Working with Independent Contractors? New Laws Offer Greater Worker Protections

By Shelley Luzaich | July 30, 2024

Landmark changes in laws for freelancers in Illinois and gig workers in California have the best interests of Independent Contractors in mind. Let’s dive into each and the implications.  

Freelance Worker Protection Act in Illinois: A New Era for Freelancers 

Freelancers in Illinois are witnessing a significant shift in their working conditions with the implementation of the Freelance Worker Protection Act. This law aims to ensure fair treatment for freelancers by mandating clear contracts, timely payments, and legal protections against exploitation. The law only applies to contracts taking effect after July 1, 2024; it is not retroactive.  

According to the Illinois Department of Labor, here are the key provisions:  

  • Mandatory Written Contracts: For work amounting to $600 or more, freelancers must be provided with a written contract detailing the scope of work, rate of pay, and payment due dates.  
  • Timely Payment: Clients are required to pay freelancers within 30 days of completing the agreed-upon work unless a different timeline is specified in the contract. 
  • Protection from Retaliation: The Act safeguards freelancers from being blacklisted, threatened, or punished for asserting their rights. 
  • Legal Recourse: Freelancers can pursue legal action if their rights under the Act are violated. 

It’s important to note who is and who is not considered a freelancer since there are conflicting regulations. Refer to “Independent Contractors: Conflicting Definitions, Conflicting Regulations” for more in-depth details.  

California Supreme Court Ruling: Gig Workers Remain Independent Contractors 

In a landmark decision, the California Supreme Court has ruled that gig workers can continue to be classified as independent contractors, upholding the constitutionality of Proposition 22. This decision contrasts with the state legislature’s AB 5, which aimed to reclassify gig workers as employees to extend standard labor protections to them. 

Proposition 22 vs. AB 5 

Proposition 22: Passed in 2020, this ballot initiative classifies gig workers for companies like Uber and Postmates as independent contractors. It offers protections such as wage guarantees at 120% of minimum wage, a 35 cents-per-mile reimbursement, healthcare subsidies, and accident insurance. 

AB 5: This law, passed in 2019, introduced the “ABC” test to classify workers as employees unless they met specific criteria. It aimed to provide gig workers with minimum wage protections, unemployment insurance, and other benefits. 

The court’s ruling allows voters to use ballot initiatives to amend existing laws, thereby permitting gig workers to maintain their independent contractor status. This decision has sparked varied reactions, with labor unions decrying it as a setback for workers’ rights, while industry groups praise it for preserving the flexibility and independence that many gig workers value. 

Implications Beyond California 

The ruling has significant implications beyond California, particularly as similar debates unfold in other states and at the Federal level. The Biden administration’s adoption of a test similar to the ABC test nationally faces legal challenges, and this ruling could influence the outcome of these challenges. 

Moving Forward – Independent Contractors and Businesses 

Implications for Freelancers in Illinois 

  • Ensure you receive a written contract for any work over $600. 
  • Track payment timelines and follow-up on any delays beyond 30 days. 
  • Familiarize yourself with legal recourse options if your rights are violated. 

Implications for Gig Workers in California 

  • Understand the protections and benefits provided under Proposition 22. 
  • Stay informed about potential changes to gig worker classifications at the federal level. 
  • Consider the long-term implications of independent contractor status versus employee classification on your rights and benefits. 

Implications for Businesses 

  • Adapt to these new regulations immediately to avoid legal repercussions.  
  • Update contracts to include necessary details such as the scope of work, payment terms, and deadlines.  
  • Revise payment processes to ensure compliance with the 30-day payment mandate, which may necessitate changes in accounting practices.  

With the myriads of conflicting regulations, it’s imperative that businesses properly classify their workers. When you engage us, we also review contracts, compensation, duties, and assess the level of exposure and risk of misclassification. Our evaluation factors in all jurisdictions and is done under the advice of employment attorneys specializing in misclassification. If workers fail to classify and remediation efforts aren’t possible, nextSource then recommends engaging workers under Employer of Record (EOR) services in which a third party services as the legal employer for a temporary worker on behalf of the organization.  

Posted in Clients, Working Knowledge