From JDSupra, Richard Meneghello discusses a proposal in the tax reform bill that would provide a safe harbor for companies engaging with independent contractors. Richard writes:
Among those identified by Senator John Thune (R-S.D.) is a provision that would provide a misclassification safe harbor to any business that takes certain steps as outlined in the bill. This is similar to the approach taken by Florida and Texas in the past year, offering protections to transportation companies (such as Uber and Lyft) if they satisfy some fairly simple tests to ensure their drivers are truly independent contractors.
Although we don’t yet have the exact language that will be inserted into the Senate’s tax reform bill, we can assume it will largely mirror Senator Thune’s “NEW GIG Act of 2017” introduced several months ago. S. 1549, also known as the “New Economy Works to Guarantee Independence and Growth Act of 2017,” has been in the works for some time now. It is a stand-alone measure that would offer blanket misclassification protections to companies that follow certain steps and meet certain objective tests. A companion bill – H.R. 4165 – was just introduced in the House on October 27 by Congressman Tom Rice (R-S.C.).
As my colleague Sidney Minter described when he wrote about this bill earlier this year, a company would avoid misclassification claims if it ensures that the worker in question:
- Incurs unreimbursed expenses;
- Performs services for a particular amount of time, to achieve a specific result, or to complete a specific task;
- Has a principal place of business, does not provide the service primarily in the company’s place of business, pays a fair market rentfor use of the company’s place of business, or provides the service primarily using equipment they supply on their own; and
- Agrees to a written independent contractor agreement, the term of which cannot exceed two years.
Moreover, the company would need to ensure the worker in question satisfies at least one of the following four factors:
- Has a significant investment in assets or training which are applicable to the service performed;
- Is not required to perform services exclusively for the company;
- Has not been treated as an employee by the company during the one-year period ending with the date of the commencement of services under the written independent contractor agreement; or
- Is not compensated on a basis which is tied primarily to the number of hours actually worked.
Read the full story at Could Congress Soon Swoop In To Aid The Gig Economy?