Category Archives: Independent Contractor

01.29.24
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The Clash: Supreme Court to Decide About Arbitration in a Misclassification Case

The 1982 release by the Clash asked, “Should I Stay or Should I Go?” The song included backing vocals in Spanish, but since none of the band members spoke Spanish, they had tape operator, Eddie, call his mother, who was Ecuadorian. Eddies’ mom translated the backing vocals into what we hear on the recording (Yo me enfrio o lo soplo).

The Supreme Court agreed last month to address the same question — should I stay or should I go? — but in a different context.

The case involves independent contractors who sued, alleging misclassification, the contractors had signed individual arbitration agreements, and the business successfully moved to compel arbitration. So far, this is all very ordinary.

But when a court sends a case to arbitration, should it stay the case or dismiss it? Different federal courts handle this differently. There’s a good ol’ fashioned circuit split, and the Supreme Court will decide whether courts have the discretion to dismiss cases instead of merely staying them.

Why does it matter? In most cases, it won’t matter. But there are varying points of view. A dismissed case can be appealed; the decision to stay a case usually cannot. A stayed case may require updates to be filed; a dismissed case does not. A stayed case may lead to a streamlined order adopting the arbitrator’s decision; a dismissed case would require a new filing.

Sometimes cases have claims that are subject to arbitration and claims that are not. In those instances, a stay is probably the only logical option. When the arbitration is done, the court will decide the remaining claims. But when all parties have agreed, by contract, that their dispute must be arbitrated, many courts see no basis for staying the case, and they dismiss it.

The textualist argument is that a stay is the only way to go (see what I did there?). Section 3 of the Federal Arbitration Act says that a court, “shall on application of one of the parties stay the trial of the action until such arbitration has been had….”

But if there’s no dispute that the court can hear, because all parties have agreed to arbitrate disputes, then there’s nothing left for the court, and dismissal would seem proper.

We’ll continue to watch this case. The Supreme Court will likely hear the matter in late 2024.

In the meantime, This indecision’s buggin’ me (esta indecisión me molesta).

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.22.24
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Face It: The New DOL Independent Contractor Rule Faces Court Challenges

“Faces” is a useful word.

It can mean the front part of the head, as in this selfie featuring two hairy-faced beasts. The one on the left has a wet drippy beard after sloppily drinking water from a bowl. No, I meant on your left.

It can mean the English rock band formed in 1969, which featured Rod Stewart and Ronnie Wood. Their 1971 album, A Nod Is As Good As a Wink… to a Blind Horse, reached #2 in the UK charts.

Or it can be a verb, as in “DOL Independent Contractor Test Faces Court Challenges.” In today’s post, we’re going with verb.

As expected, the independent contractor rule released by the DOL earlier this month is already being challenged in court.

A coalition of business groups is trying to invalidate the rule by asking the Fifth Circuit to reopen an earlier case. In the earlier case, these groups challenged the Biden DOL’s effort to withdraw the Trump DOL’s 2021 version of the independent contractor rule. The 2021 version would have simplified the test, focusing the analysis on two key factors — control and opportunity for profit or loss. In the lawsuit, the business groups argued that the Biden DOL’s efforts to delay and withdraw the Trump DOL’s 2021 rule violated the Administrative Procedure Act (APA).

These groups now argue that the new rule contains the same legal flaws and that that the Trump DOL rule should be the rule that rules. The case is Coalition for Workforce Innovation v. Su, 5th Cir., No. 22-40316.

A second challenge has been filed by freelancer writers and editors who argue that the new rule is impermissibly vague and “freewheeling” (an excellent word choice) and that it violates the APA. They claim that the new rule impermissibly threatens their ability to work as independent contractors and is too vague to allow them to reasonably structure their businesses.

These challenges will take a while to resolve, and more may be filed. Unless a court issues an injunction staying the rule while these cases proceed, the new rule will take effect March 11th.

In the meantime, we’ll keep watching to see what happens. It’s a real face off!

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.15.24
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Don’t Read This Post (Read This Instead)

I didn’t post last week because I was waiting for the DOL’s new independent contractor rule to drop.

And then it did. And I’m still focused on it. And businesses using independent contractors should be aware of it too.

So today, leave this page and don’t read this post.

