Freelancers and the DOL

I have hard-won expertise on the topic of hiring freelancers for agency work.  As the head of an agency, I went to court with the Department of Labor over the issue of freelancers (read, Unemployment Insurance).  The DOL does not recognize the term “freelance”, only employees and (Independent) contractors, and knows there is widespread confusion among employers:

“You may genuinely believe that you have hired people to perform services for you as independent contractors. You may discover that by law they are considered employees and that you are liable for unemployment insurance contributions and interest.”

In fact, there are nearly 30 criteria the Department of Labor uses to determine (“gotcha”) whether your freelancer is an employee or an Independent Contractor.  You can read about them at https://www.labor.ny.gov/ui/dande/ic.shtm

Even though many freelancers protest, “I work with all my clients this way” (invoicing but not incorporated)”, insist they be paid as employees unless they have an Employer ID. Yes, there are instances where unincorporated people are not “employees”, but spend a few months explaining/defending that distinction in a courtroom (years after the work was completed and the freelancer forgotten), and you may be unmoved to entertain individual arguments about employment classification.

Managing the entire DOL audit process is the subject of another post one day.  Suffice it say, if someone’s name appears on your books for anything other than Expense Reimbursement, you are at risk of having to defend the terms of their employment for 5 years to come.  Better to insist on unincorporated people being paid as normal employees.