Independent Planners Beware

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The Massachusetts Independent Contractor Law, which is similar to California’s AB5 has been in effect since 2004.

Several pending state bills—and a federal one—may make it harder for some independent planners to remain in business. Here’s a look at where things stand and what could be in store.

In California, many independent planners, entertainers and other independent contractors have found it challenging to find work since the passage of Assembly Bill 5 (AB5) which uses an “ABC” test to determine whether a worker is an employee or a contractor. The bill, which took effect on January 1, was designed to prevent employers from sidestepping paying benefits and taxes by misclassifying employees as independent contractors, which, according to the National Employment Law Project, can increase costs by as much as 30 percent.

California is not the first state to impose an ABC rule. Connecticut, Delaware, Illinois, Indiana, Nebraska, Nevada, New Hampshire Vermont, Washington and West Virginia are among the many states that use some form of ABC criteria.

The Massachusetts Independent Contractor Law (MICL), which is similar to California’s AB5 has been in effect since 2004. In Massachusetts, as in California, a worker may be defined as an employee, even if he/she is only working for a single day.

Massachusetts’ Joint Task Force on the Underground Economy and Employee Misclassification recovered over $20 million through its enforcement efforts, said attorney Jeffrey Ment, who specializes in the travel and hospitality industries. “This is a prime example of why this (kind of) initiative is likely to continue.”

Nevertheless, there still is a place for legitimate independent planners, said Ment. “In California, companies who are not hiring independent contractors are doing so out of fear and uncertainty. Like anything else, I think the new law will take time to get accustomed to. It may take some time for employers to understand how the law will be interpreted,” he said.

Bills pending in several states

New York State has employee misclassification bills akin to AB5 and MICL pending in its State Senate and Assembly. A similar bill in New Jersey was put on hold in response to push back from both independent contractors and businesses but is still in the pipeline. Plus, Indiana, Kansas, Missouri, Pennsylvania, and Virginia all have bills pending that would either set up task forces or increase enforcement and/or penalties for employee misclassification.

At the federal level, the “Protecting the Right to Organize” (PRO) Act was passed by the House of Representatives, which includes an ABC test to prevent employees from being misclassified as contractors in addition to bolstering union rights. The bill is not expected to make it through a Republican Senate, but could be revived in the future.

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