Editorial: Contractor laws need clarity, not constraints
Entrepreneurs built America and continue to drive its economic future. We tend to think of these wealth and opportunity builders as singular geniuses with a big idea — think Steve Jobs or Mark Zuckerberg — but most start small and, even at their most successful, stay relatively small.
Particularly in service industries, these entrepreneurs are independent contractors, an employment classification now in the crosshairs on the state and national level. Governments seeking revenue are taking the legitimate issue of misclassification as an excuse to strangle the practice and force more companies to classify freelancers as employees.
There is no question that some companies intentionally take advantage of ambiguous definitions of what constitutes an independent contractor to subvert the law's intent. Companies can sidestep compliance with the Americans with Disabilities Act, the Occupational Safety and Health Act and the Fair Labor Standards Act.
In other instances, a business can in good faith run afoul of the regulations if it isn't careful. The laws are long due for an overhaul.
But governments are desperate to increase tax collections, and there is a strong, unsubstantiated belief that independent contractors under-report their income. These new restrictive laws, the reasoning goes, will help capture that lost revenue.
At the same time, however, they will increase the cost of doing business for those same employers, pile on more paperwork and hinder flexibility. In the long run, it could lead to less hiring, for no company wants to be constantly hiring and laying off employees as work ebbs and flows. Paradoxically, instead of strengthening workers' comp and unemployment funds, as proponents expect, they could be strained even further.
And making it harder for companies to use independent contractors will squelch opportunity for countless entrepreneurs to nurture their dreams of being their own bosses. It may come as a surprise to some legislators, but not everyone in the workforce wants to be an employee, subject to one company's policies, decision-making and economic health.
Independent contractors, used properly, bring talent, skills and ideas to a company when they are needed, and they make an economy more nimble as these workers are free to follow demand and adjust their offerings accordingly.
Instead of making the business-independent contractor exchange more difficult, lawmakers should focus on improving current laws to better define work-for-hire and freelance relationships. The goal should be to reduce abuse and encourage more budding entrepreneurs, not to sacrifice individual initiative to even greater government control.