Instead read this Client Alert, in which I break down the new DOL rule, its likely impact, and the practical implications for businesses.

https://www.bakerlaw.com/insights/the-dols-new-independent-contractor-test-just-dropped-now-what/

See you all next week!

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.02.24
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Snakes! And Other Things to Watch for in 2024

This is a venomous Eastern Brown Snake, native to Australia. Stay away.

Tennis star Dominic Thiem knew what to watch for in his match this past weekend in Brisbane. It was on-court hazard he couldn’t ignore.

Play was interrupted when a “really poisonous snake” slithered onto the court near the ballkids. The intruder, an Eastern Brown Snake, “has the unfortunate distinction of causing more deaths by snake bite than any other species of snake in Australia.” The snake’s venom causes “progressive paralysis and uncontrollable bleeding,” which is not one of the on-court hazards typically of ballkidding.

(I don’t know if ballkidding is the real word for this, but it should be. Or ballkiddery maybe. I also learned from the snake bite article that the proper term for being bit by a venomous snake is “envenomation,” which is a word I hope to use elsewhere in a sentence sometime in 2024. So there’s a New Year’s resolution. [@Lisa, take note, I made one, even though you {correctly} say I am no fun because I won’t play the New Year’s Resolution game.])

The Eastern Brown Snake is not present in the U.S., so we don’t have to watch for any in 2024.

But here are several other things that could bite you in the behind in 2024 if you’re not paying attention:

1. New DOL test for independent contractor misclassification. The DOL issued its proposed new rule in October 2022 and targeted the fall of 2023 for release of a new final rule. The proposed rule would identify seven factors to consider when evaluating whether someone is an employee under the Fair Labor Standards Act (FLSA). The final rule will likely be very similar. We’re still waiting, and the final rule could be released at any time.

2. The new NLRB test for joint employment takes effect Feb. 26, 2024. Unless it doesn’t. The new rule is being challenged in both a federal district court in Texas and the U.S. Court of Appeals in D.C. Either court could quash the rule. The new rule will substantially expand who is a joint employer under the NLRA, even for worksites without unions.

3. Increased state and local enforcement activity. States and localities are filing their own lawsuits alleging worker misclassification. The New Jersey Attorney General recently filed a major lawsuit. The California Attorney General and California localities have been pursuing misclassification lawsuits too. Remember this: As much as I advocate for individual arbitration agreements with class waivers, they have no effect on enforcement actions brought by a state or local government. These lawsuits pose a substantial risk, and the governments love to issue one-sided accusatory press releases when they file the lawsuits.

4. The feds are doing this too. The DOL is bringing its own enforcement actions and publicizing them.

5. State and local laws that affect independent contractor classification and joint employment. We’re seeing legislative activity in three main areas:

(a) laws to change the tests;
(b) laws that provide a safe harbor for independent contractor classification if certain protections are provided to the workers (Cal. Prop 22, this proposed Mass. state law); and
(c) Freelancers laws that impose various requirements when retaining a solo independent contractor (currently: NY, IL, Los Angeles, Minneapolis, Seattle, NYC, Columbus).

6. State laws that criminalize worker misclassification. Take a look at recent legislation passed in NY State and Rhode Island.

7. State laws governing the use of temporary workers. Look for more states to enact laws like the Illinois Day and Temporary Worker Services Act (amended in Aug. 2023) and the New Jersey Temporary Workers’ Bill of Rights (enacted in Aug, 2023). These laws force companies that use staffing agencies to disclose the wages and benefits being paid to direct employees.

8. California’s AB 5 is still being challenged. This is the law that codified the ABC Test for most independent contractor relationships. But it also included a grab bag of miscellaneous and arbitrary exceptions. A full en banc Ninth Circuit has agreed to rehear Olson v. State of California, which challenges the constitutionality of AB 5.

Wishing you a happy, healthy, and litigation-free 2024.

Best wishes,
Todd

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.11.23
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The Best of You: When to Use a Master Services Agreement with Independent Contractors

In “Best of You” by Foo Fighters, Dave Grohl repeats the word “best” 40 times. In “Coconut,” Harry Nillson repeats the word “coconut” 28 times. I get it, Harry, she put the lime in the coconut and she got a bellyache. In “I Don’t Care Anymore,” Phil Collins ends the song with 18 mentions of “no more,” which all right I get your point.

