DOL Clarifies Worker Classification: 'Economic Realities Test' Now Key
The U.S. Department of Labor (DOL) has issued new guidelines to help determine if workers are employees or independent contractors. The key factor is now the 'Economic Realities Test', which assesses a worker's economic dependence on a company.
The DOL emphasizes that contractors must market their entrepreneurial skills to multiple businesses to show entrepreneurial initiative. Simply having a business license or working from home is not enough. It also considers the qualitative similarity of investments made by workers and companies, not just the dollar amount. For instance, a worker investing in specific tools or training may indicate more entrepreneurial independence.
The guidelines warn that exerting control beyond what regulations require could indicate an employment relationship. For example, dictating when, where, and how work is done may suggest an employer-employee relationship. Both employers and workers are encouraged to assess the entrepreneurial independence of contractor relationships.
The DOL's new guidelines stress the importance of the 'Economic Realities Test' for classifying workers correctly. This test helps ensure that workers are truly in business for themselves, not just reliant on one company. Employers and workers should review these guidelines to understand the nuances of the test and ensure compliance with labor laws.
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