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Contractor or Employee—Has a “Business Friendly” Administration Relaxed the Rules?

By March 22, 2018December 16th, 2022HR, Legal, Recruiting

Last year, President Trump withdrew two Obama-era Department of Labor (DOL) “Guidance Letters,” one of which had made it more difficult for companies to safely classify workers as independent contractors. Some national organizations hailed withdrawal of the guidance as “pro-employer,” but Marathon recommended companies continue to be very cautious with their determinations. Now, we are reiterating that stance.

With the withdrawal of the guidance letter, a 2015 “multi-factor test” was no longer relevant. However, the withdrawal did not abolish the commonly accepted “degree of control and independence” tests promulgated by the DOL:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (These include factors such as how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

You can review more DOL guidance on independent contractors versus employees, including the consequences for misclassification, here.

Marathon has long maintained that the surest way to avoid running afoul of Wage and Hour Division rules is to make as many workers as possible hourly employees. Barring that, workers that derive a substantial portion of their income from a company, or who are required to work specific hours or perform assigned duties, likely should be treated as employees. To learn more about the distinction between an independent contractor and an employee, give Marathon HR a call.

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