New Federal Labor Rule Changes Worker Classification Process

posted on 1.22.2024

- Focuses on Independent Contractors, Increases Risk of Fines

Broadcasters and other employers face an increased risk for costly penalties if they fail to comply with a new rule from the U.S. Department of Labor that makes it harder to classify a worker as an independent contractor.

The change makes it imperative that broadcasters review their prior classifications of workers as independent contractors to make sure they remain in legal compliance.

TAB’s FCC legal counsel, Scott Flick with Pillsbury Winthrop Shaw Pittman, explains that the new rule restores the six-factor "economic realities" test used during the Obama administration, which generally makes it harder to classify a worker as an independent contractor by focusing on the degree to which the worker is economically dependent on the "employer."  

This method replaces the two-factor test adopted by the Labor Department during the Trump administration, which focused principally on two factors–the employer's degree of control over the work and the worker's opportunity for profit and loss.

The six factors of the new test are:

• The opportunity for profit or loss depending on the worker's managerial skill
• Investments by the worker and the potential employer in the work being produced
• The degree of permanence of the work relationship
• The nature and degree of the worker's control over the work
• The extent to which the work performed is an integral part of the potential employer's business
• Whether the work performed requires special skills or initiative

LEGAL ADVISORY:  Employers Face Greater Misclassification Risk Under Resurrected Federal Independent Contractor Rule, Opening Door to Substantial Liability

Managers are encouraged to review the firm’s advisory on the matter, especially considering the substantial costs and penalties a business could face for misclassifying employees as independent contractors.

For matters such as determining who is eligible for overtime pay or when an intern needs to be paid, TAB members can consult the Federal Overtime Exemption Requirements legal advisory at TAB.org.

Questions? Contact Oscar Rodriguez or call (512) 322-9944.

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