24 Aug 2021
Just Tell Me! DOL Teetering on Independent Contractor vs. Employee Classifications
An individual’s status as an employee or as an independent contractor when performing services for a service recipient is important for wage and hour compliance, tax withholding and information reporting, and eligibility for employee benefits. While the Trump administration proffered “employer-friendly,” revised rules in December 2020 regarding independent contractor status determinations, widening the service-performer’s characterization as an independent contractor, the Biden administration announced that the change would not take effect, restoring, for now, the “economic realities” test. 86 Fed. Reg. 1168 (Jan. 7, 2021); 86 Fed. Reg. 24303 (May 6, 2021). A lobbying group currently is seeking to lift the Biden administration’s delay in a Texas district court. See Biz Groups Challenge Labor Dept’s Delay of Contractor Rule; Trade Groups Seek Win to Save Trump Contractor Rule. What test will apply? A majority of states apply a test with an even-broader “employee status”: the ABC test (or a derivative).
Related Content
- Independent Contractor and Employee Classification: Special Tax Issues
Check out this practice note, which details special tax issues concerning independent contractor and employee classifications. Specifically, this note discusses which workers qualify as statutory employees for federal tax purposes under both the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Insurance Tax Act (FUTA).
- Independent Contractor Tests and Risks of Worker Misclassification
Learn the three principal tests used to determine whether a worker is an employee or an independent contractor by reading this practice note by Littler Mendelson P.C. Also described are the risks that employers face in incorrectly classifying an employee as an independent contractor, including significant tax, wage, and benefit liabilities, as well as unanticipated (and perhaps under-insured) tort liability to third parties for injuries caused by contractors.
Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.
- Tax Key Legal Developments Tracker (Federal)
Stay informed on new developments.- Business Entities: IRS explains how to receive automatic consent from the IRS for accounting method changes put in place to comply with changes made by the TCJA to R.C. Section 451(b). Those changes specify that credit card cash advance fees, late fees, and interchange fees are subject to the applicable financial statement income timing rules rather than the original issue discount timing rules for those using the accrual method of accounting. Rev. Proc. 2021-34.
- Excise Taxes and Credits: IRS extends the 28-day deadline for employers to submit a request to a designated local agency (DLA) to certify that an employee hired between January 1 and October 8 of this year is a Designated Community Resident or a Qualified Summer Youth Employee. R.S. Notice 2021-43.
- IRS Newsroom: IRS issues a snapshot highlighting the universal availability requirement that applies to 403(b) plans. IRS Issue Snapshot. All employees must be eligible to make elective deferrals if they have the right to do so, with certain limited exceptions. Certain part-time employees may be excluded from eligibility to make elective deferrals.
- Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
- New and Recently Updated Practical Guidance Content
- Tax Considerations for Redemptions of Partnership and LLC Interests
- Structure and Taxation of Commercial Leases
- Senate Clears Budget Vehicle for Biden’s $3.5T Relief Plan
- New York State Mandates Secure Choice, Putting NYC Plan’s Fate in Doubt
- NY Group Appeals Property Tax System to State High Court
- How Tax Code Changes Affect State AG Settlement Talks
Experience results today with practical guidance, legal research, and data-driven insights—all in one place.
Experience Lexis+