New Independent Contractor Rules: Do They Affect Your Employees?

New Independent Contractor Rules: Do They Affect Your Employees?

The Department of Labor’s final rule for employee or independent contractor classification under the Fair Labor Standards Act rescinds the 2021 Independent Contractor Rule, replacing it with guidance on analysis that’s more consistent with the FLSA as interpreted by longstanding judicial precedent, and was scheduled to take effect March 11, 2024.

The final rule reduces the risk of misclassification while providing greater consistency for businesses and gig workers, specifically:

  • The designation of control and opportunity for profit or loss are given greater weight.
  • Considering workers’ investments and initiative only as part of the opportunity for profit or loss.
  • Prohibiting consideration of whether work performed is central or important to your business.

A step toward greater clarification

The 2021 IC Rule narrowed the economic reality test: Is a worker economically dependent on the employer for work? This had a confusing and disruptive effect, departing from decades of case law and describing and applying the multifactor economic reality test as a totality-of-circumstances test.

Analysis of the final rule may be applied to workers in any industry and will be accessible in the Code of Federal Regulations. It doesn’t adopt an ABC test, permitting an independent contractor relationship only if all three factors in a three-factor test are satisfied. Instead, the multifactor economic reality test that courts use to determine whether a worker is an employee or an independent contractor is used, relying on the totality of the circumstances where no one factor is determinative.

The final rule revises only the DOL’s interpretation under the FLSA and has no effect on federal, state or local laws with different standards of classification. The IRS and National Labor Relations Act have different statutory language and judicial precedent governing the distinction between employees and independent contractors. The laws are interpreted and enforced by different federal agencies. The rule has no effect on state wage and hour laws that use the ABC test — California’s and New Jersey’s, for instance. The FLSA doesn’t preempt federal, state and local laws that apply.

In brief, according to new federal guidance, businesses should meet whichever standard provides workers with the greatest protection.

The key aspects

The final rule affirms that a worker is not an independent contractor if economically dependent on an employer for work, applying six factors:

  • Opportunity for profit or loss depending on managerial skill.
  • Investments by the worker and the potential employer.
  • Degree of permanence of the work relationship.
  • Nature and degree of control.
  • Extent of the work performed as integral to the potential employer’s business.
  • Skill and initiative.

Workers cannot voluntarily waive employee status, choosing to be classified as independent contractors. They cannot waive FLSA-protected rights like minimum wage or overtime pay. The Supreme Court has explained that waiving their FLSA rights would harm other employees, undermining the goal of eliminating unfair methods of competition in commerce.

Among the similarities to the 2021 rule: advice on definitions and on identifying economic dependence as the ultimate inquiry of the analysis, providing a nonexhaustive list of factors to assess economic dependence with no single factor being determinative. Both clarify that economic dependence doesn’t focus on the amount of income the worker earns or whether the worker has other sources of income.

Differences between the new rule and the 2021 rule:

  • Returns to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight.
  • Provides additional analysis of the control factor, including how scheduling, supervising, price-setting and working for others are considered when analyzing the nature and degree of control over a worker.
  • Returns to the DOL’s consideration of whether the work is integral to the employer’s business rather than exclusively part of an integrated unit of production.
  • Omits a provision from the 2021 rule that minimized the relevance of an employer’s reserved but unexercised rights to control a worker.

Note that this is just a summary of a complex series of provisions. One thing certainly hasn’t changed between the new rules and the old: the need for companies to obtain qualified professional advice to make sure they are in compliance.

7 Laws That Protect Employees From Retaliation

7 Laws That Protect Employees From Retaliation

1. Title VII of the Civil Rights Act of 1964

Forbids employers from discriminating against job applicants and employees based on their race, color, national origin, sex or religion.

An employer cannot retaliate against an employee for objecting to discrimination under Title VII, reporting discrimination, filing a discrimination charge or participating in a discrimination legal proceeding.

