Reforming Classification of Employees and Independent Contractors

The House Commerce Committee will take further testimony and potentially vote on legislation to reform employee classification statutes determining employee or independent contractor status for UI and workers’ compensation, as well as make additional related reforms.

As reported previously, the Committee is working primarily from H.773, with employer groups also recommending elements from H.378.  AIV will be providing testimony in the form of amendments to H.773. We are continuing discussions with other stakeholders and the Department of Labor that could further refine our recommendations, but at this time our key recommendations are expected to be:

  • Support H.773 language allowing independent contractors to pass the “nature of the business” test under workers’ compensation if they are registered with the Secretary of State as their own business.
  • Replace H.773 revision to the “nature of the business” test under unemployment insurance, which would require multiple clients, with the registration revision noted above for workers’ compensation.
  • Use language from H.378 to allow independent contractors to qualify as such even if they have only one client, as long as they are technically open to having multiple clients (H.773 as introduced would effectively require multiple clients).
  • Strike all new provisions in H.773 that would prohibit companies from contracting with more than one independent contractor for the same work or jobsite.

In addition, we are working on proposed language to clarify that companies would not be exposed to workers’ compensation liability if independent contractors opt out of or misrepresent whether they have their own workers’ compensation coverage.

These recommendations would create greater consistency between UI and workers’ compensation tests, and would be intended to address the most challenging obstacles to utilizing independent contractors under current law.

With regard to other provisions of H.773, we will be recommending changes to provisions regarding workplace inspections and access to employees by the Department to better ensure that business operations will not be unduly disrupted.

We will also be seeking to delete or modify language in H.773 that would prohibit employers from “coercing” employees to become independent contractors. Such language could effectively prevent employers from changing their business operations to make use of independent contractors even for legitimate reasons, particularly if they want to hire current employees as independent contractors.

The outlook for positive action on this issue is cautiously optimistic. The Committee is clearly interested in helping companies make use of independent contractors. Organized labor advocates are expected to try and bog down or sidetrack legislation, however, and underlying reluctance or even outright opposition from the Department could still re-emerge as we get closer to finalizing any truly effective legislation.

Members interested in more information or options for engaging on this issue are encouraged to contact us at info@aivt.org.