Repeating the same thing over and over might be a useful device when performing a song. But it’s annoying in independent contractor agreements. And it’s unnecessary.

Consider using a Master Services Agreement (MSA) instead, which is a particular type of independent contractor agreement.

An MSA is an evergreen contract that describes the terms of the relationship but does not specify the particular project. The MSA will often describe the type of service to be performed — delivery, installation, whatever — but it will not describe the specific delivery or installation (or whatever).

Instead, each specific project will be described in a separate Work Order. For an installation, the Work Order would describe the customer, the location, the product to be installed, any specific customer requirements tied to that order, the installation time or deadline, and the fee to be paid. The MSA and Work Order would both make clear, in pre-printed text, that every Work Order is subject to the MSA.

The advantage of this setup is that it’s simple and convenient. There’s no need to restate the full terms of the relationship in every Work Order, particularly if the contractor is likely to perform multiple projects, all of which are subject to the same general terms and conditions.

The MSA will be a multi-page document containing all of the general terms we would expect to see in an independent contractor agreement, including representations as to IC status, a recitation of facts that support IC status, the obligations of each party, payment and invoicing terms, a general description of services, a list of things the contracting party will not control, indemnity, insurance, duration or termination, survival, and other typical IC contract terms.

The MSA should make clear that the IC can reject or accept specific proposed Work Orders, which is consistent with the IC being allowed to choose when to work. But the MSA should also make clear that once a Work Order is accepted, the IC has a contractual obligation to perform.

The MSA might also specify the manner in which Work Orders are offered and accepted. While it is preferable to have each Work Order signed, that’s not always practical. Consider how Work Orders will be accepted, and describe in the MSA what will constitute acceptance. In some cases, acceptance might be indicated by the contractor’s receipt of a Work Order and the contractor’s failure to decline it within 24 hours. It’s ok to create a presumption of acceptance, but you’ll want to preserve the contractor’s right to decline any particular Work Order without penalty.

And that’s how you can create the best, the best, the best of contracts.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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12.04.23
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Beware of Falling Tortoises: Large Fines Are the Law for Willful Misclassification in California

Aeschylus (525-456 BC) was a Greek playwright and is often described as the father of tragedy. While only seven of his estimated 70+ plays have survived, the story of his death remains solidly entrenched atop the list of all-time oddest deaths (if it’s true).

Apparently, Aeschylus died after being struck in the head by a tortoise dropped by an eagle which had mistaken his head for a rock suitable for shattering the shell. That qualifies as a surprise ending to an otherwise successful career.

Today’s post is intended to help businesses in California avoid their own surprising deaths, sans tortoises.

Businesses using independent contractors in California are reminded that misclassification risks extend beyond the usual laws you’d think to be worried about. The California Labor Code has a special section devoted to making willful misclassification of workers illegal, period, end stop, and the law imposes substantial fines.

In other words, if you are working with independent contractors who should — under California law — be classified as employees instead, your business may be subject to substantial fines, even if you are not violating any of the laws addressing overtime, meal and rest breaks, reimbursement of expenses, etc.

Under Labor Code section 226.8, “willful misclassification” of independent contractors is, by itself, unlawful. Penalties start at “not less than” $5,000 and “not more than” $15,000 for each violation. If the Labor and Workforce Development Agency or a court determines that the violations are part of a pattern or practice, the fines jump to “not less than” $10,000 and “not more than” $25,000 for each violation.

Violators will also be required to post a notice on their website or in a location accessible to the public.

If your business is registered with the Contractors’ State Licensing Board, violations will also be reported to the Board for disciplinary proceedings.

The law defines “willful misclassification” as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.” The law applies to “any person or employer,” raising questions as to whether individuals may be penalized too.

So if you’re doing business with independent contractors in California, be aware of the usual range of potential violations — overtime, meal and rest breaks, wage statements, expense reimbursements, etc. But also be aware that willful misclassification is, by itself, unlawful. Fines under Labor Code section 226.8 should be something you’re aware of. Enforcement is more frequent and more likely than being hit in the head by a falling tortoise.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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11.27.23
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New York State Jumps on the Band Wagon with New Freelancer Law

In the 1800s, P.T. Barnum used to promote the arrival of the circus with parades and clowns and band wagons through the town. By the late 1800s, politicians were noticing the excitement generated by the band wagons, and they would ride their own band wagons through town to generate support and excitement for the campaigns. Supporters would climb aboard, and the phrase “jump on the band wagon” was born.

