Independent Contractor Compliance Blog - by Collabrus™

A few days ago I wrote to you about HR 6111, a proposed bill that is intended to make it more difficult to misclassify workers as IC’s and, if the worker is misclassified, adds severe employer penalties above and beyond all the current fines and penalties. 

Why the sudden, high profile, push to “fix” the “IC Problem”?

There are the publically stated and legitimate motivations why this bill is being considered, all of which I’ve reported to you in the past. These include:

• Misclassifying workers is unfair to other businesses attempting to compete while properly classifying their workers. 
• Misclassification contributes to the “Tax Gap,” meaning the government does not collect the full amount of tax revenue it believes should be paid. 
• Misclassification of workers denies employees of their entitlements under the law, such as minimum wage guarantees, unemployment benefits, disability benefits, workman’s compensation for on the job injuries, retirement benefits, health benefits, etc.

But why this bill now?

There is a legal activist group in Washington DC, named the Washington Legal Foundation. This group advocates for businesses and acts as a watch dog of our federal and state governments to protect the interests of business. The organization is very pro business and pro independent contractor and actively supports the proper use of IC’s in the United States. Because of their mission they typically have their fingers on the pulse of what’s happening in the government when it affects the business community.

As far back as 2006, the Washington Legal Foundation saw this current push to limit the use of IC’s in the United States coming. In their publication The Legal Backgrounder, Vol. 21 No. 19, June 2, 2006, they reported, “The “independent contractor” model of conducting business affairs is coming under increasing assault from government regulators, labor activists, and plaintiff’s attorneys…” The article continues to say, “But the free enterprise community is often its own worst enemy in the battle to preserve the independent contractor model. All too often, businesses are tempted to skirt the law by classifying individuals as “independent contractors” who quite clearly are employees…”

One of the article’s conclusions is “(this practice)…strengthen(s) the hand of those who, if given a chance, would do away with the independent contractor model completely.”

Government enforcement and regulatory agencies exist to find errors and collect additional taxes. I believe they view it like this: The more errors they find and the more additional taxes they collect the higher their status and corresponding power is in their World of Government. So these agencies, at one level or the other, are constantly lobbying with those in power above them to gain more resources and tools to do their job. 

In my opinion, although you will never hear any government bureaucrat say this publically, these agencies (and incidentally the unions too) would do away with the IC model completely and require all workers to be treated as employees. Employees are known, reported, withheld from and fully taxed. On the other hand, independent contractors are difficult to find, resist being controlled and their income is sometimes invisible. This makes IC’s suspect in the eyes of those who would regulate the business world. In general, most of these bureaucrats have never operated or managed a private company and appear to be less concerned with the needs of the business community or the economic value of entrepreneurial enterprises.

Having said all that, the problem isn’t really them, it’s the employers who abuse the IC models to gain an unfair advantage and thereby give the would-be regulators ammunition to argue for more authority and more money to “crack down” on the IC model.

In other words, if businesses set out classify their workers correctly, right from the beginning, there wouldn’t be a need for bills like HR 6111.