UPDATE: NSBA submitted comments on the DOL's poorly proposed standard.
On Oct. 11, 2022, The U.S. Department of Labor (DOL) issued a new proposed rule to be used for determining whether a worker is an employee or a contractor. The proposal would largely roll-back a similar rulemaking that occurred during the last administration.
When determining a worker’s status, the Labor Department is proposing using a multi-factor economic realities test that considers factors of the working relationship to determine whether the worker is truly in business for themselves. The proposed changes would be a “totality-of-the-circumstances” analysis, according to the proposal, evaluating all of the factors involved in the working relationship equally.
The rulemaking would rescind a Trump-era rule that outlined a similar multi-factor test, but which gave greater weight to how much control workers have over their job duties and their opportunities for profit or loss when determining whether a worker is an employee or an independent contractor. The current rule is more readily understood and clear than the proposed rule.
The current test includes five factors, but two were given far greater weight: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment.
The new proposal would consider those two factors and four others: investments by the worker and the employer, the degree of permanence of the working relationship, the extent to which the work performed is an integral part of the employer’s business, and the degree of skill and initiative exhibited by the worker. The DOL may also consider “additional factors” beyond those six, according to the proposal.
However, the proposal gives no guidance on how these factors interplay and how businesses should make decisions if these factors point in different directions. NSBA believes that these new rules should be withdrawn and the current rules should be given a chance to work.