Crackdown leaves firms wary of freelancers

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From Business Insurance —

“Most often, however, companies make innocent mistakes when trying to interpret labor laws — often in cases where the worker has actually asked to be treated as a contractor, say experts.

“Given how complicated the tests are, there is no one thing you can do that will always be the golden bullet that will prevent any misclassification,” said Mr. Fisher. For instance, a freelancer who helps with a project might seem to be a contractor — but might not be considered one legally if he doesn’t, for example, advertise his services on a website, have his own business card, use his own computer or show other signs of operating a business.

Mr. Parlo and others say that the Fair Labor Standards Act, which took effect in 1938, doesn’t take into account the flexible and remote ways that technology allows people to work these days. Many companies care more about workers’ results than having them sit in an office all day under the watchful eye of a boss. “It’s completely out of touch with how today’s workplace functions,” Mr. Parlo said.

Legislators are inclined to support laws that limit independent contracting, according to Mr. Parlo, because it is easier for government agencies to collect taxes from employees’ paychecks than from contractors. Employers don’t have to report the annual income of an individual contractor on a 1099 form if he earns less than $600 from a company in a year, for one thing. In addition, he noted, contractors can write off expenses that traditional employees can’t….

Often, what triggers an investigation is an unemployment claim by a former contractor who thinks he or she is eligible to collect…”

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