YOUNGSTOWN, Ohio (WKBN) – The Labor Department has published a new proposal on how workers should be classified, saying that thousands of people have been incorrectly labeled as contractors rather than employees.

Employees get a W-2, and the company takes out social security and Medicare taxes, aLONG with other employee benefits.

Independent contractors get a 1099 and a lump sum for their work.

“If you’re in it for making extra money, it’s great. If you’re in it for a career, it’s probably not the best thing in the world,” said Dr. Bob Badowski, chair of the West Minster School of Business.

The law establishing the definitions was set in 1938 for things like minimum wage, Social Security and unemployment insurance.

“The problem with that is a lot of new businesses are gig-type businesses where you’re considered an independent contractor,” Badowski said.

Independent contractors aren’t offered federal benefits.

Some self-employed workers want to keep their independent contractor status, saying they prefer the flexibility. Badowski says the litmus test for determining if you’re an independent contractor or employee has been if you have control over your work.
“It will definitely change how businesses look at independent contractors and who they might consider hiring,” Badowski said.

Benefits can be from 25% to 50% of an employee’s check. So, a change in what determines an independent contractor could be important.

“If I hire three people as independent contractors, I might be able to only hire two people as employees because of benefits and those types of things on the background,” Badowski said.

The Labor Department started Thursday hearing 45 days of public comments on the issue, but the next step for this argument will definitely be the courts, where it’s been argued numerous times.