Issue Position: Independent Contractors

Beginning in 2012, I have lead the effort - working with colleagues from across the political spectrum - to bring our labor laws and regulations into the 21st Century. Starting with my collaboration with Democratic Representative Chip Conquest and the Department of Labor under Governor Peter Shumlin, up until this past year, my goal has been to ensure true independent contractors in Vermont would continue to be able to find work, and that entities would continue to be able to contract with them.

Unfortunately, it has been a very long, difficult road. Even with a unanimous vote out of our House Economic Development Committee in 2016 (6 Democrats, 4 Republicans, and 1 Independent), and wide support across the political spectrum, pure politics prevented the bill from even coming before the full House for action. After all of the effort bringing so many together on a very difficult issue, Big Labor brought their power to bear on the democratic legislative leadership, and killed the bill.

As background, as both native Vermonters and Vermonters by choice know well, our state has a long tradition of independence. One manifestation of that independence throughout the years has been in work. For greater flexibility and autonomy, and greater control over their destinies, many Vermonters have chosen to work for themselves, and be what we now call independent contractors.

Over the years, this style of work has sometimes come into conflict with various labor laws - specifically in workers' compensation and unemployment insurance - because of how we in Vermont, define employer. In the past, this conflict has mostly arisen in the construction industry with general contractors hiring subcontractors to do specific parts of the job. The Department of Labor (or the hiring entity's insurance company) then determines through an audit that the subcontractor should have been classified as an employee.

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

However, this conflict has recently reared its head in our new economy. The 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 have a new kind of independent workforce around which we must tailor our laws.

Every state in the country is trying to address this issue, but I would like Vermont to lead the charge. 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 demographic challenges.

I am really pleased to report that in 2017, we started to do just that!

Through both a unanimous decision from the Vermont Supreme Court and a Guidance Document released a bit later by the Department of Labor, we have begun to open the doors wider for the independent workforce.

In June 2017, the Vermont Supreme Court, in Bourbeau Custom Homes, unanimously ruled that a single-members LLC could not be classified as an employee for the purposes of Unemployment Insurance.

To be clear, this decision was limited to Unemployment Insurance, with the Court specifically saying "We need not decide whether any of these individuals are employees of Bourbeau for other purposes, such as tort law or tax law."

That said, many of the arguments used by the Court in making the determination would hold true in the Workers' Compensation program as well.

The Vermont Department of Labor clearly realized that as well, so released a Guidance Document, "Workers' Compensation Best Practices When Hiring an Independent Contractor."

Like the Supreme Court decision, this Guidance Document opens the door to allow greater flexibility and greater opportunity for the independent, creative, collaborative workforce in Vermont. Importantly, it also provides some critical best practices for businesses when they hire a LLC, Corporation, Sole Proprietor, or Partnership.

If you pay an individual to perform work for your business, you are required to provide workers' compensation insurance for that individual unless:

You can demonstrate the individual is covered by his/her own workers' compensation policy

OR

The individual is a member, manager or executive officer of a Corporation or LLC registered with the Vermont Secretary of State's office or with another State

AND

The individual has filed an exclusion using Form 29 with the Vermont Department of Labor and had it APPROVED

It should be noted that if a hiring entity is not responsible for workers' compensation coverage, it is potentially civilly liable for injures to its independent contractor and the possible civil damages may be considerably costlier than worker's compensation coverage.

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