The rules for classifying independent contractors (IC) per the National Labor Relations Board have changed, according to HR Morning. This goes against the precedent already set by a circuit court in Washington, D.C.
The new rule, the entrepreneurial opportunity standard, indicates that contractors must be in business for themselves, with the possibility of experiencing profit or loss. An IC must not only be able to conduct business with others, but must also exercise his or her right to do so. The FedEx September 2014 case involving FedEx drivers, and the NLRB changed the outcome previously held by the D.C. Circuit Court.
Department of Labor cracking down on falsely identified independent contractors
The Department of Labor has been strengthening state enforcement of the IC rules to ensure that employees are not misclassified. According to a separate HR Morning article, the DOL has begun providing $10.2 million to 19 states for improving better audit support when looking to confirm whether an employer is using contractors incorrectly.
"This is one of many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections," said U.S. Secretary of Labor Thomas E. Perez in a statement issued by the DOL. "Today's federal grant awards will enhance states' ability to detect incidents of worker misclassification and protect the integrity of state unemployment insurance trust funds."
What employers can do
The safest way to ensure compliance is to follow the IRS's three-pronged test and the fair labor standard's act's own separate test.
Another change by the NLRB
The NLRB might change its way of testing for joint employers, so that McDonalds, for example, may become responsible for its franchise's employees as well as the franchises themselves. For companies that hire from temporary services companies, this could become a crucial issue.