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New DOL Guidelines on Employees versus Independent Contractors

The U.S. Department of Labor (DOL) recently (July 2015) issued new guidelines on how to differentiate between employees and independent contractors, leading some experts to suggest that employers should re-examine how they classify workers in close cases. The guidelines do not notably differ from existing standards, but are thought to reflect the Department's intent to pursue misclassification cases. Classification effects the application of employee work rules and protections, including access to workers' compensation.

The DOL guidance recommends that employers use the Fair Labor Standards Act's definition of employ as "to suffer and permit to work" by applying an "economic realities test" in determining whether a person is an employee or an independent contractor. The guidance goes on to state that the factors to be employed in this test are:

          *     The extent to which the work performance is an integral part of the employer's business.  

          *     The worker's opportunity for profit or loss depending upon his managerial skills.

          *     The extent of the relative investments of the employer and the worker.

          *     Whether the work performed requires special skills and initiatives.

          *     The permanency of the relationship.

          *     The degree of control exercised or retained by the worker.

Experts consider the DOL guidance to be consistent with, but pushing the limits of, judicial decisions distinguishing employees from independent contractors.

If you need to obtain workers' compensation insurance for your business or if you have questions about your current coverage, please contact Pfeifer Insurance Brokers.

Alex Pfeifer
Pfeifer Insurance Brokers
650 762-8070
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