Act (FLSA) definition of "employment” is very broad, and that employers are probably violating the law if they're treating workers who are integral to the business as independent contractors.

Employers are supposed to consider a list of six "economic realities” when classifying workers, including how much control the employer has over the worker's tasks and schedule. It focuses on whether the worker is economically dependent on the employer or in business for him or herself. (The DOL says, for example, that if a nurse must accept every client a registry refers to her, she's an employee. If the nurse can turn down clients, she may be an independent contractor.)

But in this new guidance, the DOL warns that too many employers look solely at this control factor when making classifications. Instead, the guidance says, all six factors "should be considered in totality … the 'control' factor should not play an oversized role.”


Got employment law questions? LEAP is renowned for offering attendees direct access to the best management-side employment lawyers in the country. Our "Learn from the Lawyers Lunch” and "Interactive Roundtables” help you find solutions to all your employment law problems. LEAP 2016 will be March 16-18 at Bellagio in Las Vegas. Grab those Early Bird prices and save $200.00 by registering now!


The DOL's new interpretive guidance clearly moves further away from using control over a worker's day as the crucial element in determining employee or independent contractor status. Instead, the interpretation focuses on the FLSA's term of art, "to suffer or permit to work,” and the economic realities of the relationship. This is a significant shift.

A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of "employ” under the FLSA, most workers are employees under the FLSA, according to the new interpretation. That's especially true with workers in low-wage occupations, who are economically dependent on the company using their services.

Bottom line: Employers that want to use independent contractors properly should apply the economic realities test. Consider each factor, focusing on whether the worker is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is an employee).

New classification standards are just one example of how the employment law landscape is changing. Learn how to stay in compliance at LEAP 2016. Plus, you'll have a fabulous time with your peers at the legendary Bellagio.

See you in Las Vegas!

Sincerely,

Joseph L. Beachboard, Esq.
Moderator, LEAP 2016

P.S. Book today! This is your LAST CHANCE to register for LEAP 2016 at the rock-bottom Early Bird rate. You'll also get comprehensive course materials … two FREE bonuses … and an unconditional money-back guarantee. Click here to reserve your spot.

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