The Midwest. One of the few places in the United States where it can range from 100 degrees in the summer to -40 in the winter. What a time to be alive! While the students in your District might continue to sing “Let It Snow!” school administrators (and parents) are ready for a reprieve from the snow, wind, and sub-zero temperatures. Since you (likely) have no place to go (See what I did there? Frank Sinatra’s classic has so much potential.), today seems like the perfect opportunity to leaf through the newest Department of Labor rules on the classification of independent contractors which go into effect March 11, 2024.
As a reminder, why should you care as a school district? Failure to comply with the independent contractor rules can be costly. Misclassification of an employee as an independent contractor can cost the district back taxes and penalties from the IRS. Sometimes districts attempt to make clever arguments about why an individual is not an employee but an independent contractor. These arguments usually fail to be successful. Sadly, the IRS is not an agency that rewards creativity.
Starting in March, the IRS will apply six factors to determine if an employee is an independent contractor under the FLSA. The factors include: opportunity for profit or loss depending on managerial skill; investments by the worker and the potential employer; degree of permanence of the work relationship; nature and degree of control; extent to which the work performed is an integral part of the potential employer’s business; and skill and initiative. None of the factors are dispositive standing alone. This is a tougher standard than existed in the past.
Before looking at contracting with an individual for services under the theory the individual would be an independent contractor, a district should conduct an analysis under the six-factor test above. Additionally, an employee cannot waive their status as an employee to be classified as an independent contractor. It is the district’s responsibility to ensure that employees are properly classified under the FLSA.
If you are looking at classifying an individual as an independent contractor, consider giving your school attorney a call just to talk through the new test and factors. We also conduct full FLSA audits for school districts for a flat rate. You can enjoy a ray of sunshine (that IS what you call the KSB lawyers, right?) in your building and get all of your FLSA issues addressed at one time. If you’re a KSB client, give any of us a call or drop us a line at ksb@ksbschoollaw.com. Let it snow?!