02/18/2021

Nonprofits: Classify Workers Correctly

The Department of Labor is watching

The U.S. Department of Labor (DOL) recently clarified classification of independent contractor status in a final rule that is scheduled to be effective March 8, 2021. The final rule reaffirms an economic reality test, which demonstrates whether individuals are in business for themselves or actually economically dependent on the business for work, by evaluating two core factors:

• The nature and degree of control over the work.
• The worker’s opportunity for profit or loss based on initiative and/or investment.

Three other factors may also provide clarity if the first two don’t point to the same classification:

• The amount of skill required for the work.
• The degree of permanence of the working relationship between the worker and the potential employer.
• Whether the work is part of an integrated unit of production.

It’s important to note that evaluating how the work will actually be done is more relevant than evaluating based on what is theoretically possible.

Please select this link to read the complete blog post from OSAE Member VonLehman CPAs & Advisory Firm.