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What Are The New Department of Labor Independent Contractor Laws?

Generally, every worker in the country, including North Carolina and Virginia, must be an employee to qualify for worker’s compensation benefits. Employees can be full-time workers, part-time workers, or season-employees.

Workers who are classified as independent contractors do not qualify for workers’ compensation benefits under either Virginia or North Carolina worker’s compensation laws.

When the employer and worker’s compensation insurance company defend a claim based on the notion that the injured worker is an Independent contractor, the worker would then have two options, either they need to show that they are actually employees and then head to a Hearing before the Worker’s Compensation Commission or Industrial Commission or file a personal injury claim against the company that contracted for their work – in order to receive compensation. In the personal injury claim scenario, though, they would need to show fault.

The US Department of Labor (DOL) has helped shape the definition of which workers are employees and which are independent contractors based on their rules and interpretations of the Fair Labor StandardsAct of 1938 (FLSA). The DOL has the authority to enforce the FLSA. DOL’s new rule regarding the employee/independent contractor status became effective on March 11, 2024.

These new rules essentially standardize and codify, under Federal Law, legal concepts which have been established for many years, which concepts can be found in the case law of many States, otherwise known as “common law,” including Virginia and North Carolina, when it comes to who is actually an employee and who is actually an independent contractor.

These laws essentially will cause many more employers who are attempting to run their businesses by hiring “independent contractors” be subject to fines and other penalties due to “misclassification” of their workers as independent contractors vs. employees.

This means that in terms of the rights of U.S. Workers such as their wages, hours, entitlement to certain benefits, the need for payroll taxes and many other issues, those rights will likely be looked upon more favorably by Courts across the U.S., as the new rules are more employee-favorable.

Insofar as whether you are an independent contractor vs. employee in a situation where there is an on-the-job job injury, because State Worker’s Compensation Law is different in each state, the classification a worker on the job will likely still remain under the province of the common laws of the State that has jurisdiction over the claim.

How is a workers’ compensation claim different in compared to a personal injury claim?

Filing a workers’ compensation claim is different than filing a personal injury claim. When we file a worker’s compensation claim, there is no need to prove fault, otherwise known as negligence of the employer or that the employer’s negligence caused your injuries. As long as a claimant suffers an accident while acting within the scope of their employment (doing his or her job), and the accident is the cause of those injuries, the claimant should be entitled to worker’s compensation benefits.

In personal injury claims, the claimant must show that the employer’s negligence caused the accident – and that the claimant wasn’t negligent. The main benefit of a personal injury claim is that you can make a claim for damages related to pain and suffering, in addition to your claims for medical bills, and lost wages, both in the past and into the future. Moreover, in personal injury claims, you may claim future damages related to losses for the remainder of your life expectancy, whereas in most workers’ compensation claims, at least with regard to wage benefits, those benefits are limited to 500 weeks, and are not awarded in a lump sum. All of which means your damages and recovery in a personal injury claim may potentially be much higher.

In addition, in a personal injury claim, your damages and recovery are decided by a Jury, whereas in Worker’s Compensation Cases, your recovery is determined by a Deputy Commissioner, or in Federal Cases, by an Administrative Law Judge. You are not entitled to a Jury.

In worker’s compensation claims, your employer must generally pay you 2/3rds of your weekly wages while you’re on temporary total disability, i.e. held out of work by your doctors, and additional benefits (if you are found to have a permanent partial impairment) once your medical condition has improved to the point that additional care won’t help provide further improvement. (MMI). In a personal injury claim, the claimant is entitled to 100% of their work loss benefits.

In most work injury scenarios, there is insufficient proof to show fault on the part of the employer. It is just a fact that most work accidents are that—accidents.

Also, in most situations where you can show fault, the case ends up being one that is compensable under workers’ compensation law, so that any potential personal injury claim would be barred by the provisions of worker’s compensation law. These laws make very clear that if there is a valid workers’ compensation claim, one may NOT sue his or her employer.

Not only this, but specifically in Virginia, if there is ANOTHER contractor on the same job that may have been at fault for the accident, the worker would also be barred from suing that contractor because that contractor would be considered a statutory employer of the claimant. The laws relating to statutory employees in Virginia are very complex and beyond the scope of the discussion at hand.

The main takeaway is that it is critical for workers that the correct determination is made as to a workers’ job status when he or she is injured. Are you actually an employee or an independent contractor?

The history behind DOL’s employee vs independent contractor review

As to the Federal Codification of the Department of Labor’s laws as they apply to employees, Congress, according to the DOL’s discussion behind the new rules, states that Congress enacted the Fair Labor Standards Act (FLSA) in 1938 to help protect American workers. The protections of the FLSA only apply to employees and not to independent contractors. The DOL states that “independent contractors” “refers to workers who, as a matter of economic reality, are not economically dependent on an employer for work and are in business for themselves.” While the FLSA doesn’t specifically define “independent contractors,” there are numerous specific definitions of employer and employee.