So it seems fair to say, even back then, politicians were imitating clowns.

Over time, the phrase has come to mean rallying around any popular cause, clowns or no clowns.

And with the new statewide Freelance Isn’t Free Act, signed by Gov. Hochul on Nov. 22, the State of New York has done just that. New York’s statewide adoption of this freelancer law follows similar laws enacted in Illinois, New York City, Los Angeles, Minneapolis, Seattle, and Columbus. You can compare the four cities’ laws here and read more about Illinois’ law here.

Here’s what the NY State version will require, any time there is a contract with an individual independent contractor for services valued at $800 or more, either for one project or an aggregation of projects over 120 days:

  • Written contract required, which must include:
    • Name and address of hiring party and contractor
    • Itemization of services
    • Value of services
    • Rate and method of compensation
    • Date payment is due, or how due date will be determined
    • Any deadline by which the contractor must submit a list of services provided so that the hiring party can timely process payment.
  • The hiring party must provide a copy of the contract to the contractor.
  • The hiring party must retain the contract for six years!
  • Payment to the contractor must be made by the deadline specified in the contract or, if no deadline is specified, then within 30 days after the services have been completed.
  • The hiring party cannot require the contractor to accept less than the contracted amount. (The law does not seem to provide any exception for unsatisfactory services.)
  • Retaliation is prohibited against any contractor who seeks to exercise rights under the Act.

If there is a dispute over whether timely payment was made, the burden of proof is on the hiring party.

The law creates a private right of action.

The penalty for failing to provide a written contract is $250, if the contractor requested the written contract. Such a claim must be brought within two years.

The penalty for failing to make payment as required by the law or under the contract is the value of the contract, plus double damages, plus attorneys’ fees, and possibly injunctive relief. The statute of limitations for this type of claim is six years.

Waivers of any right under this Act are void as against public policy.

The law takes effect on May 20, 2024, and it will apply to contracts entered into after that date. In December 2022, Gov. Hochul vetoed an earlier version of this law, finding that it imposed too great a burden on the NYSDOL. Those concerns have been resolved in the new version of the Act.

The law does not apply to contracts with independent sales representatives, lawyers, medical professionals, or construction contractors.

The law applies not only to businesses, but to anyone in New York State who retains an independent contractor. As we discussed here when the New York City version of the law was enacted in 2017, the Act applies even to babysitters and dog walkers, if the minimum compensation amount is met.

Businesses and individuals who retain individual independent contractors in New York State, Illinois, Los Angeles, Minneapolis, Seattle, and Columbus need to know their obligations under these laws and act accordingly.

The Freelance Isn’t Free laws do not weigh in on whether the contractor is properly classified as an independent contractor.

There is a clear trend toward passing these types of laws, and we can expect more cities and states to jump on the band wagon.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.16.23
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Weighing Heavy: Rhode Island Makes Some Misclassification a Felony

Because of gravitational pull, topography, and geology, people apparently weigh a bit more when in Southern Illinois than in Ohio or Indiana.

For an adult human, the difference is only about .02 pounds, so relocation is probably not a viable weight loss strategy. But still. Who knew?

Meanwhile, in Rhode Island a new wage theft law is going to weigh heavily on some buysinesses, no matter what the gravitational pull might be in Providence.

Amendments to the Rhode Island Payment of Wages Act, effective 1.1.2024, drastically increase the penalties for independent contractor misclassification.

Outside of the construction industry, penalties for misclassification will include fines between $1,500 and $5,000 per misclassified employee. Complaints will result in an investigation and, if a violation is found, a lengthy new administrative process ensues that may result in referral to the state attorney general for criminal prosecution.

In the construction industry, independent contractor misclassification will now be a felony, punishable by up to three years in prison, if the violation (a) is knowing and willful, (b) is a second violation of the Rhode Island law, and (c) is valued at $1,500 or more. First violations, if knowing and willful, are misdemeanors punishable by up to one year of imprisonment, for violations valued at $1,500 or less. Violations may also result in a fine of up to $1,000, instead of or in addition to imprisonment.