Employers with 15 or more employees must adhere to Title VII.

2. The Age Discrimination in Employment Act (ADEA)

Prohibits discrimination based on their age against job applicants and employees who are 40 years or older.

Under the ADEA, these individuals cannot be retaliated against for opposing the employer’s discriminatory actions, filing a discrimination charge or participating in a discrimination proceeding.

The ADEA covers employers with 20 or more employees.

3. The Americans with Disabilities Act (ADA)

Makes it illegal for employers to discriminate against job applicants and employees with disabilities.

Title V of the ADA prohibits employers from retaliating against qualified individuals who object to the employer’s unlawful practices or have “made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this chapter.”

The ADA applies to employers with 15 or more employees.

4. The Equal Pay Act (EPA)

Requires that employers compensate men and women equally for performing the same work at the same location.

Designed to eliminate gender-based wage discrimination, the EPA also forbids employers from retaliating against employees who exercise their rights under the act.

All employers must comply with the EPA.

5. The Fair Labor Standards Act (FLSA)

Establishes federal minimum wage, overtime, child labor and recordkeeping standards.

In addition, the FLSA protects employees who have filed FLSA-related complaints from retaliation. Among other things, an employer cannot retaliate against an employee for participating in a Department of Labor audit, testifying in a legal proceeding, filing a wage complaint or communicating with Wage and Hour Division investigators.

The FLSA covers most private-sector employers.

6. The Occupational Safety and Health Act (OSHA)

Sets federal health and safety standards to protect people on the job.

Per Section 11(c) of the OSHA, it is unlawful for employers to retaliate against employees who assert their rights under the act — such as by complaining about unsafe or unhealthy working conditions. OSHA also oversees more than 20 whistleblower protection laws.

Any employee can file a complaint with OSHA if he or she believes his or her employer violated a retaliation or whistleblower law that OSHA administers. 

7. The Family Medical and Leave Act (FMLA)

Requires covered employers to provide unpaid, job-protected leave to eligible employees.

Under the FMLA, employees cannot be punished for exercising their FMLA rights, including taking FMLA leave.

The FMLA applies to employers that have 50 or more employees during at least 20 weeks of the year.

Employers should consider other federal laws — such as the National Labor Relations Act and Title II of the Genetic Information Nondiscrimination Act (GINA) — plus any state laws that protect employees from retaliation. In fact, this is just a brief intro to a wide range of laws, and regulations are always changing. The bottom line? Work closely with legal and HR experts.

Remote Employees and FMLA

Remote Employees and FMLA

Now that we’ve become a “remote first” company with most of our employees working from home, we’ve started hiring remote employees in other parts of the country. We’re covered by FMLA because we have more than 50 employees—even at our headquarters alone. Will our remote employees be eligible for FMLA leave once they’ve worked the required amount of time?

Yes, these new remote employees will likely be entitled to take leave under the federal Family and Medical Leave Act (FMLA), but not just yet. To be eligible for leave under the FMLA, an employee must have worked for your company for at least 12 months, have worked at least 1,250 hours during the 12-month period immediately before their leave, and work at a worksite with 50 or more employees within a 75-mile radius.

Unlike other situations, for purposes of FMLA, an employee’s home is not a worksite. Rather, their worksite is the office they report to or receive assignments from. So, if your remote employees report to or get their assignments from your headquarters, then they are considered to work at a worksite that has 50 or more employees. If you have multiple physical offices, you’ll need to evaluate which location would be considered each employee’s worksite, and then how many employees fall under that worksite.

Bottom line: an employee whose worksite has 50 or more employees will be eligible for FMLA leave once they’ve worked 1,250 hours and hit their one-year anniversary.

Content courtesy of the HR Support Center –

Creating a Safe and Fulfilling Workplace for Another Challenging Year

Creating a Safe and Fulfilling Workplace for Another Challenging Year

As we enter the new year, the risks of COVID-19 may recede, but the trauma, pain, and disruptions of these past two years will still be with us, affecting our lives and our work. We’ve all struggled, sometimes in ways we can’t pinpoint.

