5 On Your Side

Are you an employee or independent contractor? Change could be coming

Posted October 22, 2020 11:43 a.m. EDT
Updated October 26, 2020 9:22 a.m. EDT

Time is running out to weigh in on a proposed change that could impact all sorts of employees.

The new rule the US Department of Labor is considering would redefine the parameters of when an employee can be classified as an independent contractor.

Why does that matter?

Some legal experts say it will impact workplace legal protections and benefits.

"It really could affect a broad range of individuals across a broad range of industries," says Laura Noble, an employment law attorney with the Noble Law Firm.

More employees could be hired as independent contractors, a status that lacks protections under the federal Fair Labor Standards Act.

Contractors don’t have the same "rights to things like overtime pay and minimum wage, but also other employment right protections in the workplace, like workers’ compensation, unemployment insurance, protections against discrimination in the workplace," said Noble.

She says the change in job classification would also impact benefits.

"You’re not going to have paid vacation time or paid sick leave, or health care or dental or a 401k or pension plan. That’s going to be something that you’re going to have to pay for out of your own pocket," said Noble.

Those who support the update say the current rule needs clarification.

They also believe the loosening will encourage entrepreneurship.

The Labor Department says the change will "…reduce litigation, increase efficiency and increase job satisfaction and flexibility.”

For companies, there’s an added financial benefit to hiring contract workers instead of employees, the company doesn’t have to pay payroll tax, Social Security taxes or workers compensation insurance.

The public can weigh in on the issue through the Labor Department’s website through Monday.

Comments will be reviewed, and the change could be adopted as early as December.

Noble added a point for small business owners who continue to hire employees.

"You may find yourself undercut in competition by those who would now choose to make them all independent contractors because it saves the money," she said.

Noble wants to get the word out because she’s concerned many employees who could be impacted have no idea "what the potential unintended consequences are of making it easier for companies to make people classified as independent contractors," she said.

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