Federal and state laws and regulatory actions, as well as recent court actions, threaten the independent contractor’s way of doing business.
In 2007, the IRS undertook a “worker misclassification” program, aimed at forcing the companies to turn independent contractors into employees, and entered into data-sharing agreements with more than 25 states. Numerous lawsuits have been filed, some already successful in forcing companies to convert contractors to employees.
Earlier this year, a bill (H.R. 5804) was introduced in Congress that would repeal a 1978 law that protects independent contractors from “overzealous” actions by the Internal Revenue Service to reclassify them as employees.
States are also getting into the act. In just the past few years, Arizona, Delaware, Illinois, Massachusetts, Michigan, New Jersey, New Mexico, Oregon, Pennsylvania and other states have enacted new laws that make it more difficult to earn a living as an independent contractor.
Reports of the effects of these laws range from “disastrous for the construction industry in Illinois” to the medical profession in New York “being thrown into disarray.” At the same time, the federal government has launched a series of lawsuits that are forcing companies to turn independent contractors into employees.
Who’s affected? Independent Contractors (and the companies that hire them) in Construction, Trucking and Deliveries, Healthcare, Financial Services, Technology, Real Estate, Consulting and several other industries. In Massachusetts, for example, a 2005 law was so broad that the Massachusetts Society of Certified Public Accountants said it affects “all occupations and industries.”
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