November 2022 Volume 4

OPERATIONS & MANAGEMENT

4. Nature and degree of control. Here, the evaluation considers factors such as: (a) does the company set the schedule for the individual; (b) does the company supervise the individual’s work (or reserve the right to do so); (c) does the company limit what the individual can do for others; and (d) does the company control prices or rates for the individual’s services. The more control by the company/employer, the more this factor leans toward employee status. 5. Extent to which the work performed is an integral part of the company/employer’s business. This is not about whether the individual is integral, but the work itself. Are the individual’s services critical, necessary, or central to the business? If yes, the individual looks more like an employee. 6. Skill and initiative. Does the individual use specialized skill versus relying on training by the employer/company? Again, the more that the company appears to be “in charge”, the more potential difficulty in upholding the independent contractor status. By now, I am sure that at least some of you are thinking – ugh; this is not going to be helpful if we have independent contractors. And I get that. But I do think it is important to remember a few “bright side” points: • The rule is not yet final. Interested parties have until 45 days to submit public comments. • It is a “totality of the circumstances test” so that you have multiple avenues to say how or why someone is (or is not) an independent contractor. In other words, failing at one factor is not fatal to the analysis. • The DOL did not go so far as to the “ABC” test that we see in some states. And the DOL discusses this in the commentary, which I read as suggesting that they would have supported this test if they thought it was consistent with the precedent of the Supreme Court. Under the ABC test, everyone is considered to be an employee unless the individual satisfies each/all of the following: (a) the individual is free from the company’s control in how he/she performs the work, both under a written contract and in reality; (b) the individual performs work outside the usual course of the company’s business; and (c) the individual is “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” Dynamex Operations W., Inc. v. Superior Court. The DOL characterized the ABC test as a “simpler and clearer standard,” and you can see why – it is much more difficult to meet each of the factors and failing at one ends the analysis.

In short, misclassification, i.e., engaging independent contractors who are functionally employees, continues to have potential far reaching and expensive consequences. This proposed rule change is just another reason for companies to review their independent contractors and evaluate whether the individuals meet that designated status.

Johanna Fabrizio Parker is a partner in Benesch's labor and employment group. Her practice involves representing and counseling management clients in a wide range of complex employment matters, including claims of discrimination, harassment, and retaliation brought under federal and state law, as well as wage and hour claims, and matters involving noncompetition agreements and trade secrets. She can be reached at jparker@ beneschlaw.com.

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FIA MAGAZINE | NOVEMBER 2022 47