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Contractor or Employee? President Trump Reverses Guidance, but Employers Must Remain Vigilant

By July 18, 2017December 16th, 2022Legal

Contractor or Employee?In June of this year, President Trump withdrew two Department of Labor (DOL) “Guidance Letters,” one of which could potentially relax scrutiny as to whether a worker is an employee or a contractor. The guidance, issued during the Obama administration, took the general position that most workers are employees rather than independent contractors. Some national organizations hailed this move as “pro-employer,” but Marathon cautions its customers not to assume they can stop being cautious in their determinations.

The withdrawn guidance letter, Administrator’s Interpretation No. 2015-1, was first issued in July 2015. It contained a multifactor test to determine whether a worker was an employee or an independent contractor—a test that did not provide a clear line for employers to follow.  Instead, the test focused on whether the worker was economically dependent on the employer or was in business for himself.

Although the withdrawal of this guidance eliminated a test that effectively turned many previous contractors into workers, it did not abolish any of the earlier, commonly accepted tests promulgated by the DOL Far more “deconstruction” of the rules would be required to substantially change the current employer guidance regarding employees versus contractors.

Marathon has long maintained that the surest way to avoid running afoul of Wage and Hour Division (WHD) 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 in light of this new guidance, give Marathon HR a call.

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