The U.S. Department of Labor today issued guidance to assess whether a worker is properly classified as an independent contractor. The guidance also helps to determine who is an employee under the Fair Labor Standards Act, which determines overtime, unemployment insurance and other obligations. Independent contractors are not covered under the act.

The guidance was issued with no opportunity for notice and comment from the public. NAHB is analyzing the rule to ensure it does not place undue burdens on our members to show that subcontractors that they hire are independent contractors and not employees.

The purpose of the new guidance, according to the DOL, is to educate members and help them comply with the law so that they can clearly determine whether their workers are employees or independent contractors. NAHB plans to urge Congress to use its oversight authority to ensure DOL hasn’t overstepped its boundaries.

The law permits home builders, remodelers and other businesses the use of independent contractors, provided such workers are not “employees” under existing tax, employee benefit, labor and employment laws.

Employer misclassification occurs when an employer incorrectly defines a worker as an independent contractor rather than an employee.

Responding to mounting evidence that many employers nationwide have classified some of their employees as independent contractors as a cost-savings measure, there has been increased federal and state focus on whether workers are properly designated as independent contractors or if they instead should be considered company employees.

The federal guidance outlines tests commonly used to determine worker status for purposes of unemployment insurance, workers’ compensation, and revenue, or taxation.

NAHB also has a new guide to help you understand the law in your state — and any other state where you may do business. This valuable tool is the latest benefit for NAHB members, who otherwise might need to collect the information on their own or buy $349 CDs to get it all in one place. The state-by-state guide examines the laws that determine whether a worker is an independent contractor or employee.

Visit the page to learn more, or download the full guide to keep as a reference.

For more information email David Jaffe at NAHB or call him at 800-368-5242 x8317.