The misclassification of employees as independent contractors can have serious consequences for both workers and employers. For employees, being misclassified means missing out on essential benefits and protections that come with being an employee, such as minimum wage, overtime pay, unemployment insurance, and workers’ compensation. Here we explain the new independent contractor law for employees, helping you navigate your rights and responsibilities under the changing landscape.
The Essence of the New Law
The new independent contractor law, effective March 11, 2024, seeks to establish clear criteria for classifying workers and ensure that employers cannot sidestep their responsibilities by incorrectly labeling employees as independent contractors. This law recognizes that many independent contractors may be economically dependent on employers, yet lack the benefits and protections typically afforded to employees.
Benefits and Protections for Employees
One of the most vital aspects of the new law is the extension of essential benefits and protections to properly classified employees. By ensuring workers are accurately classified, this legislation allows employees to access benefits such as healthcare coverage, retirement plans, and paid leave. Furthermore, employees can expect to receive workers’ compensation and protection under employment laws, safeguarding them from unfair treatment and exploitation.
Determining Employee or Independent Contractor Status
The new independent contractor law outlines several criteria for assessing whether a worker should be classified as an employee or an independent contractor. Adopting these guidelines ensures a more systematic approach to classification and reduces the chances of misclassification. The new law looks at six factors, giving no individual factor a predetermined weight. In the past, certain factors weighed more than others, but now the court will look at all the factors together. These factors include:
- Opportunity for profit or loss depending on managerial skill (do you make any business decisions that can affect the profit/loss of the company?)
- Nature and degree of control (how much does the employer control your work?)
- Degree of permanence of the work relationship (how long are you working for the employer?)
- Is work performed an “integral” part of the employer’s business (are you performing work that is an essential part of the employer’s business?)
- Specialized skill and initiative (do you provide special skills or is your work similar to what other employees are doing?)
- Relative amount of investment of capital or entrepreneurial effort by the worker compared to investment by potential employer (do you provide your own tools for the job or do you use the employers?)
The new law allows for other evidence to be considered in addition to the criteria above. So, if you have been working for an employer as an independent contractor and think that you should be an employee, contact an employment attorney. You may be entitled to additional compensation.
Implications for Employers
For employers, the implementation of the new law has significant implications. This legislation will require employers to re-evaluate their business practices and employee classification methods. Employers must ensure that the classification process is in compliance with the law to avoid legal repercussions and potential financial penalties. Employers could have to pay wage law violations, unpaid employment taxes, I-9 violations, unemployment insurance shortfalls, unpaid workers compensation premiums, and much more.
Increased Legal Protections for Workers
The new law not only enhances protections for employees but also strengthens legal remedies for those facing misclassification. Under this legislation, unfairly treated workers can report the misclassification and seek resolution through administrative channels, like the Department of Labor, or legal proceedings. These enhanced legal protections act as a deterrent for employers who may be tempted to misclassify employees to evade payroll taxes and obligations.
Conclusion
The implementation of the new independent contractor law marks a significant milestone in protecting the rights of workers. By accurately distinguishing between employees and independent contractors, this legislation promotes equitable treatment, grants access to essential benefits, and strengthens legal remedies for those wrongly classified. If you think you may be misclassified as an independent contractor, speak with an employment attorney as soon as you can.
This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your specific set of facts. Please read the Terms and Conditions for additional information.