March 24, 206

As much of the focus of activities in Montpelier are on the budget and taxes, I am very proud to report that the House Commerce and Economic Development Committee, on which I serve, passed out a bill, unanimously, that clarifies the laws governing employers, employees, and independent contractors with regard to workers' compensation and unemployment insurance. 

Along with colleagues from across the political spectrum, I have fought diligently throughout the years, to do something that would ensure the many protections for workers historically in place are maintained, while ensuring that we position our state as a place in which the new, independent and collaborative workforce is encouraged to grow and invest.

The bill that was voted out of our committee, H. 867, does just that.

 

This is a very complicated issue and one that attracts the passionate attention of numerous stakeholders.  For that reason, our committee thought it important to send a letter to our House colleagues explaining in detail some of the main aspects of the bill, and our reasons for bringing it forward for passage.

From that letter:

Independent contractors are a critical part of any modern and growing economy.  Operating your own, independent business, whether you are a web developer, accountant, skilled tradesperson, or other professional, provides tremendous opportunities in today’s economy.  For many companies across sectors, being able to contract with such independent businesses allows them to address specialized needs in a more efficient, nimble way that would not make sense to address with their own in-house employees.

What does H. 867 actually do?

The bill takes elements from the current law’s definitions to explicitly define an “independent contractor” as an individual who:

  1. is free from the direction and control of the employing unit, both under the person’s contract of service and in fact;
  2. controls the means and manner of the work performed;
  3. operates a separate and distinct business from that of the person with whom it contracts;
  4. holds itself out as in business for itself;
  5. offers its services to the general public; and
  6. is not treated as an employee for purposes of income or employment taxation with regard to the work performed.

If someone meets the definition of an independent contractor, that person is not considered an “employee” of their client under one of two circumstances.   Either:

  1. the individual or partner owner is an independent contractor who performs work that is distinct and separate from that of the person with whom the individual or partner owner contracts; or
  2. the individual or partner owner is an independent contractor and is either actively registered as a business with the Vermont Secretary of State or actively registered as a business in the state or country of domicile.

So how is this different from current law?

Under current law, even an independent contractor with their own, long-standing business could be considered their client’s “employee,” just because the subject matter of the work they did was similar to an activity that some of their client’s employees did or used to do.  

The other major difference is that under current law, an independent contractor could be considered their client’s “employee” just because at any given time they might have only one client.  In either of the two scenarios above, current law would not recognize how truly “independent” the person actually is.

To be clear, the goal has always been to be sure that businesses are following the laws and that employees are being treated fairly; that when an individual works for somebody, and is, in fact, an employee, that that person is employed as such by the business and covered under workers compensation and unemployment insurance.

However, our economy is changing.  This new 21st century economy is fast growing, but is very different.  Instead of the traditional economy of an employer with many employees, in many ways it is an independent workforce coming together to collaborate on projects. 

Couple this with the sharing economy, and we've got a new kind of independent workforce around which we must tailor our laws.  We must ensure that the current protections in place for the traditional workforce are maintained, while at the same time encourage and grow this new, independent workforce and sharing economy.

Every state in the country is trying to address this issue, but I would like Vermont to lead the charge as much as possible.  If we can position ourselves as the place to come to work both independently and collaboratively, and do so successfully, we can attract this new workforce and start to address our significant economic and demographic challenges.