Oregon’s House Bill 2498 would add a new test to define independent contractors operating within the state, which may put limits on the use of contractors and may reclassify many of them as employees.
What Is An Independent Contractor?
An independent contract is a worker who does work for another individual or business entity, but is not considered an actual employee. For example, in the world of construction a general contractor might be responsible for ensuring a new building gets built, but that general contractor might enlist the services of a third party plumber to install the pipes and fixtures, an electrician to wire the building, and a roofer to install roofing materials. The electrician, plumber and the roofer wouldn’t be considered employees of the general contractor, rather they would be considered independent contractors (or possibly employees of their respective plumbing/electrical companies).
Independent Contractors Versus Employees
A big distinction between employees and independent contractors is that employees are offered wide protections that independent contractors are not. Employees must be paid minimum wage, offered workers’ compensation, have taxes withheld on their behalf, and they can sue their employers for unfair treatment. Independent contractors, on the other hand, are offered no such protections. Rather, they are thought of as companies in and of themselves. They must set aside their own money for taxes, there is no consideration for minimum wage, and since they don’t actually have an employer, there really is no consideration for mistreatment in the workplace. Independent contractors, though, do enjoy some benefits that employees do not. They have complete control over their working hours, they get to write off expenses for things like equipment, home office use, and vehicle use, and they get to pick and choose who they work for.
Oregon’s Current System
Under the current system, the test for determining whether or not a worker is an employee or an independent contractor generally revolves around how much control the employer has over the worker. The more control that the employer exercises over the worker, the more the relationship is skewed towards being an employer/employee relationship, rather than independent contractor relationship. For example, under the current system, if a logging company enlists the service of an independent contractor who has his own logging service, but doesn’t set his hours, doesn’t tell him how to do the work, and doesn’t provide all of the equipment for him to use, that would safely be considered an independent contractor because the control over the worker is minimal. On the other hand, if the chief logging company tells the supposed independent contractor what his working hours will be, exactly how to do the work, and furnishes all the equipment to use, that would likely be considered an employee/employer relationship.
Oregon House Bill 2498
Under the proposed system, HB2498, a new test would be added. The test is “whether that person performs services that are within the usual course of business of person that hired purported independent contractor.” With respect to the logging company reference above, since logging services fall within the scope of the services offered by the logging company, the independent contractor would likely fall under classification as an employee, rather than an independent contractor. It would apply to every industry, however. Implications would reach into industries such as salons, construction, and software development.
You can read the full text of the bill here.