New Guidance on Independent Contractor Classification

Earlier this summer, the Wage and Hour Division of the Department of Labor (“DOL”) issued a Field Assistance Bulletin (“Bulletin”) on independent contractor classification in the caregiver registry industry. The Bulletin provides the first substantive guidance from the new administration on structuring independent contractor arrangements since the DOL withdrew its 2015 Administrative Interpretation last June.

While the new Bulletin focuses on factors to determine whether an employment relationship exists between a registry and a caregiver, other industries should note the significance of this Bulletin as well. Combined with the 2017 retraction of the Administrative Interpretation of the independent contractor guidance issued during the Obama administration in 2015, this Bulletin indicates a continued shift back to the traditional, multifactor balancing test previously used by the DOL and courts. The Bulletin lays out numerous factors that a DOL investigator may consider when determining whether a covered worker should be classified as an independent contractor or as an employee. For example, practices that do not suggest an employer-employee relationship include:

  1. Conducting background checks, including confirming credentials and contacting professional references;
  2. Determining what work the service provider is willing to perform, their target compensation, their availability, and other personal preferences;
  3. Interviewing the client to determine the needs of the client, the client’s budget, and the client’s personal preferences;
  4. Charging a fee for administrative services for the client, such as fees for recordkeeping, invoicing, collecting, and administering payroll;
  5. Posting available positions online for such service providers to screen and consider;
  6. Providing information to service providers and clients regarding typical pay rates in the area;
  7. Acting as a liaison between the service provider and the client in the process of the negotiating compensation; and
  8. Providing the service provider with the opportunity to purchase necessary equipment from the business or a third party.

Alternatively, activities that will suggest an employer-employee relationship, include:

  1. Suggesting or determining the rate to be paid to the service provider;
  2. Exercising control over the service provider’s schedule;
  3. Exercising any level of control over discipline;
  4. Interviewing candidates to evaluate subjective factors for the client;
  5. Exercising any control over hiring and firing decisions;
  6. Offering work assignments to select service providers based on the business’s own criteria;
  7. Assigning specific service providers to specific clients;
  8. Directing service providers on how to perform the work;
  9. Monitoring, supervising, or evaluating the service provider’s performance;
  10. Charging fees for ongoing services to be provided by the service provider; and
  11. Directing payment of its own funds to the service provider, even if later reimbursed by the client.

The DOL made clear that “the analysis does not depend on any single factor.”  Rather, it “will consider the totality of the circumstances to evaluate whether an employment relationship exists.”

While the Bulletin is limited on its face to caregiver registries, it signals a transition back to the historical approach previously employed by the DOL—focusing on the totality of the circumstances to reach the appropriate classification with a primary focus on the extent of control over the worker. Employers should consider how the DOL’s new guidance can assist them in structuring their independent contractor relationships to avoid reclassification.

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