Michigan bills to redefine who counts as an “independent contractor,” increase wage transparency, and limit the use of non-compete clauses received a hearing Thursday before the House Labor Committee.
There are sixteen total bills in the package. They're aimed at wage theft and payroll fraud.
Tom Lutz is with the Michigan Regional Council of Carpenters and Millwrights. Testifying before the committee, he said the current system puts too much burden on workers to make sure they’re not taken advantage of.
“One of the complications of a good independent contractor is they’re not only good at the craft they do whether that’s driving a car, cutting hair or doing construction, but then they’re also asked to be a good tax person, a good lawyer, and a good contract negotiator,” Lutz said.
Business organizations brought up a host of concerns with the package during Thursday’s committee hearing.
Among them, the three criteria for deciding whether someone falls under the category of “independent contractor.”
Under HB 4390, an independent contractor is someone who is: a) “free from control and direction of the payer,” b) “performs work that is outside the usual course of the payer’s business,” and c) “is customarily engaged in an independently established trade.”
Wendy Block, Senior VP of Business Advocacy and Member Engagement for the Michigan Chamber of Commerce, compared the Michigan proposal to California’s independent contractor law.
She said it would have a negative effect on a wide range of gig workers like Lyft and Uber drivers.
“It is somewhat of a difficult test for employers because it does severely restrict the use and ability for people to use independent contractors and for individuals to be independent contractors if they enjoy and like the flexibility that goes along with that,” Block said.
But Lutz and other supporters say the system needs to change. He argued some employers abuse the current rules to wrongly classify someone as an independent contractor to avoid paying them full benefits and other perks.
“There are legitimate independent contractors. But in construction, that’s a code word for exploited … employee,” he told the committee.
Outside of the definitions, Block also took issue with some of the punishments laid out for violating the policies.
For example, employers would be required to let workers know how much their peers are making upon request.
HB 4401 and HB 4406 would make it a felony punishable by up to two years in prison and or a $10,000 fine to refuse to provide that information more than once.
Block said the package goes too far.
“So, this is very severe, I mean we are looking at weaponizing this information or not providing this information to employees and I think a lot of people that look at this, they are really scared. And frankly there’s a lot of felony provisions incorporated,” she said.
During Thursday’s hearing, package sponsors defended the wage information sharing requirement. They argued it should be publicly available to lower the risk of discrimination and underpayment.
“I think most employers who are currently paying and acting in good faith are going to find very little change in their current actions and status,” Rep. Joey Andrews(D-St. Joseph) said.
Democrats have introduced legislation in the past to address wage theft and payroll fraud. Labor committee leadership has not yet publicly set a timeline for getting these current bills to the full floor.
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