Updated DOL Rules on Contractors vs. Employees: What Child Care Business Owners Need to Know

The U.S. Department of Labor (DOL) recently updated its rules on March 11, 2024, regarding the classification of workers as contractors or employees. While this update may seem significant, it's essential for child care business owners to understand that the changes primarily codify the way the DOL has been enforcing these rules for years.

The most notable change is the shift from prioritizing certain criteria to evaluating the totality of the circumstances when determining a worker's status. Previously, the DOL placed the greatest importance on two factors: the nature and degree of control over the work and the worker's opportunity for profit or loss. Under these criteria, most workers in the child care industry were considered employees due to the high degree of control over their work and the minimal concern about profit or loss.

The new regulation, deemed more "employee-friendly," considers six factors concurrently. If a worker is economically dependent on the employer for work, they are generally classified as an employee. The six factors are:

1. Opportunity for Profit or Loss Depending on Managerial Skill

2. Investments by the Worker and the Potential Employer

3. The Degree of Permanence of the Work Relationship

4. The Nature and Degree of Control

5. The Extent to Which the Work Performed is an Integral Part of the Potential Employer's Business

6. Skill and Initiative

For child care providers, this update doesn't significantly change the classification of their workers. Their contractors are still very likely to be considered employees under the new regulation. However, the update may have a more substantial impact on gig economy workers, as they are more likely to meet the criteria for employee status under the revised guidelines.