Independent Contractor Compliance: Key Factors Every Business Must Know

Hiring independent contractors is nothing new for business owners. In fact, 25–35% of workers in the U.S. have worked for themselves in some capacity.

Since classification between an employee and an independent contractor falls solely on the employer, it’s critical to get it right. Misclassification can lead to serious legal and financial consequences.

This month, the Department of Labor (DOL) highlighted areas they will be monitoring closely to ensure flexibility in today’s labor market while still protecting core worker rights.

The 2024 Final Rule on Independent Contractors

In January 2024, the DOL issued a final rule changing the criteria for classifying independent contractors. Under this rule, employers must apply a “totality of the circumstances” analysis—meaning no single factor outweighs the others.

The test includes six key factors:

1. Degree of control: How much control does the employer have over how the work is done?

2. Opportunity for profit or loss: Can the worker make business decisions that affect their own earnings?

3. Skill and initiative: How much specialized skill or independent decision-making is required?

4. Permanence of the relationship: Is the relationship temporary, project-based, or ongoing?

5. Investment in equipment or materials: Has the worker invested in tools, equipment, or resources necessary for the work?

6. Integral nature of the work: Is the service a key part of the employer’s core business?

These six factors serve as a starting framework when deciding how to classify a worker, but they are not exhaustive. Employers should consider the full picture when making determinations.

Partner With Experts

Classification can be complicated, but you don’t have to navigate it alone. Atlas Services is here to partner with you to make sure these decisions are handled correctly and confidently.

Have questions about worker classification? Reach out to our team, we’re here to help!