If your business model relies on using workers that you classify as “independent contractors” the latest interpretation from the US Department of Labor should be of extreme concern you.
Hat tip to Attorney Tristan Pettit for alerting me to this.
I have written a number of post about the dangers of calling a worker an independent contractor when they met the definition of employee. Well that bar was just raised substantially.
Rather than the old tests, the new ones are fairly bright line:
Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).
But the ruling goes even further than is the worker dependent on the pay they receive from you. Below are a few paragraphs of the Department of Labor document worth noting.
If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer.
In sum, in order to inform the determination of whether the worker is in business for him or herself, this factor should not focus on the worker’s ability to work more hours, but rather on whether the worker exercises managerial skills and whether those skills affect the worker’s opportunity for both profit and loss.
The worker should make some investment (and therefore undertake at least some risk for a loss) in order for there to be an indication that he or she is an independent business.
For example, investing in tools and equipment is not necessarily a business investment or a capital expenditure that indicates that the worker is an independent contractor.
So if the guy is a licensed electrician doing work for dozens or hundreds of other owners – pretty much he is a contractor.
However if you are paying a painter $10 an hour, or even $20 for that matter, and he works primarily for you – he is an employee and you would be well served to consider making him a legitimate employee or hire out a company that uses employees.
Remember too that if someone working on your property is injured your rental property liability policy will not cover them. Either you or they need to have a worker comp policy. And this risk is even greater than the DOJ coming after you.
