How a few distinctions could impact your business model
The pandemic greatly influenced the growth of the gig economy, upending the traditional 9 to 5 working experience and increasing social reliance on home delivery. Over the last five years, the gig economy grew from a $204 billion industry to over $455 billion in 2023. It’s estimated that about 50% of the U.S. workforce will be freelancing by 2027.
At the same time, the U.S. Department of Labor (DOL) proposed a new rule in October 2022 to redefine who is considered an employee versus an independent contractor.3 After a more relaxed approach to classification under the previous White House administration, this change seeks to align the written law with how case law currently addresses employee classification.
This reversal is already impacting workers and employers across multiple industries, from health care to trucking, construction and delivery.
With this new rule, the DOL seeks to primarily protect workers from the harms of misclassification, but misclassification can also be a challenge to businesses. On top of back wages that may need to be paid if a DOL investigation is found in favor of the worker, federal and state penalties, tax and payroll fines, and even potential for jail time can cause additional challenges for the business and its leaders.
While a 6- to 12-month grace period is expected, businesses who currently incorporate independent contractors into their employment strategies or are considering that business model will need to take into account the revised classification process once it’s approved in order to avoid such penalties.
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This information is intended for informational purposes only. Protector Plans Executive Liability is not liable for any loss or damage arising out of or in connection with the use of this information.