On January 10, 2024, the U.S. Department of Labor (“DOL”) unveiled the long-awaited Final Rule explaining when and how employers can qualify workers as independent contractors under federal law. The new Rule, which takes effect on March 11, 2024, restores and clarifies a multifactor test known as the “economic reality” test that had been modified by the 2021 Independent Contractor Rule put in place under the prior administration.
As explained more fully below, employers should use this test to assess all 1099 workers, consultants and contractors to ensure compliance with federal law. Misclassification of employees as independent contractors is a hot topic for DOL enforcement throughout the country, and failure to abide by this Rule is likely to result in legal exposure and steep penalties for noncompliant employers.
