Historically, the Department of Labor and courts have used what is called a “totality of the circumstances” analysis to classify workers as either employees or independent contractors. The factors include, but are not limited to the following:
- Opportunity for profit or loss
- The degree of control by the employer over the worker
- Whether the work is an integral part of the business
- Skill and Initiative
These six factors are what is listed, but “totality” can mean an indefinite amount of factors being considered when differentiating between employer and independent contractor. This potentially never-ending list of factors makes interpretation completely subjective and provides no clarity when trying to differentiate between the two worker classifications; therefore, skeptical at best judgements – from the perspective of independent contractors – regarding the accuracy of classifications of workers are the fear. Eliminating any bias and abiding by strict, unwavering criteria when ruling on worker classification is the goal. Under the Biden rule, carriers could be misclassified as employees, which would be detrimental to the broker marketplace.
In January of 2021, right before President Trump left office, the DOL published the “Independent Contractor Status Under the Fair Labor Standards Act” (2021 IC Rule). The 2021 rule relied heavily on two core factors that hold the most weight and - depending on the answers - are most indicative of the worker’s status as either an employee or independent contractor. Those core factors were the degree of control over the work, and the worker’s opportunity for profit or loss. If these two factors pointed toward the same worker classification, there is a great chance that the classification is correct. There were other factors, but these two provided industry stakeholders and businesses more clarity and certainty in their classification.