The Latest on Independent Contractors

AB5

Independent contractors are back in the news with the recent U.S. Supreme Court ruling that denied the California Trucking Association’s challenge of the California worker classification law known as AB5.

According to the Economic Policy Institute, an estimated 10 to 15 percent of employers misclassify at least one worker as an independent contractor.

The law, enacted in 2019, has put pressure on gig-economy companies like Uber, Lyft and DoorDash and has implications for a broad range of industries, including the meeting industry. It has set off a chain reaction by many states seeking to capture taxes that are not being paid by corporations incorrectly classifying workers as independent contractors.

There are several issues for the workers who are misclassified: They aren’t covered for minimum wages, overtime, retirement benefits and other labor law protections; they aren’t usually eligible for unemployment insurance or workers compensation; they aren’t covered under anti-discrimination, OSHA and other employment laws; and they are forced to pay their own self-employment tax (ICs can deduct half of the total when figuring out adjusted gross income).

Each state has its own classification to define contract workers, but many follow California’s “ABC” test:

A: The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of work and in reality.

B: The person performs work that is outside the usual course of the hiring entity’s business.

C: The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

How are meeting planning companies that hire ICs protecting themselves? “For some time, I’ve insisted that anyone we hire must have a business license, a business name and proof of that along with liability insurance so I can be sure they are legitimate entities,” Douglas H. Wheeler, founder & principal at Summit Performance Group, said. “That way, if the IRS questioned a 1099 status, we could say yes, this is a separate entity.”

But the future remains unclear for interpreters, musicians, independent meeting professionals and many others who either choose to be gig workers or are forced to be because they can’t find full-time employment.

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Barbara Scofidio is Editor of Prevue and heads up the Visionary Summits, our exclusive conference series targeting senior-level meeting and incentive planners. In her 30 years in the industry, she has become known for her passion around greening meetings, growing awareness of human trafficking and promoting CSR activities as part of business events. She is currently a member of SITE's Women IN Leadership committee and the media liaison for FICP's Education Committee. She was the first member of the media ever to be invited to sit on a committee by GBTA, where she spent three years on the Groups and Meetings Committee. She has also been an active member of SITE for 30 years, chairing its Crystal Awards committee and acting as a judge. Before joining Prevue in 2014, she served as Editor of Corporate Meetings & Incentives (MeetingsNet) for more than 20 years. She has a BA in Literature/Rhetoric from Binghamton University. Barbara is based outside Boston, in Groton, Mass.

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