The amendment contains a possible drafting error (using “and” instead of “or), creating ambiguity as to whether a first violation in the construction industry may be punishable as a felony if the offense is knowing and willful and results in an underpayment of more than $1,500. The questionably drafted section is 28-14-19.1(i)(2)(i).

“Construction industry” is defined broadly and includes remodeling, repairing, improving, and maintaining any building.

“Employer” is also defined broadly and includes “any agent” of the employing entity.

The standard for determining misclassification will be the same standard that applies to the Fair Labor Standards Act (FLSA). That means an Economic Realities Test.

The amendments also impose criminal felony penalties for other selected wage and hour violations, if knowing and willful, including (a) failure to follow payday requirements, (b) failure to timely pay wages or accrued unused vacation upon termination, and (c) failure to timely pay an employee’s family wages due upon an employee’s death. Penalties for violations of these provisions include imprisonment for up to three years.

According to this article on SHRM.org, the Rhode Island Attorney General supported the amendments as providing enhanced tools and penalties for wage theft violations. The Attorney General seems particularly focused on going after independent contractor misclassification in the construction industry.

Businesses with employees and contractors in Rhode Island should review their current practices and double check for misclassification risks. The penalties for wage and hour violations in Rhode Island will be heavier than ever, starting in 2024.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.09.23
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Guard Your ‘Stache: Massachusetts May Consider Its Own Version of Prop 22

This is the Moustache Guard.

Invented by Virgil A. Gates of West Virginia, the Guard is intended for “holding the moustache out of the way of food or liquid while eating or drinking.” As you may have already guessed, Virgil filed for a patent in 1876. Why would you have guessed that? Because 1876 was the last time anyone was named Virgil.

Moustaches, while certainly worth guarding (especially those of the handlebar variety), aren’t the only thing in need of protection. Solo independent business owners in the delivery and rideshare industries have been under attack, as class action lawsuits and government agency activity increasingly seek to take away their independence by declaring them employees.

In 2020, California enacted Prop 22, which preserved independent contractor status for these drivers so long as the app companies provided a list of preset benefits and guaranteed pay. In a statewide vote, Prop 22 passed overwhelmingly with 59% of the vote.

Massachusetts may soon follow suit. A similar ballot measure is likely to be considered by voters in the Bay State about a year from now.

The ballot measure, if successful, would create a system like Prop 22 in Massachusetts. Delivery and rideshare drivers would be granted independent contractor status, so long as the app company they were using provided them with a litany of worker benefits. The required benefits would include:

  • Guaranteed pay at 120% of state minimum wage for time spent completing delivery or rideshare requests;
  • Additional per mile pay for each mile driven in a personal vehicle;
  • A healthcare stipend for drivers who average 25 or more hours per week;
  • One hour of paid sick time per 30 hours worked;
  • Accident insurance; and
  • Prohibitions on discrimination based on race, sex, sexual orientation, and other protected characteristics.

Click here for the official summary of the proposed law.

If the ballot initiative receives enough signatures, it may appear on the ballot for a statewide vote in November 2024. Alternatively, the legislature may choose to consider the issue on its own, before the 2024 general election.

Initiatives like this one and California’s successful Prop 22 provide a reasonable, common sense third alternative to what is usually a binary choice between classification as an independent contractor (with no employee rights) and an employee. Rideshare and delivery drivers generally value their independence and the ability to operate their own business. Laws like this one allow them to do so as contractors while receiving certain benefits and guarantees.

And that’s worth protecting.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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09.25.23
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Odd Jobs and Not-So-Odd: Illinois to Enact New Freelancer Law

My Smart Home is book smart, not street smart.

It’s going to be hard to move my garage. I figure I’ll need at least four or five strong guys to help. My garage is heavy and seems pretty securely attached to the ground, so the work will be hard and I’m sure that I’d have to pay them at least $500 apiece.

But at least I don’t live in Illinois. Starting July 1, 2023, freelance labor will be governed by the Freelance Worker Protection Act (FWPA), another freelancer law similar to the ones in Los Angeles, Minneapolis, New York City, Seattle, and Columbus Ohio.

