The issue for businesses of whether workers are properly classified as independent contractors or employees has long been a challenge. The rules regarding such classification (or at least the manner in which the rules are enforced) seem to change with each administration in Washington and also vary by federal agency as well as by each state government. After unsuccessfully attempting to delay the implementation of the rule issued by the Department of Labor (DOL) in the last hours of the Trump administration in early 2021, the Biden DOL now intends to issue its own rule.

Federal and state agencies, and the courts, have for many years relied on a number of factors to determine whether a worker is an employee or an independent contractor with some describing the ultimate issue being who is in control of the work being done and others articulating the ultimate issue as the "economic realities."  Regardless of the label, the analysis involves the consideration of a number of factors (at one time the IRS used a 20 factor test), which the Trump administration in January 2021 described as follows:

• The nature and degree of control over the work.
• The worker's opportunity for profit or loss.
• The amount of specialized training or skill required for the work that the potential employer does not provide.
• The degree of permanence of the working relationship (focusing on the continuity and duration of the relationship and weighing toward independent contractor status if the relationship is definite in duration or sporadic).
• Whether the work performed is "part of an integrated unit of production."

The current rule from the Trump DOL states that the first two factors are the "most probative" and therefore should be "afforded greater weight." The first factor – nature and degree of the individual's control over the work – supports independent contractor status if the individual exercises "substantial control over key aspects of the performance of the work," such as setting their own schedule, selecting their own projects, or having the ability to work for others. The second factor – the worker's opportunity for profit or loss – involves consideration of the individual's exercise of initiative or management of their investment or capital expenditure. The ability to affect earnings only by working faster or more hours does not support independent contractor status.