Welcome to Issue #20 of The Compliance Brief. Every Tuesday I break down the HR and labor law updates that actually matter to small businesses — in plain English, no legal jargon.

DOL Moves to Finalize a New Independent Contractor Test

The Department of Labor is on track to finalize a new rule that changes how you determine whether a worker is an employee or an independent contractor under federal law. The new "economic reality" test centers on two core factors: how much control you exercise over the work, and the worker's opportunity for profit or loss. When those two don't give a clear answer, three additional factors come into play — specialized skill, permanence of the relationship, and how integrated the work is into your business.

This is a meaningful shift from the current standard, and it's expected to finalize by year-end. If you rely on contractors in any part of your business, this is worth watching closely, since misclassification remains one of the costliest mistakes a small business can make.

Action step: Review any contractor relationships where you set schedules, provide equipment, or closely direct the work — those are the ones most likely to be reclassified once the new rule takes effect.

1. New Jersey's ABC Test Goes Live October 1

New Jersey finalized regulations that codify how its ABC test applies to worker classification. Every worker is presumed an employee unless the business proves all three prongs — control, work performed outside the usual course of business, and an independently established trade. If you have New Jersey workers, this applies regardless of how they're classified federally.

2. Ford Pays $2.3M Over Workplace Graffiti

The EEOC secured a $2.3 million settlement with Ford over racist graffiti at a Buffalo plant. The lesson for small employers: graffiti reports should be treated as harassment complaints, not facilities issues — document, photograph, remove, log, and escalate every incident.

3. DOL Signals Renewed Mental Health Parity Enforcement

The DOL's benefits division issued a new enforcement roadmap for mental health parity, focusing on treatment limitations, medical-necessity standards, and network adequacy for behavioral health coverage. If your health plan uses prior authorization or narrow networks for mental health benefits, confirm your vendor can produce the required comparative analysis.

✅ Review contractor relationships involving close control, scheduling, or provided equipment

✅ If you have New Jersey workers, confirm classification under the new ABC test before October 1

✅ Create a simple protocol for logging and escalating workplace graffiti or harassment incidents

✅ Ask your benefits provider whether your mental health coverage meets parity comparative-analysis requirements

The DOL's guidance on independent contractor classification under the FLSA explains the economic reality test in detail: dol.gov/agencies/whd

That's it for this week. Short, actionable, no fluff.

If this was useful, forward it to another small business owner who could use it.

See you next Tuesday.

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This is for informational purposes only and does not constitute legal advice.