The American Payroll Association (APA) provided comments to the United States Department of Labor (DOL) in response to the DOL’s proposed rule on the classification of workers as employees or independent contractors. The APA’s comments expressed concerns about the conflicting definitions of the term employee at the federal, state and local levels. Thomson Reuters Tax & Accounting summaries the APA’s concerns.
The APA’s primary concern is about the conflicting definitions of an employee and of an independent contractor that exist at the federal level. Specifically, the APA is concerned with the conflicting definitions of employee and independent contractor between the proposed rule by the DOL’s Wage and Hour Division (WHD) and the common law definition used by the IRS.
The current definitions and the different tests used to determine whether a worker is an employee or an independent contractor can result indifferent answers, so the APA asked the WHD to better align the FLSA definition of an independent contractor with the IRS.
The APA is also concerned with conflicting definitions between the federal government and state and local jurisdictions. The APA explains that it is possible for the same worker to be classified as an employee at the federal level and an independent contractor at the state level.
The APA has a legitimate concern, but it is only tangentially related to the proposed rule. Their concern applies to the existing rule as well. Their concern is that the United States Department of Labor has a different standard from the IRS, which may have a different standard from state law. In fact, state laws may have different standards for different purposes. For examplle, in Massachusetts, the standard for income tax is different from the standard for unemployment tax, and both are different from the standard for labor laws, and they are alll different from the standard for workers compensation. Employers face multiple standards for classifying workers as employees or independent contractors and unfortunately, this issue can’t be resolved by the United States Departmnet of Labor’s proposed rule.