Biz Rules: Freelancer or Employee?

In this issue, Biz Rules looks at the Department of Labor's updated definitions of full-time employees versus freelancers.

By Chelsey Lucas October 29, 2015

by Chelsey Lucas

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Independent contractors, or freelancers, are a growing part of the U.S. labor force. A 2014 survey by MBO Partners estimates that almost 18 million U.S. workers make a living as independents and 40 percent of Americans have been a “solopreneur” at some point in their careers. But as more employers have begun to classify workers as independent contractors to cut costs such as Social Security, Medicare and employment taxes, workers are questioning their status and rights. Late this summer, the wage and hour division of the U.S. Department of Labor expanded its definition of who is an independent worker and who is really an employee.

The new rule says if a person who completes work for you or your company depends on that work for their livelihood, they are an employee and taxes can be applied to their employment; if the person is not economically dependent on work that you provide, they are an independent contractor and taxes do not apply. This new interpretation of a worker aligns with the Fair Labor Standards Act definition of employment, and by that standard most workers are considered employees.

“[The DOL] wants to protect employees to have all their rights and benefits, while at the same time making sure the government is getting paid taxes [on the employees],” says Christine Bellaire, vice president of client relations and human resources at Sarasota’s Progressive Employer Management Company.

Employers face a penalty of paying back wages and taxes should an investigation occur.

“The onus is on the employer,” Bellaire says. “Employers have to re-evaluate who they have classified as an independent contractor, look at this guidance and make sure they can still justify their status as independent. Otherwise, they need to hire them as employees.”

For more information on whether an employee is an independent contractor, go to and search for Administrator’s Interpretation 2015-1. ■

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