With little fanfare, the New York City Council approved a sweeping change to its employment laws in September when it updated its anti-discrimination rules to include independent contractors.
It’s a dynamic update to a decades-old city law that has focused on relationships between employers and traditional employees. When the amendment went into effect on January 1, 2020, a group of workers that hadn’t even been referenced in the law became fully covered by it.
For companies that engage independent contractors in New York City, the expansion brought broad implications for a variety of day-to-day practices. The amendment impacts activities from how companies conduct background screenings of prospective workers before they even get an assignment, to how employers manage these workers once they do.
It’s another example of how, as the gig economy grows, so will laws protecting workers who aren’t clocking in at traditional 9-to-5 jobs.
Gig workers surge, laws grow
The NYC Human Rights Law makes it unlawful for employers, among others, to discriminate based on a variety of protected statuses, including age, race, color, national origin, gender, partnership status, sexual orientation and disability.
When workers allege discrimination, the law lets them file complaints with the city’s Commission on Human Rights. It also protects workers from retaliation if they’ve spoken up about discrimination or harassment.
The decision to expand the law to include independent contractors came as the gig economy surges. About 36% of U.S. workers are part of the gig economy, according to a 2018 Gallup report. A 2017 report from Upwork and Freelancers Union forecast that the majority of workers will be freelance by 2027.
Now, new laws and legal rulings are cropping up to protect this growing class of workers. In 2016, for example, New York City lawmakers passed the Freelance Isn’t Free Act. It spells out penalties for employers who don’t pay their freelancers on time and in full.
In September, California lawmakers approved Assembly Bill 5, which went into effect on January 1, 2020. The law sets standards for whether a worker should be classified as an employee or independent contractor in California. It essentially codifies the 2018 ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, which points to the so-called ABC test that a number of jurisdictions require employers to use to determine if a worker is an employee or contractor.
According to the ABC test, a worker should be declared an employee, not an independent contractor, unless they:
A: Are free from the “control and direction of the hiring entity.”
B: Perform work that is “outside the usual course of the hiring entity’s business.”
C: Generally, “engage in an independently established trade, occupation or business.”
AB 5 has faced plenty of criticism, especially from companies in the gig economy space that hire scores of independent contractors. But it could serve as a model for other state laws around the country.
Case in point: New York. This year, New York state lawmakers considered the Dependent Worker Act, which would extend contract workers certain rights that are typically provided to employees. Legislators didn’t take action, but it’s likely they’ll study the issue again — and, inspired by California’s AB 5, may go even further, as discussed in a recent New York Senate Committee on Internet and Technology hearing. Until then, most individuals who perform services free from supervision, direction, and control are generally considered independent contractors in New York.
New law impacts compliance with NYC’s Article 23-A
At the moment, however, employers in New York City need to be mindful of the city’s updated Human Rights Law, and that it will shortly apply to not just employees, but also independent contractors.
In particular, employers should be aware that among the law’s many subdivisions are sections that relate specifically to how employers can use a job candidate’s past criminal history, and bars companies from not hiring somebody just because of prior convictions. The law is designed to ensure that past offenders have a fair chance at landing work.
Now, thanks to the anti-discrimination law’s expansion, those same sections will apply to independent contractors. What’s more, when they conduct a criminal background check on prospective workers and turn up a criminal conviction, companies in New York City will need to comply with New York Correction Law Article 23-A.
The Article takes employers through an eight-step analysis to assess the risk that an individual with a criminal record brings to the employer. Considerations include:
- The duties of the job
- The bearing of the person’s conviction history on his or her ability to do the job
- The time elapsed since the conviction
- The candidate’s age at the time of the offense
- The seriousness of the crime
- Any evidence of rehabilitation provided by the candidate
- The employer’s legitimate interest to protect property or the public as well as
- The state’s policy to encourage the employment of persons with criminal rerecords
New York City employers also must remember that they can be held liable if a third-party vendor like an outsourced human resources provider or a staffing firm fails to conduct a 23-A analysis when screening a prospective independent contractor on their behalf.
The gig economy is transforming the workplace, and employment laws are just starting to catch up. New York City’s action is just another reminder that companies need to stay abreast of big legal shifts to ensure they remain in compliance as they bring on independent contractors in this talent short economy.