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self-study / Employment

Aug. 14, 2018

DOL provides the latest guidance on employee classification

Elizabeth Arnold

Director, Berkeley Research Group LLC

Chester Hanvey

Associate Director, Berkeley Research Group LLC

Determining whether workers meet the legal standard for "employee" or independent contractor has been a compliance priority for the past few years. In the past few months, however, there has been a significant amount of activity related evaluating compliance. For example, the California Supreme Court's April 30 decision in Dynamex Operations West v. Superior Court, 2018 DJDAR 3856, laying out a new "ABC test" for determining employee classification -- workers are employees unless the employer can show (A) the worker is free from control and direction over performance of the work, both under the contract and in fact; (B) the work provided is outside the usual course of the business for which the work is performed; and (C) the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity. And just last week, the California Legislature passed Assembly Bill 2496, which, if signed by the governor, would subject property service employers to a rebuttable presumption that their workers are employees rather than independent contractors.

Recently at the federal level, the Wage and Hour Division of the Department of Labor issued its first significant guidance under the current administration related to independent contractor classification. See Field Assistance Bulletin, "Determining Whether Nurse or Caregiver Registries are Employers of the Caregiver" (July 13, 2018). The guidance specifically addresses issues in the context of the home health care industry; however, the guidance provided can be reasonably applied to other industries as well.

The guidance lists 10 factors relevant to independent contractor classification. These factors should be analyzed in their totality on a case-by-case basis -- no one factor is dispositive. Although the detailed analysis may differ from case to case, these factors provide useful insight into what is relevant to an evaluation. The factors are:

1. Conducting background and reference checks

2. Hiring and firing

3. Scheduling and assigning work

4. Controlling the caregiver's work

5. Setting the pay rate

6. Receiving continuous payments for caregiver services

7. Paying wages

8. Tracking caregiver hours

9. Purchasing equipment/supplies

10. Receiving EINs or 1099s

Here we discuss which factors may be operationalized and measured so that organizations can make informed decisions regarding the classification of their workers. We focus on the more nuanced factors. For example, "controlling the caregiver's work" often involves detailed study of the work being performed, as opposed to asking whether or not employees received EINs or 1099s. Policies and documented procedures can provide tangible examples of control, but others are subtler and may be exercised through informal interactions and communication.

The guidance provides several examples of actions that indicate that a company is exercising control over a worker, including: giving instruction, monitoring or managing a worker's methods or work habits, evaluating a worker's performance, and setting policies that require work to be executed in a particular manner. However, it also acknowledges that a company may exert control over a worker in other ways, which means that a detailed review of the work performed may be needed.

To accurately assess the extent to which the company may exercise control over a worker, it is important to understand the nature of the work being performed and the context in which it is being performed within the broader organization. The extent to which the company exerts control over a worker often manifests itself differently based on the industry as well as the company.

Multisource Data Collection

A variety of well-established approaches exist for collecting valid and reliable data in the workplace. Multiple methods can be used in conjunction to collect a robust dataset to address relevant factors. One method that has been successful for assessing independent contractor status -- called "multisource data collection" -- involves collecting data from multiple sources, including the worker and different company employees who directly interact with workers or have knowledge about overall operations. Data from these sources provides a comprehensive picture of the organization and the job(s) performed by workers.

Data collected directly from the worker provides valuable insight into the worker's understanding of the work she is performing and the nature of her relationship with the company. Data collected from leadership and management provides insight into a worker's role in the company, as well as the company's overall business strategy or model. One advantage to collecting data from both sides of the relationship is that it provides a more balanced and holistic view.

Further, collecting data from multiple points of contact at the company (i.e., the areas of the company that interface with the worker, if applicable) provides more detailed information about interactions that could be perceived as evidence of "control" by workers. A thorough understanding of the organization's operations and the variety of scenarios in which a worker may interact with different units within the organization is needed to identify the various points of contact at the company. For example, at a delivery company, a driver may contact the customer service department regarding a customer complaint, the site manager regarding a missing box, and the IT department regarding issues with his company-issued phone. Once these different points of contact are identified, data can be collected regarding their work activity using several methods.

Finally, there are also secondary sources, such as company policies and procedures that can provide insight in to the nature of the work being performed.

Methods for Collecting Data

Two general categories of methods are commonly used to collect data relevant to independent contractor status. These observational methods (e.g., time and motion studies) and self-report methods (e.g., structured interview, survey). The most appropriate method depends on the individual circumstances of the worker and the company. The ultimate goal is to select a method that is capable of producing reliable and valid data that are relevant to one of the applicable factors in the analysis.

Observation. An observational approach involves "shadowing" workers while they perform their jobs and recording detailed information about the activities they perform -- for example, listing the specific tasks a worker performs and how long the worker spends on each task. This method generates a detailed work record that includes the description and duration of all activities performed. Each observation is an objective record that includes the frequency and nature of contact between parties. This information can be used to determine the cumulative duration and nature of interaction with the organization, which provides compelling evidence related to the degree of "control" exercised over the manner in which the worker performs her work. Workers and points of contact at a company can be observed to provide a more complete picture of the relationship.

Structured Interview. A structured interview method is a self-report approach that involves verbally asking a predetermined set of questions (e.g., "Who determines the driver's delivery schedule for the day?") and clarifying responses as needed. Interviewing workers and points of contact using a structured interview approach can be beneficial because it allows for consistent comparison and analysis across respondents. This balanced approach can illustrate subtle differences in the way parties perceive different processes that may otherwise be undetected.


Determining the appropriate classifications as workers or independent contractors often involves a detailed analysis with results that have important legal ramification. The recent guidance by the DOL has clarified the department's interpretation of employment status for nurse or caregiver registries. Collecting data using multiple scientific methods can result in a robust and detailed data set to analyze and from which to draw conclusions regarding relationships among companies and workers and various company activities. This approach allows measurement of the specific actions and behavior of the "control" referenced in the guidance.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.


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