In her book Bearing the Unbearable, Joanne Cacciatore describes grief as “a process of expansion and contraction.” Cacciatore explains that in a moment of contraction, we may feel unsteady and unsafe, and we “feel the call to self-protect.” In a moment of expansion, we “become more willing to venture out and explore” and “take risks.” This process isn’t exclusive to grief, of course. Whatever the cause, many of us right now are experiencing one or the other, or both.

A recent guest on the HR Social Hour Half Hour Podcast, Julie Turney, founder and CEO of HR@Heart Consulting, observed that people today recognize that they deserve better, and they are demanding better. They are less willing to settle, less comfortable with the way things are. People are fleeing jobs that are physically or psychologically unsafe. Others are chasing their dreams with a newfound passion.

For the foreseeable future, people will seek environments that are both flexible and strong enough to support a process of contraction and expansion. They will desire work that gives them a safe place to be and a fulfilling place to go. They will crave a future they can own and a course they can chart, and their jobs will either help or hinder them. Jobs that help them will be in high demand.

Fortunately, such sought-after work environments can be achieved with some basic practices. Let’s look at some.

Talk About the Future
Ask your managers to talk regularly with their direct reports about how they’re feeling today and what they’d like to be doing in the future. Due to the circumstances, you can expect the answers they hear to vary and to change. On a given day, an employee may feel optimistic and ambitious, eager to take on a new project or a new role. But a week later, that same employee may feel hesitant or anxious about taking on any new responsibilities.

Don’t assume an employee expressing conflicting feelings isn’t up for the task at hand. In normal times, it’s natural to second guess big decisions, and these are not normal times. Some employees may need a little extra encouragement. Others may truly be happier continuing to do what they’ve been doing.

Through these conversations, managers can help their people make informed decisions about their future that make sense for them and for the company.

Don’t Be Afraid to Set Deadlines
Giving employees time to decide what future makes the most sense for them can go a long way to building trust and gratitude. There will come a time, however, when a decision needs to be made. A manager who has been talking with a member of their team about a new career opportunity in another part of the company, for example, will need a definitive answer eventually, probably sooner rather than later.

When a manager has a conversation with a team member about opportunities for growth that require significant change, they should, as soon as possible, make it clear to the employee when a final decision needs to be made. That way the employee has a set timeframe to work through their feelings, and a deadline isn’t unexpectedly thrust upon them.

Provide Grief Support
A lot of people are grieving, and grief takes work. People grieving need the time, space, and freedom to do that work. The option to take bereavement leave after a loss can be invaluable to them, but so too is the liberty to take days off down the road when they’re needed. The grieving process isn’t linear, and the unbearable pain of grief can resurface unexpectedly, months and years later. The life of grief is long. Whatever you can do to enable employees to safely take the time they need to process a loss and heal, do it.

Take Care of Yourself and Your HR Leaders
Lars Schmidt, founder of Amplify, points out that, while the “market for HR roles has never been hotter,” the work of HR has taken a “sustained toll” on those doing that work. They’re “carrying the emotional burdens of their employees (and their own).” Burnout is common.

Be sure to give yourself and anyone else caring for your people time to rest, recharge, grieve, or whatever else each of you needs to do to stay healthy. “Resilience is not an infinite resource,” executive coach Sarah Noll Wilson reminds us. Take time off. You need it, too.

Don’t Take Departures Personally or Draw the Wrong Conclusions
When an employee leaves an organization, it’s always a good idea to understand why and consider what changes you could have made to keep them. What you learn may not persuade that employee to reconsider their departure, but it may assist you in keeping others. That said, sometimes employees quit and there’s nothing you could have done to convince them to stay. The best possible workplace in the world will still see people go elsewhere simply because those people want a change or because of circumstances beyond their control.

