LEGAL
The DOL claims the vast majority of workers
classified as independent contractors are
invalidly classified and the companies engaging
their services are violating the law.
the business even if it is performed
off-premises, or just one component
of the business. For example, carpenters
would perform work integral to a
homebuilder’s business.
•• Does the worker’s managerial skill affect
the worker’s opportunity for profit or loss?
The DOL evaluates whether the worker’s
managerial skill affects his or her
opportunity for profit or loss beyond
the current job (such as by leading to
additional business from other parties
or by reducing the opportunity for
future work) and just working more
hours. For example, can the worker
sub-contract the work? If so, this factor
will weigh in favor of classification
as an independent contractor.
•• How does the worker’s relative investment
compare to the employer’s investment?
Investment by the worker indicates
that he or she is an independent
business, as independent contractors
typically make investments that support
a business as a business beyond
any particular job. However, the worker’s
investment “must be significant in
nature and magnitude relative to the
employer’s investment in its overall
business.” If the worker’s investment is
relatively minor in comparison to the
employer’s investment, this suggests to
the DOL that the worker may be an
employee as opposed to an independent
contractor. For example, if the
employer owns most of the tools or
equipment used for the job that would
weigh in favor of classification as an
employee.
•• Does the work performed require special
skill and initiative? This factor analyzes
the worker’s business skills, judgment
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