New “Employee” Definitions from the Labor Department Leave the Golf Industry Scrambling

Mar 26, 2024 | News

By David Gould, Staff Editor

A brand-new rule from the U.S. Department of Labor has government officials examining—through a revised legal lens—what many of us would consider to be independent-contractor relationships. Federal officials are seeing employer-employee relationships instead. Last Tuesday, an hour-long webinar sponsored by the National Golf Course Owners Association dug into the language of the new rule, spending long stretches of time discussing golf instructors as well as caddies.

Attorney Rick Hackman, the webinar’s featured speaker, displayed expertise on the statutory language in general plus a detailed understanding of how golf facilities and coaches coexist and interact. One of his most impactful points had to do with mutually agreed-upon arrangements that are satisfactory to both the course operator and the golf instructor, and therefore seemingly without issues.

Not the case, apparently. “The intent of the parties” is the legal term Hackman used in reference to a non-W2 coach and the golf facility where he or she works, adding: “It won’t necessarily carry the day.” Another way to say that, he explained, is that “if it looks like an employer-employee relationship, that’s what matters, even when the instructor doesn’t wish to be” a payroll employee.

By way of context, Hackman several times referred to the “Trump rule” and the “Biden rule.” Under Trump’s presidency, this part of the Fair Labor Standards Act was revised in a way that the current administration considers inappropriate. Its subsequent revision, a DOL advisory states, “will help ensure that workers who are employees are paid the minimum wage and overtime due them, and that responsible employers that comply with the law are not placed at a competitive disadvantage when competing against employers that misclassify employees.”

So that’s the politics of it. The enforcement and compliance part comes down to what the Department calls “The Economic Reality Test” and the “Six Factors” this test is comprised of. The mindset driving it recalls the classic phrase, “if it looks like a duck and quacks like a duck…” You can click open the DOL’s explanation of that test here.

Without going into heavy detail about all half-dozen factors, there are points to be made that derive in part from attorney Hackman’s parsing of the updated language. For example, if you’re a coach who holds independent-contractor status and—in accord with the facility owner—you wish to keep things that way, you could find some encouragement from Factor One: Opportunity for Profit or Loss Depending on Managerial Skill. Its components include “whether the worker determines or can meaningfully negotiate the charge for the work provided,” as well as “whether the worker accepts or declines jobs or chooses the order and/or time in which the jobs are performed.”

On that latter point, having to work a certain number of hours in the golf shop is an indicator to the DOL that your independence is in name only, and “employee” status better fits the situation.

All the money that serious coaches have spent on their teaching technology and certifications tilts the needle toward independence and away from W-2 employment, as suggested by the title of Factor Two: Investments by the Worker and the Potential Employer. Even when a caddie goes out and purchases a rangefinder, and uses only that rangefinder during their loops, was noteworthy to Hackman. Later, in his remarks on Factor Three: Degree of Permanence of the Work Relationship, the lawyer had to acknowledge that for a coach to be hanging their hat at just one golf venue tilts the needle toward employment.

Also relevant to Factor Three is this inquiry: “Is the work relationship indefinite in duration, continuous, or exclusive of work for other employers? That would weigh in favor of the worker being an employee. Is the work relationship indefinite in duration, non-exclusive, project-based, or sporadic based on the worker being in business for themself and marketing their services or labor to multiple businesses? That would weigh in favor of the worker being an independent contractor.”

The comments about job description and assignment of duties made above in reference to working in the shop are also material to the DOL’s Factor Four: Nature and Degree of Control. It inquires into whether someone other than the instructor “sets the worker’s schedule, supervises the performance of the work, explicitly limits the worker’s ability to work for others, or places demands or restrictions on workers that do not allow them to work for others or work when they choose, and controls economic aspects of the working relationship, such as the prices or rates for services and the marketing of the services or products provided by the worker.”

From the Proponent Group perspective, there’s something paradoxical about the DOL’s Factor Five: Extent to Which the Work Performed is an Integral Part of the Potential Employer’s Business. There is no louder voice than ours proclaiming the economic significance of top-quality golf instruction to a greengrass facility. At the same time, it’s fully understood that for so many of our members, retaining independent-contractor status is important.

In that light, there’s a lot to consider in DOL comments like this: “If the work performed by a worker is critical, necessary, or central to the potential employer’s principal business, then this factor indicates that the worker is an employee. If the work performed by a worker is not critical, necessary, or central to the potential employer’s principal business, then this factor indicates that the worker is an independent contractor.”

On that basis, the oft-expressed idea that “we just provide instruction as a courtesy to our golfers,” not as a business driver, might actually be a positive for IC coaches who want to stay that way.

The final yea-or-nay the DOL looks at is Factor Six: Skill and Initiative. It contains a pair of descriptions involving a professional welder that are worth quoting in their entirety:

Example 1: A highly skilled welder provides welding services for a construction firm. The welder does not make any independent decisions at the job site beyond what it takes to do the work assigned. The welder does not determine the sequence of work, order additional materials, think about bidding for the next job, or use their welding skills to obtain additional jobs, and is told what work to perform and where to do it. In this scenario, the welder, although highly skilled technically, is not using those skills in a manner that evidences business-like initiative. These facts indicate employee status under the skill and initiative factor.

Example 2: A highly skilled welder provides a specialty welding service, such as custom aluminum welding, for a variety of area construction companies. The welder uses these skills for marketing purposes, to generate new business, and to obtain work from multiple companies. The welder is not only technically skilled, but also uses and markets those skills in a manner that evidences business-like initiative. These facts indicate independent contractor status under the skill and initiative factor.

Hanging over all these what-ifs is a big one about enforcement. What would instigate a DOL action under which ABC Coach gets reclassified as an employee, despite a personal preference for independence? The government pursues other regulatory aims via spot-checks and random inquiries, so possibly that would be one means to seek remedies to the worker “misclassification” problem.