But in the eyes of the Department of Labor, one of them probably isn’t really an independent contractor (what, you were expecting a joke?). Sure, all three freelancers are free to work wherever they choose and they have the flexibility to pick and choose this project or that. But, unless they can check all the right boxes during a DOL audit, things might not be as rosy as they seem.
The point of this post is not to spread doom and gloom over the growing group of freelancers in the workforce and the companies that enlist their valuable services. I’ve done some reading lately, though, and it appears that the increasing number of misclassified independent contractors is on the DOL’s radar. Try these numbers from Colorado on for size*:
- From 2006 – 2010, the percentage of Colorado workers who were misclassified grew from 7.8% to over 14%.
- From June 2009 to Dec 2010, over 14% of all Colorado workers were misclassified.
- During the same time period, the Colorado DOL conducted over 2100 random and targeted audits and found that about 43% of employers were misclassifying workers.
Again, the majority of companies and freelancers out there today would breeze through an audit with flying colors. But if you got a funny feeling while reading this (and you can safely say it wasn’t from the author’s writing style – or lack thereof), it might be in your best interest to check out http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F. If that doesn’t make things crystal clear, there are quite a few firms in the marketplace that can help based on your industry and a variety of other factors.
Now, how many freelancers does it take to change a light bulb?
*From the Colorado DOL’s Annual Compliance Report, published May 18, 2011, on House Bill 09-1310, Misclassification of Employees as Independent Contractors