Here’s what you need to know before retaining a solo independent contractor in Illinois:

When the Law Applies

  • Independent contractor who is a natural person (i.e., a human, not an entity)
  • Providing services in Illinois
  • Providing services for a person or entity in Illinois
  • Total value is $500+, including all work aggregated over 120 days

Exclusions

  • N/a to construction or subcontractors, as defined in the Illinois Employee Classification Act (construction industry)
  • N/a to employees, as defined by the Illinois Wage Payment and Collection Act

Requirements

There must be a written contract that includes:

  • The name and contact information of both parties (including the hiring party’s mailing address);
  • An itemization of all products and services to be provided by the freelance worker;
  • The value of the products and services to be provided;
  • The rate and method of compensation;
  • The date when payment is due, which must be “no later than 30 days after the products or services are provided”; and
  • If the hiring party requires a list of products and services rendered in order to meet any payment processing deadlines (such as an invoice), the date by which the freelance worker must submit the list.
    (IDOL will provide model contracts)

Prohibitions

  • Once the IC “has commenced preparation of the product or performance of the services under the contract,” the hiring party cannot require, as a condition of timely payment, that the IC accept less compensation
  • Hiring party cannot threaten to withhold payment unless IC takes a lesser amount (no exception for unsatisfactory performance?)
  • Hiring party cannot do anything that would discourage the IC from exercising rights under the Act
  • No retaliation
  • Waivers are void against public policy (does that mean you can’t settle a dispute?)
  • If the contract failed to specify a due date for payment, the hiring party violates the Act if payment is made more than 30 days days “after the completion of the freelance worker’s services under the contract”

Record Keeping

  • Hiring party must retain a copy of the contract for two years

Enforcement

  • IC can file a civil lawsuit, or
  • IC can file an administrative complaint, which can lead to a broader investigation as to overall compliance

Penalties

  • For failure to timely pay: 2x amount owed, plus attorneys fees and costs
  • For failure to contract or to provide the contract: value of the contract or $500, whichever is greater
  • For discrimination or retaliation: value of contract, plus attorneys fees and costs

In addition, the IDOL may impose civil penalties up to $5000 for each violation, or $10,000 for each repeat violation within a five-year period, plus monetary damages to the state, restitution, and equitable relief, including injunctions.

Other Stuff

  • The law does not weigh in on whether the worker is misclassified
  • The Illinois DOL will issue regulations

Problems I See with the Law, as Written:

I see a few problems, and hopefully the IDOL will address these issues in its rulemaking.

First, suppose the IC’s work is unsatisfactory. Suppose the IC is slow or sloppy or rude or has terrible body odor. Suppose the IC does the work you requested but stomps all over your prized rose garden when walking in an out of the building. Suppose the IC comes into your home or business and breaks stuff or takes a cell phone picture of confidential information.

The law does not take into consideration all of the things that could warrant reduced or nonpayment, even if the products or services are ultimately provided. It seems that you’d still have to pay the value of the contract.

Second, the law seems to prohibit settlements. It says that any waiver of rights under this law is void as against public policy. It does say “except as otherwise provided by law,” so maybe a settlement would fall into that category.

Tips for Retaining ICs in Illinois after July 1, 2024

  • Consider including specifications or other requirements in the contract, to preserve an argument that the work is not yet completed or that the work was not performed as contractually agreed. (But don’t impose control over how the work is done, because that could lead to misclassification.)
  • Evaluate current use of individual ICs in Illinois, and consider whether this law will apply to those relationships.
  • Implement a Gatekeeper System like this, prohibiting managers from retaining ICs without going thorough an internal chokepoint for vetting. Managers who don’t know about the FWPA might retain ICs to get something done, creating liability for the company under the FWPA.
  • Look for the IDOL to release regulations that will hopefully provide clarity on the poor performance and settlement concerns.
  • Be careful about any IDOL investigation. If your business uses freelancers and the IDOL receives a complaint of a potential FWPA violation, the IDOL is likely conduct a thorough investigation that extends beyond the one complaining worker. With fines of $5,000 per occurrence, the penalties for noncompliance can get big in a hurry.

The scope of this law is broad. It applies to all “natural persons” (hey, no jokes about the weird guy down in the cubicle down the hall) who perform services for $500 or more. That would include your regular babysitter, your house cleaner, the guy you pay to wash the windows, solo consultants, or the guy you pay to assemble all the new modular furniture.

That would also include the guys I’m gonna need to pick up and move my garage.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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