In a bid to overturn the U.S. Department of Labor’s (DOL’s) final rule, which aims to tighten the criteria for classifying workers as independent contractors, Representative Kevin Kiley, R-California, and Senator Bill Cassidy, R-Louisiana, have introduced the Congressional Review Act (CRA) resolutions. While it’s scheduled to take effect on March 11, 2024, several business organizations are challenging the rule in court. Continue reading to dive into the key aspects and implications of this rule, the responses from stakeholders, and the potential outcomes of the ongoing battle.
The Controversial Rule
The new rule, set to replace the 2021 framework, introduces a more complex six-factor test to determine whether a worker should be classified as an employee or an independent contractor. This shift has been resisted by several business organizations, including the U.S. Chamber of Commerce, which has joined a lawsuit challenging the rule. The Chamber of Commerce argues that the new rule fosters ambiguity, restricting businesses' ability to provide essential training to independent workers.
Criticisms And Concerns
Representative Kevin Kiley has strongly criticized the new rule, alleging it restricts the freedom of U.S. workers to operate as independent contractors. He contends the rule will jeopardize the livelihoods of millions of independent professionals and take away the freedom of many others to enjoy flexible work arrangements.
In addition, introducing the six-factor test has raised concerns among businesses, particularly small businesses, regarding the potential confusion in determining worker classification. This uncertainty threatens the independent contractor model, enabling companies to scale their operations and retain specialized expertise while granting workers flexibility and control over their work activities.
Six Factors Of The New Test
The six factors of the new test include the following:
1. The degree of employer control over the work
2. The worker's opportunity for profit or loss
3. The level of skill and initiative required for the work
4. The permanence of the working relationship
5. The worker's investment in equipment or material
6. The extent to which the service rendered is integral to the employer's business
Seeking Clarity And Challenging The Rule
Representative Kevin Kiley has called for the withdrawal of the independent contractor rule and has requested specific guidance from the DOL’s Wage and Hour Division Administrator on the criteria for employee and independent contractor classification. His concerns center on the need for clarity and understanding amidst the complexities of the new rule.
The Road Ahead
Despite the intense efforts to challenge the rule, the odds of a successful resolution remain uncertain. The Democrat-controlled Senate presents a formidable obstacle, requiring a two-thirds majority to overcome a potential presidential veto. In addition, the rule faces multiple legal challenges, with lawsuits alleging its illegality and deviation from the Fair Labor Standards Act (FLSA).
The battle over the worker classification rule is poised to have far-reaching implications for businesses, workers, and the regulatory landscape. As the debate unfolds, stakeholders eagerly await the resolution of this issue, mindful of the potential impact on the workforce and the broader economy.
Advice For A Small Business Owner
We’ll make it simple – consider partnering with a professional employer organization (PEO). PEOs offer a compelling avenue for small businesses to address these challenges. By partnering with a PEO, small businesses can leverage expertise in HR management, gain access to comprehensive guidance on employment regulations, and receive tailored support in navigating worker classification complexities. As the landscape of labor regulations continues to evolve, the role of PEOs in assisting small businesses in effectively classifying workers and ensuring compliance with changing labor standards cannot be overstated. Meet Group Management Services (GMS), a certified PEO (CPEO), ready to take on the administrative burdens small business owners don’t have the time and energy to worry about. Get a quote from us today to start your journey with a simpler, safer, and stronger business.