Michigan could be the next state to make independent contracting out of reach for its residents.
HB 4390, if passed, would copy California Assembly Bill 5 by instituting an ABC test under the guise of fighting misclassification. The reality, however, is this test—like California’s—would assume workers are default employees and not independent contractors unless the following three criteria are met:
(i) The individual is free from control and direction of the payer in connection with the performance of the work, both under a contract and in fact.
(ii) The individual performs work that is outside the usual course of the payer’s business.
(iii) The individual is customarily engaged in an independently established trade, occupation, or business of the same work performed by the individual for the payer.
The local Chamber of Commerce warns there will be no exemptions for Michigan’s independent workers (unlike California’s AB5 which exempted over 100 occupations). The Great Lake State currently employs the Internal Revenue Service (IRS) 20-factor test, which is more amenable and receptive to flexible work arrangements.
HB 4391, on the other hand, would create an independent contractor disclosure notice to “self-report alleged misclassification issues” to accompany HB 4390.
This timing isn’t coincidental. Michigan repealed its right-to-work law earlier this year. As I noted at IWF back in April, here’s the immediate fallout from repealing right-to-work:
The Democratic-run legislature voted to repeal the 2012 law under the “Restoring Workers’ Rights” bill package. It goes into effect on March 30th, 2024.
There’s a caveat though: The Michigan bill would require private sector employees to pay union dues and fees. Public sector employees, however, are exempt from the bill since the 2018 Janus decision ruled unions can’t mandate non-unionized public sector workers pay dues on First Amendment grounds.
Although 50% of the U.S. workforce is expected to freelance by 2028, many blue states and their allies in the Biden administration support policies that would undermine this burgeoning sector of the workforce.
While the Protecting the Right to Organize (PRO) Act has stalled in Congress, the Biden Department of Labor Independent Rule is set to be finalized any day now and it would have national implications.
In the meantime, states like Michigan are working overtime to undermine freelancing and we must be vigilant.
Read more on what’s happening in Michigan HERE.