Employee or Freelancer? Compliance Considerations You Should Know

According to the latest “Freelancing in America: 2017” report, based on current growth rates, the majority of U.S. workers will freelance within the next 10 years. If your business doesn’t already have a process for working with independent contractors, you may want to brush up on what’s involved so you can get work done and stay on the right side of government rules.

Worker classification in the U.S. is governed by a number of laws, most of which were written decades ago, such as the Fair Labor Standards Act (FLSA), a statute written 80 years ago. But much has shifted in the years since: Time and technology have changed when, where, and how we work together. And legislation hasn’t kept up.

So, while working with freelancers can be a great way to access top talent and stay competitive, it also raises a key question: Are they an independent contractor, or are they actually a misclassified employee under the FLSA and other applicable laws?

“The Latest Workforce Policies Regarding Freelancers—What You Should Know” explains why it can be tricky to get that classification correct: There’s no simple test to help you figure it out. In fact, between state and federal governments, there are more than 75 different classification tests in the U.S.

Compliance was the focus of one of the panels during Upwork’s recent Work Without Limits™ Executive Summit. Here are some tips from the experts who participated:

Classify workers as accurately as possible, and consider outside help.

There are clear differences between employees and independent contractors you can start with, but external compliance services can also help you navigate the nuances.

Do your research.

Since legislation can change from state to state, it’s helpful to familiarize yourself with the rules in both your home state and that of your worker. And the panel suggests doing this ahead of time—so you can get everything set up correctly from the start.

Have a contract in place.

Remember that independent contractor engagements are regulated by the contract terms you’ve both agreed to. If you find a freelancer through Upwork, much of this is already looked after: Upwork’s User Agreement automatically covers your engagement, although you can agree to different contract terms if you want (but can’t change Upwork’s obligations or restrict Upwork’s rights under the Terms of Service).

Read the full recap to learn more about the panel discussion.

Upwork is a freelancing marketplace where businesses of all sizes can find talented independent professionals across multiple disciplines and categories. If you’re looking to get projects done while staying compliant, consider signing up! Visit Upwork Enterprise today.

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