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Nikki Jackson, MBA, CPCU, ARM, CDMS
Vice President of Strategy & Marketing |
US DOL: Final Rule on Worker Classification Announced
I received a question on this from a claims adjuster who primarily manages workers' compensation claims for a construction company. Sharing my oversimplified response.
You know how sometimes people work for a company as employees, and other times they work independently, like doing freelance or contract work? Well, the U.S. Department of Labor just made some new rules to help everyone understand when someone should be considered an employee or an independent contractor.
It's important because being classified as an employee or an independent contractor affects things like how much money you get paid and what rights and protections you have at work (workers' compensation laws typically cover employees but not independent contractors. If the new rules lead to more workers being classified as employees, it means a broader group of individuals would be eligible for workers' compensation benefits). The government wants to make sure that workers are treated fairly, and companies follow the rules.
The new rules basically say when deciding if someone is an employee or independent contractor, you have to look at a bunch of things. Like, if the person can make or lose money from their work, how much they've invested in it, how long they're planning to work with the company, how much control the company has over their work, whether their work is really important for the company, and their level of skill and independence.
This helps prevent companies from treating workers unfairly by calling them independent contractors when they should be employees. The government believes if workers are misclassified, they might not get paid enough or receive the rights and protections they deserve. When thinking about the types of companies, my mind immediately goes to gig economy platforms, construction and trades, tech and startups, healthcare, and transportation, but there are many others.
They also got rid of a rule from 2021 that they didn't think was quite right. The new rules are based on what courts have been saying for a long time about whether someone is an employee or an independent contractor. It's kind of like making sure everyone plays by the same rules. So, no more loopholes for companies trying to be the cool kid who bends the rules – everyone's in the same sandbox now.
It will be interesting to see how this unfolds. The changes in rules might lead to legal challenges or disputes as employers and workers adapt to the new criteria (for those of us in workerscompensation, we know employers are required to provide workers' compensation for their employees. If more workers are classified as employees under the new rules, employers may see an increase in insurance costs as they expand coverage to a larger workforce). Clarifications and legal precedents that emerge from these challenges could further shape how workers' compensation laws are applied in cases involving employee classification.
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