By Ronnie Miles, NGCOA Director of Advocacy
If you have been following any of my updates, you are probably aware of the new proposed independent contractor rule offered by the Department of Labor.
The rule would 1) rescind the current independent contractor rule and 2) utilize a new “economic realities” test to determine if a worker is truly an independent contractor. This test includes factors such as investment, control, the opportunity for profit or loss, and whether the work is integral to the employer’s business.
DOL will apply a totality-of-the-circumstances analysis of the economic reality test that has a refined focus on whether each factor shows the worker is economically dependent upon the employer for work versus being in business for himself, does not use a predetermined weighting of factors and that considers the factors comprehensively instead of as discrete and unrelated.
I had the opportunity to participate in a roundtable discussion hosted by the Small Business Association. With over 200 attendees covering a wide range of industries, the consensus of the testimonies was that this proposed rule was poorly written and would devastate large sectors of the small business community.
NGCOA offered our comments sharing the impact the proposed rule would have on many professional instructors and the services clubs offer their members and guests. Unlike the current rule that relies on two key factors in applying the economic realities test: 1) “nature and degree of control over the work” and 2) “worker’s opportunity for profit or risk of loss,” under the proposed rule, DOL will use six factors.
1. The opportunity for profit or loss depending on managerial skill.
2. The investments by the worker and the employer.
3. The degree of permanence of the work relationship.
4. The nature and degree of employer control.
5. The extent to which the work performed is an integral part of the employer’s business.
6. The worker’s use of skill and initiative.
NGCOA believes the planned use of a totality-of-the-circumstances analysis will result in a subjective analysis by the labor auditors. Thus business owners may be susceptible to increased fines and legal fees due to the subjectivity of the proposed rule's language.
To learn more, please contact Ronnie Miles at rmiles@ngcoa.org.