Labor Department Trying To End Independent Contractors

In a move on Tuesday, the Labor Department proposed a rule change that would force most gig workers to be treated as employees rather than independent contractors. Currently, about 20 million Americans are working in the Gig Economy trying to supplement their income in these inflationary times.

A rule by the Fair Labor Standards act defines an employee as, “any individual employed by any employer.” But the Supreme Court, in a series of rulings, added an “economic reality” test to the classification system.

Most of that system came down to the degree of control a gig worker has, whether or not they have to invest in their own equipment, and the degree of autonomy they have in setting their own hours and making more or less money. The Trump Administration focused on worker control and the opportunity for profit furthering the Supreme Court stance on independent contractors.

The Biden Administration’s new rule would look at a “totality of the circumstances,” focusing on whether or not “workers are economically dependent upon an employer for work.”

In other words, if you don’t actually need the money in the first place, you could be treated as an independent contractor. Of course, who works a side gig if they don’t need the money?

This new standard would force most independent contractors to become employees. As a result, companies like Uber and Lyft had a stock selloff yesterday that reduced the prices of their shares by over 10%.

The move by the new administration was predictable, given the fact that independent contractors cannot be unionized. They also aren’t subject to labor wage and overtime rules.

Let me leave you with this.

These changes shouldn’t be news to any employer in the State of Illinois. Our Department of Employment Security has long enforced the federal standard that an employee is, “any individual employed by any employer.”

Our state’s change in applying the federal standard occurred during the Blagojevich Administration which was encouraged by a Clinton Administration mandate to collect more Social Security and Medicare Taxes.

In an Illinois unemployment audit, they look through the transactions for individual names. If those individual names are not inside the payroll, they find you guilty and charge additional tax, interest, and penalty.

I’ve made every argument available, from an employer having no control to a worker investing in their own equipment and having complete autonomy to no avail. If you fail at the audit level, there’s a three tier system of appeals.

I stopped taking these cases into appeals years ago because it never did any good. No matter what evidence I provided or what argument was made, the answer always only came down to one thing.

If the worker had an EIN number, they were considered an independent contractor. If they only had a social security number, they were an employee. Over. Done. Forgetabadit. Write the check and go home.

This standard continues to this day and now the new administration is trying to apply it to the entire country. If they succeed in their efforts, they will only hurt the gig economy, which will of course hurt an already struggling economy as a whole.

We’re all going to get through this. Let’s get through it together.

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,

Sincerely yours,

Chris Amundson
Accounting Solutions Ltd.

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