A Spotlight on Independent Contractors
April 1, 2024

In recent months, the rules surrounding independent contractors have received some attention. And it’s critical that businesses understand and evaluate these relationships.

Here what’s new:

  • Illinois passed the Freelance Workers Protection Act on August 4, 2023, that goes into effect on July 1, 2024. This Act defines a freelance worker, outlines required elements of the contract, and sets minimum payment terms, along with other provisions. The Illinois Department of Labor is providing sample contracts at no cost. The Act applies to contracts that take effect on or after July 1, 2024. It’s important to note that independent contractor status in the construction industry has its own set of rules which can be very strict.
  • The U.S. Department of Labor released an updated definition of independent contractors as it relates to the Fair Labor Standards Act on January 9, 2024, which recently went into effect on March 11, 2024. What changed? In 2021, two of the factors were deemed to carry more weight than the others: the individual’s opportunity for profit and loss; and degree of control the employer/hiring entity has over the work. The DOL’s newly released definition looks at all 6 factors equally and takes into account the “totality of the circumstances.” As an overall statement, the test is designed to determine if the worker is economically reliant on the employer for work.

And let’s not forget that every state has its test, and the IRS has their long-standing 20-factor test that now focuses these factors into three key categories. To create the basis for defining someone as an independent contractor, the work relationship needs to be evaluated through all three tests.

Where to begin? Learn the rules. Researching the different tests that apply to your business, and working with HR and legal counsel to analyze and confirm these relationships is more important than ever. Getting this wrong has significant consequences. Now is the time to be proactive and confirm you have the right structure in place, not only to protect your company, but to protect those workers who add value to your business.

The Client HR Services team is here to assist you with this process. Contact Sue Winkler, Director of Client HR Services, at swinkler@millercooper.com for more information.

 

You might also like

HR Compliance Alert: Reminders of Upcoming Deadlines 

OSHA summaries (Form 300A) should be posted from February 1 to April 30 for all employers required to comply with recordkeeping requirements. For all Aggregate Large Employers: It’s 1095 time.  Due dates for plan year 2023 are: February 28, 2024: employers filing...

read more
Got Independent Contractors? Get to Know Form W-9

Got Independent Contractors? Get to Know Form W-9

If your nonprofit is perpetually shorthanded, you may have decided to engage independent contractors or freelancers to pick up some of the slack. Just make sure you’re collecting the right information from these individuals and filing it with the IRS. Clean paperwork...

read more