As jobless rates slowly begin to drop and many businesses just start to regain steam, our government should be doing everything it can to help grow and stabilize the economy. More so now than ever, our government should be supporting one of the most potent sparks to America’s economic recovery: independent contractors.
Today, an estimated 10.3 million American workers are independent contractors, running their own businesses and creating opportunities. Their contributions are part of Maine’s economic recovery and stability which depends on the continued growth of small businesses across the state.
In recent months, the Internal Revenue Service and Department of Labor have announced a new crackdown on the same independent contractors that are driving our economy’s resurgence. The Labor Department just closed the public comment period on a proposed study that will analyze how much workers understand about their job classification and rights.
Coupled with ongoing departmental collaborations, this study will likely provide these government agencies the “excuse” they need to expand their oversight authority and lead to more legal barriers to independent contracting. The result will make it even harder for small businesses to own, operate and grow their enterprises and could result in more lawsuits challenging the use of independent contractors.
As it is, state and federal laws make compliance cumbersome. Myriad varying “contractor tests” exist state to state, creating an entangling web of red tape that by design sets many small businesses up to fail. Given the challenges of existing enforcement laws, it is amazing that anyone is succeeding in this business environment.
A variety of professionals classified as independent contractors, including fishermen, artists, homebuilders, tax preparers, business consultants and web designers could suffer if the federal government follows through on its proposed crackdown.
What does it mean for our economy and our workforce if independent contractors suffer at the hands of federal regulation?
The most obvious implication is stifled economic growth. The harder it is for businesses to hire independent contractors, the less opportunity there will be for businesses to expand and develop.
Many businesses in the U.S. and Maine started out as independent contractors, selling specific skills to clients and building up from there. If clients aren’t permitted or encouraged to hire independent contractors, their ability to compete in a local and global economy is hampered. This stifles economic growth and means there are fewer jobs available as these businesses fail to grow.
Meanwhile, American businesses, small and large, also benefit from hiring independent contractors. Independent contractors are a huge advantage to American businesses. The ability to hire on a contractual basis, rather than full time, is more efficient and reduces overhead costs. Businesses can pay by the job, hiring experts only when they need their expertise.
Here in Maine, Augusta has taken small steps to reduce the burden it places on businesses. Business associations worked mightily for several years to create a simplified and uniform definition of an independent contractor so that businesses, employees, independent contractors and, most important, state agencies will have a clearer idea of where Augusta stands on the issue.
We must remind decision makers in the state capital that regardless of what federal bureaucrats do, future regulation and enforcement in Maine needs to reflect the sentiment of these days: Contractors are necessary to our economy’s growth and heightened employment. For the sake of America and Maine’s joint workforces, as well as our businesses, the ability to hire independent contractors must remain intact. We need more flexibility — not less — in the types of jobs that are available.
Debra Plowman is the former Senate minority whip. She and her husband own PDQ Door in Hampden.