Michigan small businesses and entrepreneurs would be hurt significantly if a proposed U.S. Department of Labor (USDOL) independent contractor rule goes into effect, according to the Small Business Association of Michigan (SBAM).
On Oct. 11, the USDOL announced the proposed rule that would rescind the existing pro-small business independent contractor analysis, replacing it with a complicated and subjective system.
The proposed change would be detrimental to entrepreneurs operating as independent contractors and small businesses who use independent contractors, states SBAM officials.
“Enacting this needlessly complicated and restrictive system on entrepreneurs and small business owners is shortsighted and harmful to our entrepreneurial economy,” says Brian Calley, president and CEO of SBAM.
“These proposed subjective rules were clearly developed by government workers who have no experience in business. Independent contractors are a vital and substantial part of our economy, and these proposed rules hurt their ability to be successful.
According to a recent survey by Upwork, 59 million people, or about one-third of the U.S. workforce, did some freelance work last year, contributing $1.3 trillion to the country’s economy.
The proposed rule establishes a far more overreaching “economic reality test” than the previous rule, including six different, often subjective factors that must be met to be an independent contractor. These restrictions exert excessive restrictions on small businesses operating as independent contractors as well as small businesses who use the services of independent contractors.
A few of the highly subjective and confusing factors included in the proposed rule are:
- Opportunity for profit or loss depending on the managerial skill
- Considering the degree of permanence of a work relationship
- Determining whether investments by a worker are entrepreneurial in nature
- Whether the work being done by an independent contractor is necessary or integral to the business.
- The degree to which the independent contractor does or does not use specialized skills in performing the work
SBAM is urging the federal government to rescind this proposed rule and go back to the drawing board. If the independent contractor rules are going to be changed, they must work for small businesses or they don’t work for Michigan.
A full issue brief prepared by SBAM on this topic is available here.
SBAM focuses solely on serving the needs of Michigan’s small business community through advocacy, collaboration, and buying power. Today, they serve more than 30,000 members in all 83 counties in Michigan. SBAM is located in Lansing, one block from the Capitol.
