Last week I wrote about laws that don’t exist: how we assume the existence of legal protections for people we know, even people we love, and how the local and state efforts to make those phantom laws real can create a real challenge for employers.
A theme I often repeat for employees is to go where you are wanted. Don’t be the nail begging for the hammer. Don’t be the square peg in the round hole.
For employers, always have policies and practices that are legally compliant. And in no area is this more of a policy decision that when dealing with independent contractors.
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We are in the age of the gig economy. Actual employment isn’t increasing in an appreciable way. Instead, people “work” for themselves. Sometimes this is voluntary and sometimes it isn’t. But the truth remains: there are many more “contract” employees than ever before.
Contract work can be a really good thing if this status is what someone wants. When appropriate, contract work allows a worker great flexibility and the ability to truly control one’s own time. It can give a company a powerful resource, and is a potentially much less expensive option for specific types of projects and work, such as seasonal work and work not traditionally within a company’s wheelhouse, but necessary for operations. Think accountant or janitorial service.
But the title of “contractor” is often abused. Employers who don’t want to deal with the hassle of payroll may try to simply make everyone an independent contractor. They may wish to avoid tax obligations. Or they may wish to exploit vulnerable individuals looking for work. Often, these “contract” positions flout requirements of federal and state wage and hour law.
When I worked for the state of Missouri, I represented a workers’ comp fund set up just for these types of employers. They would hire employees as “contractors” because they didn’t want to pay payroll taxes or have workers’ comp insurance. And when things would go wrong, the state had to pick up the tab, and chase after the bad employer to reimburse the taxpayers. I had a situation where an individual lost all of the fingers on his left hand while working for an unscrupulous employer. Needless to say, when it was time to pay the bill for fixing those fingers, the owner was nowhere to be found. Government entities have a way of finding people, though; I highly doubt this owner got off scot-free.
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But if the situation doesn’t involve tax dollars, contractors are often out of luck on basic issues employees take for granted. Like the ability to be paid in a reasonable time. Or to be free from discrimination and harassment. Or to have reasonable accommodations. Most of these “rights” are tied to one of three types of situations (employment, places of public accommodation, and housing), and “contractor” doesn’t fit in any of the boxes. Being a contractor places you, in many ways, outside of the law that otherwise protects us in everyday life. The reasoning for this seems to be that the employee who should be a contractor, like a business accountant or janitorial service, can simply go and work with a different company. Independent contractor businesses truly are envisioned as business-to-business relationships. Generally businesses that don’t treat business partners fairly get handled by the market. This is true if you are the right type of contract workers. But what if you aren’t an accountant? What if you are a delivery contract worker, and experience racial discrimination or gender discrimination at one of your daily stops? Right now, there is no legal framework to protect you. Imagine what this looks like with an all-contract workforce?
I don’t know what legal framework will be developed to deal with situations involving contract workers. Given the state of affairs with the federal government, it is likely that any such intervention will come from the states, which could result in an uneven patchwork of laws to worry the average company. But right now, even in California, a contract worker is out of luck with legal remedies.
This article is about solutions, though. So what should you do if you are a contractor and constantly the victim of inappropriate behavior because of a protected characteristic? I would question if you are in fact properly classified. One of the biggest benefits of being a contractor is control over one’s own schedule and over where and how the work is performed. If you must be at the place that discrimination takes place, it may be that you are an employee. The delivery driver in my earlier example was actually an employee. If you are misclassified, not only does your employer likely owe you a great deal, they also owe the government a lot of unpaid taxes. Key signs you are improperly classified include (1) more than minimal training, (2) a requirement that you perform contract work for only one company, and (3) excessive control by your employer over how your work is performed. If all three of these aspects are present, you likely aren’t a contractor. Your employer is breaking the law.
What should a company do if it is considering adding contractors to its rolls, or worried that it isn’t compliant, and doesn’t want to deal with an administrative audit or class action lawsuit? Or maybe you run a company that wants to do the right thing? If that is the case, I recommend you spend some time being thoroughly acquainted with the requirements for the jurisdiction where you have workers, and be sure that (1) all contract workers are in fact in professions where contract workers are appropriate, and (2) all contract workers aren’t doing things employees do and for which you should be hiring employees. As a general rule of thumb: if your business is making and selling widgets, the people making and selling widgets are employees. And companies should strive to prevent illegal harassment and discrimination for anyone who “works” with them, even if that person just happens to be a contractor.
Beth Robinson lives in Denver and is a business law attorney and employment law guru. She practices at Fortis Law Partners. You can reach her at [email protected] and follow her on Twitter at @HLSinDenver.