The DOL Rule: Clarifying the confusion about worker misclassification

The Department of Labor’s (DOL) recent “Worker Classification” rule might be a topic where facts and points of view are coming at you from all sides. Your eyes may glaze. Your cursor may be ascending to the top of this page in a mad dash to explore other topics. 

But stick with me for about 500 more words, and I promise you will have a better understanding of a few points that have been misunderstood or misinterpreted.

ABC, easy as 1-2-3…4-5-6? The DOL’s six factor test for worker classification

The new DOL rule clarifies the six-factor test to determine whether a worker should be classified as an employee or a contractor. This test has been in place for years, but confusion has crept in, and this rule aims to clear up some of the ambiguities about the test. 

This is not an “ABC” test that requires all six of the factors to be met to determine classification. Even if a company fails to meet some of the six factors in the DOL Rule, the finding would not necessarily imply that the company misclassified employees as independent contractors. 

First, let’s review the six factors in the Department of Labor’s multifactor test:

1. The worker’s opportunity for profit or loss depending on managerial skill.

2. Investments by the worker and the potential employer. 

3. The degree of permanence of the work relationship.

4. The nature and degree of control exercised by the potential employer over the worker.

5. The extent to which the work performed is an integral part of the potential employer’s business.

6. The skill and initiative exercised by the worker.

Courts have long used some or all six factors to determine whether workers are appropriately classified as independent contractors. The final DOL rule also has several similarities with guidance from the Obama administration, which also evaluated the “totality of the circumstances.”

Let’s look at a few ways to help ensure some of the rules are met. We can’t get into all six in this article, so we’ll focus on a few that have been the most muddled. 

Factor 3: The degree of permanence of the work relationship

Communities can use data provided by their staffing solutions to track cumulative hours worked by a contractor within a period of time to help ensure the community does not have a permanent relationship. 

Additionally, communities can reduce the frequency of relying on one, or a small group of independent contractors, to consistently fill shifts. Consistently bringing the same contractors into your community over an extended period of time could have the appearance that you simply don’t want to employ a worker and are forcing them to be 1099.

Factor 4: The nature and degree of control exercised by the potential employer over the worker

One common point of confusion is that some staffing solutions a contractor uses to find shifts are the employer of that contractor. Some staffing solutions can demonstrate that they do not have control over users of their platforms – caregivers or communities – as it would a corporate employee of the staffing solution. Contractors can use a variety of platforms at any time to find potential shifts. Contractors are free to work when and where they want, without any input or restriction by any particular staffing solution. Contractors, when using certain staffing solutions, are also free to choose pay rates as agreed upon with the community. 

Platforms using such models are not involved in setting, confirming, negotiating pay rates with caregivers or communities or accepting rates on anyone’s behalf. 

Factor 1:  The worker’s opportunity for profit or loss depending on managerial skill

Caregivers working as independent contractors are skilled healthcare providers who must invest in their education and certification, as well as tools such as their scrubs, cell phone and transportation. 

As noted above, contractors can use a variety of platforms to find shifts to work when and where they want, without any input or restriction by any particular staffing solution. The ability to choose shifts with pay rates that can match the investments made by the contractor demonstrates the contractor’s control over potential profit or loss. 

Is this all still clear as mud? Well, none of this is meant to serve as legal advice, and you should check with your legal counsel to evaluate the impact of these rules on your specific circumstances.

Feeling less confused? GREAT! While none of this should be considered legal advice, having a better understanding of the impact of the DOL rule will help you to have more informed conversations with your legal counsel as well as your team.

Oh! One more thing… The National Labor Relations Board (NLRB), which is a separate entity from the Department of Labor, has also recently issued a rule, the NLRB Rule, that outlines the criteria used to determine joint‐employer status under the National Labor Relations Act. Notably, the risk of joint employment stands somewhat apart from the risk of worker misclassification— determining whether a worker is categorized as a W‐2 employee or a 1099 contractor. 

The possibility of multiple entities being considered a joint employer arises when control is shared by multiple entities over an employee. This means joint employer status can apply to a community even if a worker was engaged through a traditional W‐2 staffing agency.

This is a topic definitely worthy of another post. 

Charles Turner is currently the CEO of KARE, which is the leading solution to solving the labor shortage in senior care. Prior to KARE, Charles was the President and CEO of Lifewell Senior Living and PinPoint Senior Living, where he led development and operating initiatives for the companies.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.

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