The Labor Department’s proposal for contractors has six criteria. What are travel ICs like?: Travel Weekly | Tech US News


Mark Pestronk

Mark Pestronk

Q: In his Oct. 24 Legal Reports column, “Labor rule coming to clarify IC status,” he said many independent contractor (IC) travel agencies would not approve the Labor Department’s proposed rule because it would not meet the fifth rule of six criteria for valid IC status: “Environment in which the work performed is an integral part of the employer’s business.” However, he also wrote that the Labor Department emphasizes that, “no one factor or subset of factors is necessarily determinative, and the weight to be given to each factor may depend on the facts and circumstances of the particular case. Moreover, these six factors are not exhaustive, [and] additional factors may be considered.” First, what are the other five criteria? Second, how would most IC-host relationships be judged?

A: Here are the other five factors the Labor Department says it will weigh. As with the “integral part” factor, each must be explained before one can understand what the government is really driving at:

1) Chance of profit and loss depending on managerial skill. This means that the IC could suffer a loss as a result of the independent decisions of the IC. This factor may also consider whether the worker can, at least in theory, negotiate the salary; declining work and therefore not earning money; market yourself to get more work; decide to hire employees; buy equipment; or rent space. In my opinion, most ICs would do well here.

2) Investments of the worker and the employer. This means that the IC must make investments in the IC’s own business, such as paying for office equipment or business cards. The investment required should be more than minimal, but it does not have to be equal to the host’s own expenses. Here again, most ICs could probably pass the meeting.

3) Degree of permanence of the employment relationship. The government believes that true ICs are workers who move from one job to another, such as a freelance journalist, while employees are usually in a company. Unfortunately, most ICs would do poorly here, as they tend to stick with a host they have a smooth and lucrative relationship with.

4) Nature and degree of control. As with all government agency IC testing, the company cannot control how, where, or when the IC operates. The Department of Labor would consider the worker’s schedule, degree of supervision, limitations on the worker’s ability to work for others and the scope of contractual or customer service standards. Most IC relationships should perform well under this criterion.

5) Skill and initiative. This refers to both specialist skills, which advisers certainly possess, and ‘business initiative’, which must be used in conjunction with specialist skills, not just initiative alone. Here again, most IC relationships would do well under this factor.

Therefore, it appears that most CIs would have problems only under the “integral part” and “nature and degree of permanence” criteria. In a future column, I’ll also talk about ways to meet them.


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