Since the 1940s, the DOL has applied and “economic reality test” which examines “whether, as a matter of economic reality, the worker is economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor).”

Some of the factors used (until the new DOL rules) included the worker’s “opportunity for profit or loss, investment, permanency, control, whether the work is an integral part of the employer’s business, and skill and initiative.”

The New DOL Employee/Independent Contractor Rule

The 2024 rules replaces the prior DOL 2021 rule established under the Trump Administration. That 2021 rule was a rule that tended to favor employers who, in turn, favor classifying workers as independent contractors because employers generally have little legal responsibility to independent contractors.

The 2024 DOL rule will now use the following six “economic-reality test” factors. Each factor has equal weight.

  1. Opportunity for profit or loss depending on managerial skill. This factor assesses the worker’s opportunity for financial success or failure – based on the worker’s own abilities.
  2. Investments by the worker and the potential employer. This factor reviews whether the worker has any direct financial stake in the company’s success.
  3. Degree of permanence of the work relationship. This factor assesses the length of the project, how often the worker works for the company, if the work if project-based, and other determinations.
  4. Nature and degree of control. This factor examines who controls the worker’s schedule, performance, and other determinations.
  5. Extent to which the work performed is an integral part of the potential employer’s business. This factor examines how critical the worker’s job is to the business.
  6. Skill and initiative. This factor examines if the worker has unique skills that he/she brings to the job or whether the employer trains the worker.

The new US DOL rule states that other factors may be considered relevant.

Don’t pay Attention to What the Employer Says as to Your Status.

Note that you cannot “waive away” your status by signing a document saying that you agree that you are a subcontractor. In other words, no matter what the employer calls you, if the “facts on the ground” demonstrate that you are an employee under the law, then if you are employed in the U.S., then that is what you will be considered insofar as the law is concerned.

Please know that whether you are paid with a W-2 or a 1099 is not determinative of your job status.

Generally, if you control your own hours, use your own materials, and work on other jobs – that suggests you’re an independent contractor.

An easy example many can relate to is to think of someone who is a painting contractor. He bids on jobs for many different contractors around town. He shows up at those jobs with his own equipment, on his own time, when he is available to work. The contractors over him have no control as to when he shows up or how he is to perform his painting work. He has not been trained by the entities who hire him, but has acquired his skills of painting over his years of work and experience in various jobs. Once he is finished with the job, he will typically send an invoice for payment to each of the entities who hired him to do his painting work. That is the nature of an independent contractor.

On the other hand, if you report to work at a specific time each day when the employer wants you, you use company tools and equipment provided by the employer, the employer requires that you follow its rules and specifications under threat of termination, you are required to wear a company uniform, and your job with this employer is your only job, those factors suggest you are an employee.

Other job status tests

The DOL is only one agency that reviews the employee/independent contractor status. Other federal agencies that have their own rules include the Internal Revenue Service (IRS) and the National Labor Relations Board (NLRB). And as stated previously, each state is generally controlled by its own rules insofar as these classifications when it comes to injuries on the job.

At Joe Miller Ltd., if you have an otherwise valid workers’ compensation claim, and the employer attempts to deny your claim by classifying you as an independent contractor, we fight to show that you are, in fact, an employee. Never assume that you’re not qualified.

Do not rely on what the employer says or how they pay you. Many times, workers who the employer labels as independent contractors are actually employees and do quality for workers’ compensation benefits. Our North Carolina and Virginia workers’ compensation attorney has helped thousands of workers obtain strong workers’ compensation recoveries. To schedule a free consultation, call lawyer Joe Miller, Esq., at 888-667-8295 or fill out my online contact form. We’ll answer all your questions and guide you through the claims process.

Our law firm does have a way for you to provide your details of your accident and injuries if you simply want to do that electronically from the comfort and safety of your home at any time of day or night. To utilize this service, simply click here: New Electronic Case Review.

We’ll get back to you, typically within 24 hours to provide our response as to whether your situation is one where we can provide you with legal representation. If we require more information, we’ll contact you and ask for that information in order to make that determination as to whether we are the best folks to assist you. If we ultimately determine that we cannot represent or assist you, we will not leave you high and dry. We’ll do our best to provide you with other resources to assist you.

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If you are looking at this site, you or a loved one has probably been hurt. If that's true, you've come to the right place. Helping people who have been hurt is what we do. In fact, it is all we do. Joe Miller Law is a law firm concentrating exclusively on representing people who are injured by the carelessness of others or those hurt on the job. We provide the highest quality legal services to people who have been seriously injured. We practice Personal Injury law and Workmens' Compensation law in both Virginia and North Carolina.