Federal law clarifies worker classification: employee vs. independent contractor rules.
This Act establishes clear, federal criteria to determine whether an individual is classified as an employee (entitled to benefits and protections) or an independent contractor (self-employed). For those who do not meet mandatory classification criteria, the law allows them to elect their status. These changes directly impact your labor rights, tax obligations, and access to social benefits by standardizing definitions across key federal laws, including labor standards and tax codes.
Key points
Introduction of a bifurcated classification system: mandatory employee or mandatory independent contractor, based on new, detailed definitions.
Mandatory employee status applies if there is a 'substantial economic relationship' (e.g., working substantially full-time, with compensation primarily based on time worked).
Individuals not meeting mandatory criteria can elect their status (employee or independent contractor) through a written, countersigned agreement with the service recipient.
The Act standardizes the definitions of 'employee' and 'employer' across major federal laws, including the Fair Labor Standards Act (FLSA), the National Labor Relations Act (NLRA), and the Internal Revenue Code.
Penalties are introduced for willful or reckless misclassification of a worker as an independent contractor (15% of compensation paid).
Expired
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