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).

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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.

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