The Legal Corner - John Hagan, Hagan Law Group

February 2024

WHAT I LEARNED IN HR THIS WEEK: DIFFICULT NEW RULES TO COMPLY WITH ARE COMING.

Beginning on March 11, 2024, some or all of your independent contractors can no longer remain independent contractors because a new test from the Department of Labor. That means that you will need to reclassify them as W-2 employees for the purposes of minimum wages, overtime payments and child labor laws under the Fair Labor Standards Act.

Specifically, under the old test, employers needed only prove two factors before they could classify a worker as a 1099 contractor. Now employers must prove six factors that each worker:
1.     Could lose money working for you;
2.     Invested heavily to work for you, for which you will not reimburse him;
3.     Does not and will not work for you for long time period of time;
4.     Significantly controls the work he and his workers perform;
5.     Is not an integral part of your business; and
6.     Utilizes special skills to work for you and acts like an independent business owner when working for you.

These factors are in addition to existing factors that must be proven if your classifications are challenged by the DOL or in court. Start taking take steps now, with the assistance of counsel well experienced with the FLSA, to audit your independent contractors and eliminate/reduce your potential liability.

There are two lawsuits now challenging the DOL's new independent contractor rules. Interestingly, one is from a group of independent contractors who want to stay as independent contractors. They are suing because the new rules don't allow them to do so. Stay tuned!

John P. Hagan

Hagan Law Group LLC

1333 W. McDermott, Suite 200

Allen, Texas 75013

469-519-2760

469-208-5366 – fax

John Hagan - Board Certified Labor and Employment Attorney - Hagan Law Group LLC | LinkedIn