Today’s story over at WBUR on the Independent Contractor’s Law is a terrific example of the challenge lawmakers face in trying to come up with laws that address an underlying problem with causing unintended consequences.
The Independent Contractor’s Law (ICL, to be lazy) was originally passed 20 years ago as a progressive attempt to prevent unscrupulous business owners from pocketing a few extra bucks by re-classifying full-time employees as “independent contractors.” By reclassifying employees, business owners didn’t have to pay health insurance, unemployment insurance, workman’s compensation, and sometimes wouldn’t even withhold taxes.
The problem with this arrangement, of course, is that these employees often didn’t know they were classified in this manner until they got hurt at work, or laid off, and discovered they had no coverage.
A change to the ICL in 2004 tightened restrictions even further, basically saying if a contractor is essentially doing the same work as a full-time employee, he can’t be classified as a independent contractor. As the WBUR story says, this change was mainly targeted for construction jobs to prevent the use of day laborers, which, I think, most of us would support as a policy.
But here comes the unintended consequences. The law is now so strict that it is affecting freelance editors, writers, illustrators, graphic designers and other creative types who have always traditionally worked on a free-lance basis, and accept and even embrace the temporary nature of their employment. Now, as one illustrator told WBUR, these Massachusetts -based freelancers are losing jobs because businesses don’t want to run afoul of the law.
So how to change it? If you strip out the 2004 change (which was sponsored by former Sen. Cashinbra) you anger the trade unions, and risk reopening loopholes that would allow more workers to be exploited. If you leave it unchanged, the creative economy in this state will be strangled.
So what do you do?
run afoul of the law?
One of the problems with this law is that it adopts different definitions of “employee” and “contractor” than does federal tax and social security law. It is difficult to understate the confusion that this causes for employers, especially small employers. I am told that as a result of the ICL, the definition of “employee” for state income tax purposes is different than the state definition used for workers comp. and unemployment insurance.
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p>I think ICL was passed because the prior law was not being properly enforced. The result is a mess.
and replace employer-provided health insurance with free health care, fund unemployment and workers comp and social security from the general fund, and let businesses just do their business, and just pay their employees and contractors their pay.