Independent Contractor Misclassification and Compliance News September 2022

By MBO Partners | September 30, 2022

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misclassification and compliance news

The Federal Trade Commission (FTC) announced enforcement priorities to protect gig workers

The Seattle City Council passed an ordinance that provides protections to independent contractors providing services in Seattle.  

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

1. Federal Trade Commission Announces It Will Protect Gig Workers

The Federal Trade Commission (FTC) announced enforcement priorities to protect gig workers. The FTC enforces the Federal Trade Commission Act (FTC Act) and other laws and regulations that prohibit unfair methods of competition and unfair or deceptive acts or practices. The FTC also enforces federal antitrust laws that prohibit anticompetitive mergers and other business practices that could lead to higher prices, fewer choices, or less innovation.  

In September, the FTC issued a policy statement outlining the ways in which the FTC would protect gig workers. The FTC said that no matter how gig workers are classified, they are consumers who are entitled to protections under the law. The FTC’s policy statement said it would use the laws that it enforces to prevent unfair, deceptive, and anticompetitive practices in the gig economy including: 

  • Misleading claims about the costs and benefits of gig work 
  • Deceptive or unfair pay practices 
  • Undisclosed costs or terms of work 
  • Unfair or deceptive practices involving artificial intelligence or algorithmic based decision-making prohibited by the FTC Act 
  • Unfair contractual terms or restrictions on mobility 
  • Unfair competition including wage fixing and price coordination  

The FTC will use the full portfolio of laws it enforces to prevent “unfair, deceptive, anticompetitive and otherwise unlawful practices” affecting gig workers. 

This policy statement follows the announcement in July of a cooperation agreement with the National Labor Relations Board (NLRB). The FTC and NLRB agreed to cooperate to protect workers against unfair methods of competition, unfair or deceptive acts or practices, and unfair labor practices.  They agreed to share information and training, and coordinate education and outreach. 

2. Seattle Independent Contractor Protections Ordinance

In June 2021, the Seattle City Council passed the Independent Contractor Protections Ordinance. The ordinance because effective September 1, 2022 and, as the name suggests, provides protections to independent contractors providing services in Seattle.  

The ordinance imposes new obligations on a company who engages with independent contractors (referred to in the ordinance as “hiring entity”). The ordinance (i) requires a hiring company to provide disclosures before entering into a contract with independent contractors and provide disclosures at the time of payment and (ii) add additional protections for independent contractors such as requiring timely payments and prohibiting retaliation.  

A hiring entity must disclose the following to an independent contractor before engaging them:  

  • Date 
  • Name of the of the independent contractor and name of the hiring entity 
  • The hiring entity’s contact information including physical address, mailing address, and telephone number and/or email address 
  • Description of the work 
  • Location of the work and regular place of business of the independent contractor or hiring entity 
  • Rate or rates of pay including any multiplier or variable pricing policy or incentive pay; 
  • Basis of pay (e.g. hour, day, week, monthly, fee per project, piece rate, commission) 
  • Tip and/or service charge distribution policy, if applicable 
  • Typical expenses incurred in the course of work and which expenses will be paid or reimbursed by the hiring entity 
  • Deductions, fees, or other charges the hiring entity may subtract from payment and accompanying policies for each type of charge (if applicable) 
  • Payment schedule 
  • Any other information required by the Director of the City of Seattle’s Office of Labor Standards 

At the time of payment, the hiring entity must disclose similar information. In addition, the ordinance requires a hiring entity to provide a notice of rights to independent contractors. The notice should inform independent contractors that they have a right to:  

  • Receive a written notice that identifies the proposed terms and conditions of work and the terms and conditions of payment before starting work.  
  • Receive timely payment in accordance with the terms and conditions of the pre-work written notice or contract. If left unspecified, then receive payment within 30 days after the completion of services under the contract.  
  • Receive a written notice that gives specific itemized payment information each time that payment is made. 

In addition, the notice should also inform workers of their rights:  

  • RETALIATION IS PROHIBITED: These laws protect workers from retaliation for enjoying or exercising these rights.  
  • RIGHT TO FILE A COMPLAINT: Workers have a right to make a complaint with Office of Labor Standards (OLS) or file a lawsuit if a hiring entity violates these laws.  
  • EMPLOYMENT RIGHTS: If you think you might be an employee, rather than an independent contractor, contact OLS. As an employee, you may have rights to paid sick leave, minimum wage, overtime, and paid meal and rest breaks. Exercising your rights under the ICP ordinance will not impact any rights a worker might have as an employee. 

Companies who engage with independent contractors in Seattle should be making these disclosures.  

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help. 

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