Independent contractors are an essential lifeline to the construction industry—they provide specialized skills, entrepreneurial opportunities and stability during fluctuations of work common to construction.
Any independent contractor reform effort must recognize that independent contractors are necessary, productive participants in the construction industry, and their ability to contribute to the marketplace must be preserved.
- Efforts to provide a clear, concise and reasonable definition of independent contractors.
- Preservation of Section 530 of the Revenue Act of 1978, which provides a safe harbor for many businesses utilizing independent contractors.
- The deceptively named Protecting the Right to Organize Act (H.R. 842/S. 420), which would curb opportunities for people to work independently through gig economy platforms or more traditional independent contractor roles. On March 9, 2021, H.R. 842 passed in the U.S. House of Representatives by a vote of 225-206.
- Any proposals to repeal Section 530 of the Revenue Act of 1978.
- Any proposals that would impede the flexibility of employers to utilize independent contractors.
- Any current or future policy or regulation that would require employers to generate burdensome classification analyses regarding workers’ status under the Fair Labor Standards Act. Such a requirement would merely serve as an enforcement tool and fuel frivolous litigation.
Determining whether a worker is an employee or an independent contractor often is difficult. Internal Revenue Service and state guidelines for classifying workers as independent contractors are often ambiguous and inconsistent. When the IRS or a state agency rules an employer incorrectly classified an employee as an independent contractor, the employer may be liable for thousands of dollars in fines, back-taxes and benefits.
Companies must be able to make good faith, reasonable decisions about the classification of individuals as employees or independent contractors without fear of misclassification or penalty from the IRS. Section 530 of the Revenue Act of 1978 created a safe harbor provision that provides an employer with some protection from liability for accidental misclassification if the employer acted with a reasonable basis and treated workers consistently. Over the years, several legislative proposals sought to eliminate the Section 530 safe harbor. ABC opposes these efforts.