Independent contractor rule could trip up small businesses - Phoenix Business Journal

The U.S. Department of Labor is aiming to crack down on businesses that misclassify independent contractors with a new proposed rule., would align the government’s rule to the current court’s interpretation of the Fair Labor Standards Act and the so-called “economic reality” test that includes how much control the worker has over their schedule and their employment, how permanent their employment is and how integral their work is to the work of the company, among other items.

, which would go into effect sometime in 2023 after incorporating feedback from a recently closed public comment period, is a response to a Trump administration independent contractor rule crafted in 2021, challenged by the courts and ultimately rescinded in March 2022. It is likely that this new rule will also be challenged in court, making the ultimate timeline for when it goes into effect unclear.

For business owners that use independent contractors, there are several questions to consider. Do they perform an integral function of the business? Do they have an email address with the company? Do they appear for all intents and purposes like an employee? Do they supervise other workers? Does the independent contractor not have any other customers?

“Let them be genuinely independent. That’s an important thing that in many ways you can’t get away from as an entity. That is probably the biggest tripwire for this issue,” Kluger said. “I hate to have to tell employers this, but under this rule and even under the existing rule, it's very very tough to have somebody who regularly performs services for you be classified as an independent contractor.

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