February 2024 Compliance Updates: DOL Issues Final Rule on Employee Classification

DOL Issues Final Rule on Employee or Independent Contractor Classification

The U.S. Department of Labor unveiled the final rule regarding worker classification under the Fair Labor Standards Act (FLSA) on January 9, 2024.

In a significant move, the final rule revokes the 2021 regulation that primarily focused on two core factors of the economic realities test. These factors include the level of control the worker has over their tasks and their potential for profit or loss through their own efforts or investments. Unlike the 2021 rule, which prioritized these core factors, the 2024 final rule adopts a multi-factor approach, analyzing the totality of circumstances without assigning predetermined weights to specific factors. This approach aligns with the historical preference of the courts for a comprehensive evaluation of the economic reality of the entire work activity.

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IRS Releases Final Instructions for SS-8, Worker Status Form

The IRS released the final instructions for Form SS-8, used to determine worker status for federal employment taxes and income tax withholding. Form SS-8 can be submitted by workers or businesses to clarify if a worker is an employee or independent contractor. The updated instructions, dated January 2024, emphasize that only the Social Security Administration can determine worker classification for state and local government workers under a Section 218 Agreement. The SS-8 form specifically addresses federal tax matters.

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Deadline Approaching to Inform Employees About the Earned Income Credit

The IRS has released Notice 1015 for December 2023, reminding employers to inform eligible employees about the Earned Income Tax Credit (EIC) upcoming deadline.

Employees who worked in 2023 without any withholding and those earning less than $63,398 should be notified about their potential eligibility for the EIC. Employees claiming exemption from withholding on their W-4 form are exempt from this notification requirement.

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