As employers seek ways to keep their costs down by using contracted employees, the Federal Government is working to keep workers on the payroll by changing the definition of a contractor. In recent years, our state legislature has given detailed guidance on the definition of a contractor that I think has helped keep most Washington employers out of trouble.
But I wonder for how long.
With new recent interpretations for the definition of a contractor coming from the Department of Labor and the National Labor Relations Board, I think our companies may be in for a bumpy regulatory ride. If you have to pay for benefits and other employee liabilities, why use a contractor? If using contract workers doesn’t save you any money and only increases your risks, why do it?
Guidance from the Department of Labor makes most contract workers employees. DOL has developed a series of questions to evaluate and test the relationship. Interpretation No. 2015-1 “uses an economic realities test” to determine status that has six separate factors. The main question is, “is the worker economically dependent on the employer?” Setting your own hours is no longer relevant.
If you wonder how this hurts the contractors, I think young people just starting their own business and people who want to work from home on their own time could be hurt. Both types of contractors may not have other clients. If you’re their only client, watch out. As an employer, you would need to know who else the contractor is currently working for to determine your risk.
Then there is the National Labor Relations Board that just ruled on a case on Aug. 27, 2015, the Browning-Ferris Industries case. A new standard for contractors has replaced 30 years of business practice in this one ruling. A company must now evaluate the terms and conditions of their contract with the third party contractor. If you exercise control over training, suggest discipline or management, confirm working hours, reserve the right to remove a worker, express even indirect control over the time worked including breaks, or ask for time sheet verification, you may have a problem.
As I think about this ruling, I wonder why anyone would take the risk of using a third party contractor. In fact, the advice I got last week on a conference call was to suggest to our members to have their contracts reviewed.