When your employees tell you they’re leaving, do your due diligence to find out why, but don’t overthink their departures or take them personally. If everything was good and they still left, that just means everything was good and they still left. It doesn’t mean that you didn’t do enough or should have done something differently. Believe in the work you’re doing. Be kind to yourself. As Lars Schmidt says in his book Redefining HR, “we’re on the front lines of the highest of highs and the lowest of lows of all our employees.”

Inspire Hope
Whether we feel the strong urge to self-protect or we’re jumping out of our seat to pursue a risky venture, we could all use a little hope. The philosopher David Utsler writes, “Hope offers no guarantees. Hope does not promise that life or the world will get better. Hope only insists on the possibility.”

You can inspire hope by expanding the scope of what is possible for your employees. Talk with them about their dreams and ambitions so they can imagine what possibilities lie before them. Talk about where your company is going and what you’ll need from your employees. Help them envision a place where they can explore, take risks, and be supported.

Then work together to get there.

Business Payroll Tax: Basics, Components and Calculations

Business Payroll Tax: Basics, Components and Calculations

For those entering the world of hiring employees and building a payroll setup, this is both an exhilarating and potentially stressful time. Hiring employees includes a number of important areas, payroll serving as just one major example, and many business owners or companies reach out to third-party professionals for assistance.

Some new businesses look for a company offering numerous payroll services among an overall HR package, including payroll tax solutions and several other distinct areas. What are the basic components of payroll taxes, how are they calculated, and what are your important responsibilities as a business owner in this area? This two-part blog series covers everything you need to know.

Payroll Tax Basics and Components

Payroll taxes refer to taxes imposed both on employees and employers. They are usually calculated as a percentage of the company’s payroll and may change depending on how much an employer has paid to its employees. There are several different components to employee and employer payroll taxes:

  • Social Security: The Social Security tax is used to pay the costs of benefits for elderly people, survivors of people who have died, and those who are disabled. Employers match the amount that employees contribute for this tax.
  • Medicare: The Medicare tax is used to pay health care expenses for elderly people or those with disabilities. This is another matching tax where employers match what their employees pay to help fund it.
  • Federal income tax: Federal income taxes are those that employees contribute from their paychecks on a regular basis. Employers, on the other hand, usually only have to withhold a portion of federal income taxes from employees’ paychecks and then send it to the government on a monthly or quarterly basis.
  • State/local income tax: This one is similar to federal income taxes in that both employees and employers contribute. State income taxes are used for state programs, while local taxes are used for specific purposes in the city or county where an employer is located.

These various taxes will be deducted from employee’s pay, then sent to US Treasury agencies. As noted, employers must match Social Security and Medicare tax amounts, plus may have to pay into federal and state unemployment funds.

How Payroll Tax is Calculated

Certain payroll taxes, such as Social Security and Medicare, are fixed percentages for both employers and employees. Federal unemployment taxes are also fixed.

Other taxes, however, are variable. Income tax, naturally, will depend on the amount earned by the employee, plus certain other information in their Form W-4 filing.

For more on payroll taxes and how they work, or to learn about any of our HR or payroll services, speak to the staff at Affiliated HR & Payroll Services.

Sharing Vaccination Status

Sharing Vaccination Status

Can we share employee vaccination status with managers so they can enforce any policies based on that information, such as masking and social distancing?

Yes. Obviously, managers will need this information if they are expected to enforce vaccination-dependent policies, and employers should train them on how they should be enforcing the policies and how and when to escalate issues to HR or a higher level of management. However, you should not share this information any more widely than necessary. Vaccination status is medical information that must be kept confidential.

While anonymized information is okay to share widely—e.g., “80% of our employees are vaccinated!”—each employee’s vaccination status should be treated as confidential, even if the fact that they are wearing a mask to work seems to reveal their status publicly.