As we look back on 2015, we see massive shifts in the American workforce. In this article, we take a look back at the key events 2015, why they matter to corporations, and what clients hiring independent workers should look towards in 2016.
This summer, the Department of Labor issued an administrator’s interpretation that served more as a wake-up call addressing enterprises that employ independent contractors.
The July 14th memorandum called attention to the fact that misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States. The Department received numerous complaints from workers alleging such misclassification.
The document was intended to provide guidance to businesses in order to avoid this issue plaguing numerous industries. The DOL used the Economic Realties Factors Guide to inform its interpretation.
The key takeaway for 2016? Simply put: be more careful.
Businesses will need to be more attentive than ever to make sure they are properly engaging independent talent. The Department of Labor is growing increasingly stringent with its penalties – more than $10.2 million was awarded in 2014 to fund misclassification detection initiatives.
Towards the latter half of this year, the legal landscape has increasingly begun to tackle the evolving state of the independent contractor. Courts heard a number of misclassification cases, particularly involving direct service providers ranging from transportation to cleaning services.
Of particular interest:
Transportation service providers Uber and Lyft have both seen their fair share of courtrooms this past year. Uber claims a “be your own boss” business model, and this has mostly held up; court rulings in a number of states have determined that Uber drivers are contractors, not employees. That said, a pending California class action case where as many as many as 160,000 eligible drivers scheduled for June 2016 are claiming they should be paid as employees could have huge implications for the brand’s business model.
Similarly, FedEx Ground faced a contractor misclassification case in California. The case was settled with FedEx ponying up a $228 million settlement, citing the rigid controls FedEx Ground had over the drivers’ roles.
Well-known beauty brand Mary Kay, Inc. is involved in a prominent direct seller class action lawsuit. While a decision in the case is not expected until early next year, the potential impact is significant.
The case noted that direct sellers incur considerable expenses ranging from marketing to transportation costs, as well as “rigid rules” for doing business. As a result, direct selling companies, like Mary Kay, Inc., could be at risk under state wage payment laws should courts determine the direct sellers are employees, not independent contractors.
Instacart, a grocery delivery service, made a swift decision to classify all of their workers as employees, while butler-on-demand service Hello Alfred opted to classify workers as W-2s from the get-go.
A joint initiative by the Department of Labor and IRS has been launched to improve compliance with laws and regulations administered by both departments. This initiative will be accomplished through enhanced information sharing, so be ready to be highly scrutinized by these departments and the courts if your company may be acting in extreme ways. Make sure you’ve prepared a strong internal orexternal legal resource that is highly knowledgeable in compliance.
Access to employer-sponsored (read: subsidized) health insurance has long been a seen as a huge benefit for employees; it was often a “deal breaker” for those that wanted to be independent contractors, but couldn’t handle the burden of costs tied to independent health insurance. 2015 has seen both awareness and enrollments grow. Not only are independent professionals taking advantage, but they’re avoiding serious tax penalties for being uninsured.
The ACA has opened the door for many self-employed professionals to pursue the independent life, contracting for business, since they can now get affordable health insurance on their own via their own state-based exchange or the federal marketplace.
In 2016, companies will see a more empowered independent contractor environment. An increased number of workers are going independent thanks to easily accessible healthcare, thus expanding their talent pools, but will also likely see a push to offer to pay some benefits and taxes on behalf of their independent workforce.
The new demand from potential contractors has shifted to “portable benefits,” including individual security accounts, from their potential contract clients.
Additionally, contract workers seek additional protections, ranging from workers’ compensation to sick leave, contributing to a “safety net” should they get injured or sick, or decide to retire. This discussion will surely continue into 2016.
Companies looking to become “clients of choice” will also make decisions to offer certain extra perks to lure in top talent.
While the presidential election is still nearly a year away, many candidates have begun to address the “gig economy.”
Democratic hopeful Hillary Clinton’s opinion is mostly negative; she has gone on the record to say that the gig economy is “raising hard questions about workplace protections and what a good job will look like in the future.”
Other candidates, however, have embraced the products, services, and advantages of the gig workforce. Recent articles have cited Marco Rubio’s love for the gig worker, defending Uber and principles of the sharing economy. Ted Cruz has also weighed in on the matter, and his campaign reports the most Uber use of any presidential campaign. Jeb Bush made it a point to take Uber to a series of interviews with start-up companies in San Francisco.
As for American voters, companies should take note that independent contractors have a very strong voice. Almost 90% of the freelancers in recent studies have said they are likely to vote in the 2016 general election, and 67% said they would be more likely to vote for a candidate who supports freelancers’ interests. According to our State of Independence report, that 90% represents over 27 million Americans!
According to the latest Department of Labor report regarding the job market, the economy is continuing its strong “bounce back.” The independent workforce has seen 12% growth (including very significant growth for those independents in the $100,000+ revenue group), compared to 7% growth in overall employment over the last 5 years.
Unemployment is at 5%, a seven-year low – the question now becomes, how do you find and recruit the best independent contractor talent? Independent professionals and enterprises alike need to turn to a resource that accurately presents opportunities that connect the right talent with the right projects.
As technology has shifted from the data centers of old to cloud-based computing and storage, so has the talent marketplace. Many providers have been in the market for a few years, but now this method of recruiting has come to the forefront. Companies are now deploying programs and tools that provide candidate search, social media integration, and candidate relationship management, all in one place.
As a new year approaches, questions arise: How do you get ahead of the curve? How can you utilize these technologies to locate and bring on the best talent? New platforms are constantly emerging, and MBO Partners launched a state-of-the-art platform, connecting opportunities and reputable independent contractors alike, called MBO Connect™, currently in pilot with select enterprises.
As the Chinese zodiac tells us, 2016 is the Year of the Monkey, but this is certainly a time where positioning your business for future success should not be taken lightly. We look forward to the new trends and top stories the future holds for the business world, and of course the challenges and successes that come along the way.
We’re ready to help you lead the charge into a prosperous new year. Contact us today to learn more.
News and notes for independent professionals and their clients. This is the April 17, 2017 edition.
This blog shares 10 business books (and authors) that have been instrumental in helping the professional development of a number of MBO Partners staff and executives. We recommend adding them to your reading (and following) lists!