An issue is starting to heat up that I believe will have significant impact in fields such as career development, workforce management, and the evolving nature of the employee and employer relationship. It involves the proliferation of private, entrepreneurial, and independent contractors and the hiring or contracting of them by companies.
Projections are that a growing part of the future workforce will be made up of independent contractors providing relatively short-term project-oriented solutions for business. Where conflict may arise is in the legal enforcement of how employers classify and treat those among their workforce as to whether they are categorized as employees or independent contractors.
Both federal and state laws have a history of protecting worker rights from employers who would seek to deny workers’ compensation coverage and other benefits to their employees by classifying these workers as independent contractors. In New Hampshire, for example, legislation became effective January 1, 2008, revising and broadly applying a consistent definition of “employee”, thereby increasing worker protections enforced by the New Hampshire Department of Labor.
In the Federal government, Senator John Kerry introduced legislation in December 2009 matching a House bill that would increase the burden of employers to classify workers as independent contractors. The point being to secure workforce protections like workers’ compensation, Social Security, Medicare, overtime, unemployment compensation, and minimum wage for the greatest number of workers.
It is good to know that the government is out there looking out for the little guy, and it undoubtedly keeps many employers honest. However, I am afraid that an unintended consequence of these protections may be to discourage employers from contracting with independent providers at a time when many of these workers want to work self-reliantly and to be free from the long-term obligations of an employee status with an organization.
Employers may want to reduce legal compliance pressures by just hiring full or part-time employees and not take advantage of the strategic talent options available from independent contractors. This creates a challenge for highly motivated and skilled individuals who want more control over how they work. And it is to them that the burden lies in convincing business that contracting with them will not come with onerous worker protection strings attached. Otherwise, their dream of working creatively from one environment to the next will be in jeopardy.
Independent contractors need to be noticeably clear with themselves that being independent means just that, on your own. Income and benefits both must be generated by the private worker. A networking trend that may help independents is in establishing exchanges or guilds that can negotiate for benefits such as health insurance. By using the economies of scale, independents may be able to provide for themselves the benefits they need but should not expect from traditional employers.
Another area independents need to be clear about is in the language, terms, and conditions of their contracts. Contracts will have to be written in such a way that the independence of both the contractor and the hiring company is maintained. To write such a contract, both parties should be clear on the definition of “employee” for the state in which the working relationship is to take place.
For example, in New Hampshire the recent redefinition of the term “employee” contains eleven conditions that must be met to exclude the independent contractor from employee status. And all eleven conditions must apply! Going into these contractual arrangements armed with this kind of knowledge places the independent contractor in a stronger position, because then they are then able to mitigate the concerns and reduce the hassles for the hiring company.
There are many benefits for both parties in having temporary project-based contracted work. Despite the predictions of its imminent expansion as a practice, planning and foresight will be more necessary than ever. Here is yet another case in which adaptability and an orientation toward change will be called upon for success to be achieved.
