The issue of independent contractor misclassification continues to be hot button topic in the law. For a number of reasons, companies frequently treat individuals as independent contractors when they really must be designated as employees. Mistakes can be costly. Misclassification often results in litigation for unpaid minimum wage or overtime, or governmental investigations for unpaid FICA and unemployment taxes, or unpaid workers’ compensation insurance premiums.

On January 8, 2021, the U.S. Department of Labor issued a Final Rule that seeks to provide guidance to employers in navigating this difficult terrain. The regulation essentially clarifies that in determining whether an individual should be classified as an employee, or alternatively, independent contractor, it is necessary to analyze the “economic realities” of such individual’s relationship with the company. The key factors in this analysis include, but are not limited to:

  • The company’s nature and degree of control over the work performed;
  • The individual’s opportunity for profit or loss based on his or her exercise of initiative;
  • The amount of skill required for the individual to perform the work;
  • The degree of permanence of the working relationship between the individual and the company; and
  • Whether the work performed by the individual is part of an integrated unit of production.

This Final Rule, issued in the last few weeks of the Trump Administration, is scheduled to go into effect on March 8, 2021. However, it is possible that the incoming Biden Administration may withdraw the regulation in the interim. Employers and legal professionals need to stay tuned for important developments.

For more information, please contact Lisa Scidurlo at LMSC@stevenslee.com, Theresa Zechman at TMZ@stevenslee.com, Wade Albert at WDA@stevenslee.com, or reach out to the Stevens & Lee attorney with whom you regularly work.