Contractors Lament New Independent Contractor Rule

Framing News,

Originally Published by: Construction Dive — January 18, 2024
SBCA appreciates your input; please email us if you have any comments or corrections to this article.

The exterior of the U.S. Department of Labor, which will implement an independent contractor rule change on March 11. Thinkstock via Getty Images

Dive Brief:

  • Starting March 11, a new Department of Labor rule will change how employers determine if a worker is an independent contractor or an employee. The federal rule, first proposed in October 2022 and published in the Federal Register Jan. 10, will reverse a move made late in President Donald Trump’s term.
  • The 2021 shift by Trump’s administration altered worker classification to focus on two factors: the nature and degree of control over work and opportunity for profits or loss, according to Foley and Lardner. 
  • Under the new “totality-of-the-circumstances” framework — a return to the standard before the 2021 alteration — six nonexhaustive factors will determine a workers’ employment status.

Dive Insight:

With the new framework, the six major factors considered by the DOL when determining employment status will be:

  • Worker’s opportunity for profit or loss.
  • Investments made by the worker and the employer.
  • Degree of permanence of the work relationship.
  • Nature and degree of control over performance of the work.
  • Extent to which the work performed is an integral part of the employer’s business.
  • Use of the worker’s skill and initiative.

Construction employer groups balked at the change. Ben Brubeck, vice president of regulatory, labor and state affairs for Associated Builders and Contractors, called the final rule’s standard “ambiguous and difficult to interpret” in a release last week.

The 2021 rule provided clarity and a “consistent and common-sense economic realities test,” said Brian Turmail, vice president of public affairs and strategic initiatives for the AGC in a statement shared with Construction Dive.

“The only certainty to avoid an enforcement action an employer has under this new test is classifying, or misclassifying, someone as an employee instead of as an independent contractor, potentially stifling the entrepreneurial spirit that has long defined the industry,” Turmail said.

Labor groups, on the other hand, applauded the update.

“Simply put, this rule will ensure the basic rights of all workers, consistent with the Fair Labor Standards Act,” said Mark McManus, general president of the United Association of Union Plumbers and Pipefitters, in a statement shared with Construction Dive.

Worker misclassification is prevalent in the construction industry: An estimated 1.1 million to 2.1 million workers are misclassified or paid off the books in the industry, according to a report from the Century Foundation, a progressive think tank and research group that pursues equity in education, healthcare and work.