Are Gig Workers Independent Contractors or Employees? DOL Says Contractors!
The Department of Labor (DOL) issued an opinion letter signaling that it’s siding with business owners when it comes to determining whether gig workers like Uber drivers should be classified as employees or independent contractors.
The DOL letter concluded these particular workers are contractors, not employees, and not entitled to federal protections like minimum wage and overtime pay. This is a reversal of the DOL’s position under Obama, which held that many gig worker should be classified as employees.
Although this letter was not issued to every business owner, the business community seek guidance from such opinions for insight into the department’s stance on hot-button issues.
What does this mean?
Outside of potential lawsuits from workers, there are numerous other federal and state agencies with the power to penalize your business if you fail to properly classify your workers. This also applies to mistakes. For example, because the agency might miss out on your share of a worker’s Social Security and Medicare taxes, the IRS has a keen interest in making sure you maintain the proper employment classification—and they can audit and fine you if you aren’t careful.
What should you do?
If you hire independent contractors for your business, it's imperative that you remain vigilant about proper workers classification. If you are not sure who is an independent contractor vs. an employee, the DOL stated that independent contractors should have the freedom to choose when, where, and how long they work; the worker provides their own equipment; and the company does not require the workers to undergo a training program. Click here for IRS's 20-factor text.
While there’s no single test to determine a worker’s proper classification, it generally comes down to the level of control you have over those who work for you. If you have complete control over how the worker has to do their job, then they are probably an employee for classification purposes.
Before you sign an independent contractor's agreement, you should always allow us to review and if needed, revise your independent contractor agreement, even if it was created by another lawyer.
Better safe than sorry
In whatever you do, do not let your guard down. Whether you need new contracts created, want your old ones analyzed, or have questions about the current legal landscape, you should meet with us as your Innovative Business Lawyer. Contact our office today to schedule your appointment.
This article is a service of SL DeBarros Law Firm, LLC, a Innovative Business Lawyer. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. We also offer a Business Protection Start-Up Session or a Business Planning Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.