The Department of Labor (DOL) recently proposed new rules designed to convert more workers from being classified as independent contractors to employees, making them subject to overtime and minimum wage rules, payroll taxes, and income tax withholding. This proposal follows similar actions already taken by several states. Below, we discuss three strategies to circumvent these new rules and provide greater tax savings.

For years, practices have classified part-time hygienists and/or associates as independent contractors, rather than employees, to reduce costs. If successful, the practice was not responsible for overtime, payroll taxes (i.e., Social Security, Medicare, unemployment, etc.) or workers’ compensation on the compensation paid to the independent contractor. Nor did the practice have to include that worker in its retirement plan or fringe benefit programs. 

Proposed Economic Reality Test

The DOL’s proposed rule uses an economic reality test that includes the following six core factors to determine whether a worker is an employee or