What Does the New Independent Contractor Rule Mean for You?

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Independent contractorThe Department of Labor’s new final rule on who qualifies as an independent contractor versus an employee has now gone into effect. What does it mean for independent meeting planners (and companies that hire them)?

The Department of Labor’s final rule on who classifies as an independent contractor under the Fair Labor Standards Act (FLSA) went into effect on March 11. While most of the kerfuffle around the final rule — which rescinds the 2021 Independent Contractor Status rule and replaces it with what basically amounts to the previous way of classifying independent contractor status — has been around how it could affect gig economy workers like Uber drivers, its umbrella encompasses all independent contractors working in the U.S., as well as companies that hire them.

That includes independent meeting planners and those who employ them on, especially if those contracts are not just one-offs but for longer term work.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su. The new rule, which is considered to be more protective of workers than the more streamlined, employer-friendly 2021 rule, “will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned,” Su said.

The idea behind the new final rule was to protect independent contractors from being denied perks of regular employees, such as minimum wage, overtime pay and other benefits, if they qualify as employees under the rules six criteria, each of which are given equal weight:

  • Opportunity for profit or loss depending on managerial skill
  • Investments by the worker and the potential employer
  • The degree of permanence of the work relationship
  • The nature and degree of control over the work relationship and the performance of the work, including hours and pricing
  • The extent to which the work performed is an integral part of the potential employer’s business
  • The skills and initiative of the worker

Under the 2021 rule, just two of the six factors were considered to be “core” — the nature and degree of control over the work, and an individual’s opportunity for profit and loss.

There were concerns raised during the comment period that the final rule could force companies to hire what were formerly independent contractors as employees, which could cause companies to downsize their workforce, both in-house and on contract. At the least, companies should be reviewing all their contract workforce to ensure that they still are compliant under the new final rule and make any necessary changes to their independent contractor agreements, according to an analysis by the law firm Ogletree Deakins.

On the other side, independent contractors expressed concerns in comments that they may run the risk of losing their businesses if they aren’t in compliance with the new final rule. The DOL emphasized that “The rule is not intended to disrupt the businesses of independent contractors who are, as a matter of economic reality, in business for themselves.”

One way independent meeting planning professionals can protect their independent status is to register their business — even if it’s just a one-person outfit — as an LLC or S corp. They also would be well advised to review their contracts to ensure that they still qualify as independent contractors under the new final rule and, if not, to work with their clients and legal team to bring them into compliance.

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