IC Compliance 2023: What You Need to Know Now

Navigating the waters of independent contractor compliance could make you feel a little seasick. From evolving understandings of the IC population to new legislation coming from both the State and Federal levels, the risk of worker misclassification is high. At Populus Group, we stay on top of the trends in the IC space, so we can ensure safety and compliance for customers and contractors. Here are some trends we’re seeing -

A New Understanding of the IC Population

The independent contractor workforce has historically been hard to measure, making information on its size and impact vary from source to source. Recently, a large-scale study was published, reporting that workers who are independent contractors as their main job make up 15% of the workforce, as opposed to previous surveys that put that number at around 8%. The findings of this study also show a much more diverse independent contractor workforce than has been previously reported. Due to the large discrepancy between previous and current findings, this study could impact legislation in the coming years, making the risk of worker misclassification even higher.

State and Federal Legislation

Speaking of impacting legislation, let’s look at some recently proposed bills and passed legislation that has repercussions for IC compliance on both the State and Federal levels:

Department of Labor Notice of Proposed Rule, RIN 1235-AA43

The US Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM). This NPRM aims to revise the DOL’s guidance on determining who is an employee and who is an independent contractor under the Fair Labor Standards Act (FLSA). This would rescind the prior 2021 IC Rule.

Rhode Island S 427B (Relating to Workers’ Compensation General Provisions)

Rhode Island’s S 427B goes into effect on January 1st, 2024. This would require an annual notice of designation to be filed by an independent contractor that states they are an IC and exempt from workers’ compensation coverage. In the past, this annual designation was a one-time filing.

Michigan House Bill 4390

Proposed House Bill 4390 would impact how an independent contractor is defined in Michigan. To be considered an IC, the worker would have to meet three criteria:

• They are free from the employer's control and direction, specifically in connection with the performance of the work.
• They perform work that is outside the usual course of the employer's business.
• They are customarily engaged in an independently established trade, occupation, or business of the same work performed by the individual for the employer. The defining criteria is very similar to California’s “ABC Test”, which is among the strictest in the country.

Compliance Crackdowns

With a surge of legislation seeking to address worker misclassification, it’s no wonder this topic has been headlining news this year. You may have seen stories about some high-profile companies coming under fire for misclassifying their independent contractors. This worker misclassification comes at a steep cost, resulting in penalties and fines. In the case of some companies, these fines amounted to hundreds of millions of dollars.

Interested in learning more about how Populus Group can help you mitigate the risk of worker misclassification? Connect with the Populus Group team now to find out how we've got your back!