The U.S. Department of Labor ("DOL") has a new six-factor test for determining whether workers are "independent contractors" or employees. Each factor has equal value in making the determination if the worker is "economically dependent" upon the employer (and thus an employee) or an independent contractor. These new guidelines become effective March 11, 2024.

The six (6) factors are:

1. The worker's opportunity for profit or loss (ability to increase profits through efforts and affect economic success or failure), depending on managerial skill. Independent contractors can:

  • Determine/negotiate charge or pay for work provided.
  • Accept or decline jobs.
  • Choose the order and/or time in which the jobs are performed
  • Engage in marketing, advertising, or other efforts to expand their business or secure work.
  • Decide to hire others, purchase materials, and/or rent space.

2. Investments by the worker and potential employer. Independent contractors:

  • Invest in tools and equipment to work for multiple companies (capital and entrepreneurial investments).
  • Incur the costs associated with workers' labor.
  • Make investments of materials, supplies, or labor into work performed.

3. The degree of permanence of the relationship. Independent contractors:

  • Have a work relationship defined by duration, non-exclusivity, project basis, or sporadic basis.
  • Market their services or labor to multiple entities.
  • May be seasonal or temporary in contract but will have say in the sporadic working relationship (exercises their independent business initiative).

4. The nature and degree of the potential employer's control over the work. Independent contractors:

  • Set the schedule.
  • Supervise the performance of work including the use of technology to monitor progress and performance, the right to discipline workers, the compliance of safety and quality requirements, and training and contractual standards.
  • Are not explicitly limited in or restricted from working for others.
  • Have control over pricing or rates for services.
  • Have control over the marketing of services or products provided.

5. The extent to which the work performed (the function) is an integral part of the potential employer's business. Independent contractors:

  • May contribute to the employer's principal business but are not critical, necessary, or central to it through the making of products or provision of services.

6. The worker's skill and initiative. Independent contractors:

  • May have more specialized skills but will utilize them with business-like initiative.
  • Are not dependent on training from the employer to perform the work.