WASHINGTON (Michigan News Source) – Barring a court decision that says otherwise, a new U.S. Department of Labor’s independent contractor rule will go into effect on March 11.

What is the new rule?

This new rule revises the interpretation of the Fair Labor Standards Act’s (FLSA) classification which determines whether a worker is an “employee” or “independent contractor.”

MORE NEWS: Bedrock, GM Propose $250M in Taxpayer Money for Ren Cen Revamp

“The difference between an independent contractor and employee is really a question of control,” said Wendy Block with the Michigan Chamber of Commerce. She spoke on The Steve Gruber Show on Friday. “Who controls that person? Who controls how, when, and where they work?”

Block said the current test between an independent contractor and employee is clear-cut, according to the IRS. She said that now the Department of Labor is trying to “tighten up” those rules. It’s gone from a 20-point test to a previous six-point test.

“It comes down to whether the worker is economically dependent on the potential employer for work or in business for themselves. It narrows who can be determined an independent contractor.”

Who are W-2 employees and 1099 independent contractors?

Besides the control and flexibility questions, employees and independent contractors can be distinguished by who pays the taxes. Employers pay the taxes for W-2 employees (it comes out of their paychecks). Meanwhile, independent contractors pay their own taxes quarterly.

Why does this rule change matter?

Employers who hire employees are responsible for wage and hour concerns, overtime pay, workman’s comp, and benefits. However, employers are held to a different standard when it comes to independent contractors because it’s a more flexible relationship. In addition, independent contractors can’t be unionized.

“By having more independent contractors, that’s fewer people who are eligible for unionization,” Block explained. “That doesn’t make some people too happy. There are underlying political motivations driving this as well.”

MORE NEWS: Otsego County Man Faces Poaching Charges

In addition, the new rule could make it more difficult to hire independent contractors. Employers who misclassify workers can be held accountable for back wages, overtime, and attorney fees.

How does this impact Michigan?

In addition to the pending federal rule change, Michigan House Bill 4390 could make sweeping changes for the state’s employers as well. It also looks to add penalties and remedies for misclassification of independent contractors.