DOL: If You Were an Independent Contractor, You Probably Still Are

Commenters sent the department 55,400 comments about the department’s new draft regulations.

The new six-factor test: DOL officials now plan to use six factors to determine whether you or other workers are independent contractors:

1. 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.
5. The extent to which the work performed is an integral part of the potential employer’s business.
6. The worker’s skill and initiative;

Life industry player concerns: DOL officials note in the preamble, or official introduction, to the final rule that NAIFA, Finseca, the American Council of Life Insurers and other life and annuity issuers and industry groups wrote to complain that the proposed regulations threaten the independent status of agents, brokers and advisors.

“Having considered the comments, the department continues to believe that this rulemaking will not jeopardize legitimate independent contracting arrangements,” officials say in the preamble. “Fears to the contrary are not realistic given that the department is adopting guidance derived from the same analysis that courts have applied for decades.”

The ACLI argued, for example, that requiring independent contractors to have the ability to set prices conflicts with the reality that life and annuity commission rates may be built into insurance regulations.

The ACLI also noted that any requirement that independent contractors be separate from companies might conflict with regulator requirements for life agents and brokers to have legal connections with life insurers.

In response to a DOL suggestion that independent contractor status might depend partly on how much agents and brokers invest in their businesses, the ACLI noted that the spending requirement might punish thrifty agents and brokers.

The DOL response to the concerns: Officials responded to the concerns by softening language in some sections and emphasizing the role of the “totality of the circumstances” analysis in providing flexibility.

In another section, relating to a worker’s “managerial skill” and use of skill to impact economic success, the department changed the language to refer to a worker having an “opportunity” to exercise skill to affect success, rather than whether a worker actually succeeds in doing so.

Officials eliminated a requirement that producers or other employees spend as much as the employers.

“As an initial matter, the department is not giving any factor any greater predetermined weight than any of the other factors for all of the reasons explained in this final rule,” officials say. “And as reiterated in this final rule, workers will not be ‘deemed employees’ when applying the economic realities analysis based on one fact or factor because the analysis considers the totality of the circumstances.”

In a discussion of a section about how “integral,” or central, a worker is to a business, the department said the “integral factor” would be just one part of the department’s classification analysis.

The ACLI asked the department to state that the integral factor is, at most, a neutral factor for insurance workers.

Analysis of the integral factor “is specific to the factual circumstances of a particular relationship, and the department cannot broadly make a determination about the status of an entire sector of workers whose economic relationships are varied,” DOL officials say in the preamble. “Therefore, the department declines to provide exemptions from a particular factor for certain industries.”

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