Why W2 employment beats 1099 in home healthcare

Why it’s important the home healthcare company you work for hires you as a W2 employee with benefits

Under the Fair Labor Standards Act, or FLSA, workers have the right to minimum wage and overtime pay when 
they have an employment relationship with an employer and the law covers their work. It is up to employers 
to figure out whether a worker counts as an employee under the FLSA. Misclassification happens when an employer treats someone as an independent contractor even though they legally qualify as an employee. This is a serious issue because workers who are misclassified may miss out on minimum wage, overtime pay, and other protections and benefits they are entitled to by law.

To help address this problem, the Wage and Hour Division released a final rule on January 10, 2024, which took 
effect on March 11, 2024. This rule updates the guidance on how to determine whether a worker is an employee or an independent contractor under the FLSA. The guidance is now included in regulations at 29 CFR Part 795. Both employers and workers can use these regulations, along with other resources, to better understand how a worker’s status should be classified. The new rule also replaces the Independent Contractor Status Under the Fair Labor Standards Act rule that was issued in January 2021.

Official source

• Misclassification of Employees as Independent Contractors Under the Fair Labor Standards Act

Image: DOL

All clinical positions at Trusted Ally Home Care are W2 Employees with amazing benefits

• Skilled Nurses

• Home Health Aides

• Family Health Aides

Our amazing W2 benefits include:

• 401K Retirement Savings

• Medical Insurance

• Dental & Vision Insurance

• Health Savings Account

• Basic Life/AD&D Plan

• Employee Assistance Program

• Accident Insurance

• Paid Sick Leave

• FMLA

• Holiday Pay

• Employee Referral Bonus

• Overtime if applicable

This agency began in 2011 to be of service to former nuclear weapons program workers, a group of amazing people who gave so much to our country through their tireless efforts at numerous sites across the country.  Trusted Ally was founded on the belief that if we took outstanding care of our employees, our employees would be ready and resourced to provide the best care possible for our clients.

Want to join our team?

Trusted Ally is a premier employer in the home healthcare industry.

• View our open positions and read our Core Values

Frequently Asked Questions

Q: Do some home healthcare agencies hire 1099 contractors?

A: Yes, and those agencies are at risk of lawsuits by consumer groups for denying overtime and benefits.

Q: What is the Employee or Independent Contractor Classification Final Rule under the Fair Labor Standards Act?

A: It updates the Department of Labor’s guidance on how to tell whether someone is an employee or an 
independent contractor under the FLSA. It replaces the 2021 rule, better reflects long‑standing court 
decisions, and is meant to reduce worker misclassification while giving businesses more consistent 
guidance.

Q: When did this rule take effect?

A: March 11, 2024.

Q: Why did the Department of Labor replace the 2021 Independent Contractor Rule?

A: The Department believes the 2021 rule did not match the purpose of the FLSA or long‑standing court 
decisions. It narrowed the economic reality test too much by putting too much weight on certain factors 
and limiting what could be considered, which caused confusion and disruption.

Q: How does this rule help workers and businesses understand their rights and responsibilities?

A: It gives clearer and more detailed guidance that lines up with court rulings. The rule applies across 
industries and is published in the Code of Federal Regulations so it is easier to find and use.

Q: Does this rule use an “ABC” test?

A: No. It uses a multi‑factor economic reality test and looks at all the facts together. No single factor decides 
the outcome.

Q: Does this rule affect how workers are classified under other laws?

A: No. This rule only applies to the FLSA. Other federal, state, or local laws may use different tests, and 
businesses must follow whichever standard gives workers the most protection.

Q: How does the rule decide whether a worker is an employee or an independent contractor?

A: It uses a six‑factor economic reality test that focuses on whether the worker is economically dependent 
on the employer. No factor has more weight than the others, and additional factors can be considered if 
they are relevant.

Q: Can a worker choose to give up employee status and be treated as an independent contractor?

A: No. If a worker meets the definition of an employee under the FLSA, they cannot give up rights like 
minimum wage or overtime pay.

Q: How is this rule similar to the 2021 Independent Contractor Rule?

A: Both focus on economic dependence, use multiple factors, and make clear that no single factor controls. 
They also explain that worker status does not depend on how much money someone makes or whether 
they have income from other sources.

Q: How is this rule different from the 2021 rule?

A: This rule looks at all the circumstances together instead of relying on “core factors.” It uses six specific 
factors, separates the investment factor, expands how control is evaluated, brings back consideration of 
whether the work is integral to the business, adds more explanation to certain factors, and gives more 
weight to control the employer has even if it is not actively used.

Q: How does the final rule differ from the proposed rule issued in October 2022?

A: After reviewing about 55,400 public comments, the Department made changes, especially around control 
and investment. For example, it clarified that actions taken just to comply with the law do not count as 
control, and that costs imposed by the employer are not considered the worker’s investments.

Q: Are any of the six factors more important than the others?

A: No. The importance of each factor depends on the situation. The rule does not rank them.

Q: What does “opportunity for profit or loss based on managerial skill” mean?

A: It looks at whether a worker’s business decisions affect their profits or losses. This can include 
negotiating pay, choosing which jobs to take and when, marketing services, hiring others, or buying or 
renting equipment. Simply working more hours usually does not count as managerial skill.

Q: How does the rule look at investments made by the worker and the employer?

A: It focuses on whether the worker’s investments show they are running an independent business. These 
investments are compared to the employer’s overall investments. Routine job costs or expenses required 
by the employer tend to point toward employee status.

Q: What does “permanence of the work relationship” mean?

A: Ongoing, open‑ended, or exclusive relationships suggest employee status. Short‑term, project‑based, 
or non‑exclusive relationships suggest independent contractor status. Seasonal work by itself does not 
decide the issue.

Q: How is “control” evaluated under the rule?

A: The rule looks at how much control the employer has over the work and the economic terms of the job. 
This includes scheduling, supervision, limits on outside work, technology used to monitor performance, 
discipline, setting pay rates or prices, and marketing. Requirements that exist only to follow the law do 
not count as control.

Q: What does it mean if the work is an “integral part” of the business?

A: If the work performed is central or critical to the company’s business, that points toward employee status. 
If the work is not central to the business, it may point toward independent contractor status.

Q: How does the rule look at skill and initiative?

A: Having skills alone is not enough. The key question is whether the worker uses those skills with 
business‑like initiative, which suggests independent contractor status, or relies on the employer for 
training and work, which suggests employee status.

Q: When do “additional factors” come into play?

A: They matter when they help show whether the worker is truly running an independent business or is 
economically dependent on the employer.

Q: Does a worker need to meet all six factors to be considered an independent contractor?

A: No. All the factors are considered together. No single factor, or combination of factors, automatically 
determines the outcome.

Q: Who should I contact if I have questions about this rule or a worker classification issue?

A: For questions about the rule itself, contact the Wage and Hour Division’s Division of Regulations, 
Legislation, and Interpretation at (202) 693‑0406. For questions about a specific situation, contact the 
nearest Wage and Hour Division District Office using the Department of Labor’s local office listing.