What the Rule Actually Says
The proposed rule brings back the 'economic reality' test from 2021 that Trump rolled back. Six factors: opportunity for profit/loss, investment in equipment, degree of permanence, control, whether the work is integral to the business, and skill/initiative. If a worker leans W-2 on most of these, they're W-2, period.
Who It Actually Hits
GCs with a stable of 'preferred' 1099 subs who work on 80%+ of that GC's jobs, don't advertise elsewhere, and don't own their own equipment. Also: framing crews who are technically 'contracted' but functionally have one client. Also: paint and drywall shops running 1099 finishers who use the shop's sprayers.
Why It Matters More This Time
The DOL is signaling they'll actually audit. Under the last version of this rule, enforcement was thin. This version comes with a proposed budget for a 40% increase in Wage and Hour Division field staff. That's real.
What Legal Says To Do Now
Three things: 1) Make sure every 1099 sub is invoicing from a real business entity (LLC or Inc). 2) Make sure they have general liability insurance in their business name. 3) Make sure they can show they do work for other GCs, not just you.
The Real Cost If You Get Reclassified
Back-pay for overtime, employer-side FICA (7.65%), unemployment, workers comp — going back three years. On a $60k/yr 'sub' that's roughly $22-28k in exposure per person, per year. Multiply that by however many guys you have on 1099.
The Bottom Line
If you've been running six-plus 1099 guys who essentially work for you full-time, this rule assumes you're calling employees contractors to skip payroll tax. Fix your paperwork now, or plan to eat the reclassification.