Small Business Owners Beware: The DOL is Bringing New Changes to Independent Contractors

The Department of Labor is stirring up some trouble for small business owners as they propose changes to the way independent contractors are classified under the Fair Labor Standards Act. This new rule, proposed by the Biden administration, aims to reduce the number of workers wrongly classified as independent contractors, thereby granting them the labor protections of employees.

Previously, the Department of Labor under President Trump weighed the 6 factors determining an independent contractor's classification differently, focusing more on worker control and profit-making opportunities. However, President Biden's new rule would revert to the original weighing model where all factors are considered equally.

Independent contractors are self-employed individuals who provide services to another entity without being an employee. Unlike employees, independent contractors are responsible for paying their own taxes and don't receive benefits such as health insurance or retirement accounts.

With the rise of the gig economy, the number of small business applications has seen a 53% increase from 2019 to 2021. Many of these businesses rely on hiring independent contractors, and a majority (78%) plan on engaging with freelance talent during economic uncertainty. The reason for this is that 84% of freelancers prefer this lifestyle, as opposed to traditional employees.

This proposed update has faced opposition, mainly from companies heavily dependent on independent contractors. Reclassifying an Uber driver as an employee, for example, would pose a significant financial burden on the company. The public comments on the proposal were accepted until November 2022, and a ruling is expected this year. If passed, there are likely to be many legal challenges.

So, small business owners, keep your eyes peeled and stay updated on the latest regulations and news. Bigglone is here to make navigating the red tape of small business legislation a breeze. Let the experts do the research for you, so you can focus on running your business.

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