Are you familiar with the new laws for hiring freelancers?
Back in April of 2018, the California #Supreme #Court 🏛️ made a decision in the Dynamex v. Superior Court case that had gig workers from companies like Uber, Lyft, and DoorDash up in arms.
Then, in 2019, the California legislature wrote ✍️ a bill called AB5 that made that Dynamex ruling permanent. (They later codified AB5 as California Labor Code §2750.3, if any of you law nerds were wondering).
For now, these new laws are affecting New York 🗽, California, and Illinois, but pretty soon similar laws will arise in many other states. Not to mention, there’s word that a new federal bill will have similar provisions to AB5 – so soon we could all be in trouble.
In my opinion, we’re seeing these laws arise because #government representatives want more in #payroll 💸 taxes.
As the law stands in most states, employers who hire freelancers are not paying large payroll taxes; of course, the government doesn’t like this.
As a result, regardless of your state 🇺🇸 of residence, these new independent contractor hiring laws will affect you soon.
Therefore, it’s important that anyone who is hiring freelancers understands these laws and their implications, as they could be liable for up to $15,000 🤑 per violation.
What are the laws, exactly?
Under these newly developing bills, in order to hire a freelancer or independent contractor, you need to be able to prove three things:
✔️ You do not control or direct the person’s work
✔️ The work must be outside of your business
✔️ The work must be of an independently-established trade
A contractor in an independently-established trade is most often someone like a construction worker 🚧, accountant, or real estate agent 🏘️.
If you can’t prove that your freelancer is independently established, then they are legally not a freelancer, but your employee.
For example, if you hire a video editor and require them to wear a shirt 👕 with your logo and complete all the editing at your studio, then that worker is not an independent contractor.
Why does this matter? 🤔
If someone you hire as a freelancer is actually your employee, then you owe them meal and rest periods, vacation time, sick leave, and contributions 💲 to Medicare and Social Security. Failing to provide these provisions for an employee could get you sued for up to $15,000 💰 per violation.
Pros and cons of the law
Okay, AB5 can’t be all bad, so what are the benefits?
👍 Those in favor of AB5 and these new hiring laws argue that workers need to be protected 🛡️ by the law.
👍 Freelancers don’t ❌ want to be leveraged by employers who qualify them as independent contractors to avoid paying for overtime or other employee benefits.
👍 Freelancers need to be protected by employment discrimination and #sexual #harassment laws, which are not applicable to independent contractors and freelancers.
That being said, employers who regularly hire independent contractors are frustrated 😤 with AB5 and similar laws.
👎 These individuals claim that their labor costs are going to increase 📈 by about 30% per year, which will result in an increased cost of goods and services to consumers.
Plus, despite the benefits they may receive from AB5, even freelancers and gig workers are frustrated!
👎 They claim that the laws reduce their employment flexibility, such as the ability to work from home 🏠 on a piecemeal basis; these workers don’t want to report to a 9 to 5 job.
👎 Also, once these new laws are enacted, obtaining freelance work is going to get tough.
These are only two ✌️ examples of companies that are afraid that they’re going to be sued for that $15,000 violation, so they’re not going to do business with Californians.
Think about it this way: If you run an online marketing business that posts photos to social media lawyer, you need to hire a photographer 📸. Most of the time, this would involve hiring on a contract basis.
In this case, would you hire a Californian photographer and risk potential sanctions and civil penalties, or would you hire Nevadan photographer without facing those risks?
I think the answer is pretty obvious.
👎 Finally, freelancers don’t like these new laws because of the work for hire exception.
Under copyright law, if an artist 👨🎨 under the direction of an employer does creative work, such as graphic design or cartooning, the employer owns all the copyright to the work.
However, if an independent contractor is drawing ✒️ cartoons, they can negotiate in their contract that they will retain some of the copyrights.
Why it matters
Overall, failing to prove these three points upon hiring a freelancer will lead to a lawsuit 💼.
Take it from me:
I once represented a family 👨👨👦👦 that hired a nanny via contract for $15 per hour, eight hours a day, four days a week. After about five years, the nanny got frustrated with the job, quit, and within one year sued the family for employee misclassification.
She argued that due to the nature of her job, she was required to report to the family home and worked under the control and direction of the family.
As a result, the nanny was not an independent contractor, but a legal employee, and therefore entitled to benefits like overtime and sick 🤒 leave.
Ultimately, the family had to pay a large settlement that came straight from their personal resources.
How to properly hire a freelancer
You should take the following steps to avoid being subjected to civil penalties due to improper hiring of a freelancer, independent contractor or gig worker:
Think about all the independent contractors and freelancers you use for your business on a yearly 🗓️ basis.
Are these people virtual assistants, copywriters ✏️, photographers, videographers 📹, audio engineers 🎛️?
Make a list so you can identify your potential hires for the next year.
❇️ Get a lawyer
I know that contacting lawyers can be intimidating for some people; it can seem overly serious and often costs money.
However, getting a lawyer doesn’t always have to be expensive, and it doesn’t have to be an unpleasant experience.
Don’t be afraid to call 📞 a lawyer and, on a limited engagement, request that they draft a customizable independent contractor freelance agreement 📜.
Make it clear that you’re not going to pay for any additional time ⏰; you only want this independent contractor agreement drafted for use in your business.
Additionally, you could visit a law website or legal document assistant website to find templates for contracts.
❇️ Use a checklist
You can get my free “How to Hire a Freelancer” checklist ☑️ by texting FREELANCER to (213) 340-3302.
This checklist will provide you with all the rules that need to follow to hire a happy freelancer or independent contractor without getting sued for violation of labor law.
❇️ Learn consumer privacy laws
Did you know that, as of 2019, you can face civil penalties and potential damages for not changing your website? If you want to learn more about consumer privacy laws and how they affect your online business, check out iancorzine.com.