As recent cases have shown, the law is still catching up to the “freelancer economy.” When it comes to employing contractors and freelancers, what do you need to watch out for?

Call it what you want: the gig economy, freelancer economy, or the Uberfication of the modern workforce. But it’s clear the emergence of decentralised work is changing the way employers think about their workforce.

A study by jobs marketplace Upwork has reported that Australia’s freelance economy has grown to 4.1 million workers, with more than a third of the workforce now taking part in freelance work.

Clearly, the growth of this industry has brought renewed focus on the ways employers think about freelancers.

It’s also affecting what the law says. In late October, the New York City Council passed a bill to create legal protections for freelancer and independent contractor workers: the Freelance Isn’t Free Act. The bill rules that employees must create contracts for any employer they intend to pay more than 800 dollars to a worker for a project, and stipulates that companies must pay within 30 days.

Around the world, policies are in the works to clarify how project-based workers are treated in the eyes of the law, particularly around issues like wage minimums, or what benefits these employees are entitled to.

Some countries such as Germany and Canada have developed a ‘dependent contractor’ category that grants additional protections to workers who fall somewhere between employees and independent contractors, but are dependent on a single employer.

Aaron Goonrey, industrial relations and employment lawyer at Lander & Rogers, suggests that from the perspective of many businesses, the growing acceptability and prevalence of the freelance workforce will be “a blessing in disguise.”

“I can see from my experiences both the advantages and disadvantages [of the freelancer workforce],” he says. “The advantages are that you hire a more diverse type of worker. You are also able to manage your costs far easier than you otherwise would be if you had casual or full-time staff; the HR and administrative costs are much reduced by freelance labour.”

As more Uber-style companies emerge to offer a marketplace for freelancers or contractors, and flexible working practices gain a greater foothold in various industries, it becomes crucial that HR is mindful of how to differentiate a freelancer from an employee – and has clear policies in place to protect themselves from any legal issues that might arise.

Though there’s no one thing that qualifies someone as an independent contractor or freelancer, it generally comes down to how much control you have over a person and their work.

Says Goonrey, “where the nature of the relationship is relatively vague, that’s when there will be question marks over whether the worker is an employee or a freelancer.”

Let’s play a game of “freelancer, not a freelancer.” According to Goonrey, here’s what HR needs to consider to stay protected and ensure their employees are classified correctly in accordance with the law:

• Employers need to ask themselves: “Do we actually want an employee, or do we want a freelancer?” Make sure you’re aware of factors that might force a freelancer across the line into employee territory.
• Does the worker have all control over the work that is completed? If they do, the law suggests that person might be a freelancer, Goonrey explains.
• Similarly, if the worker is required to wear a uniform, or spend extended time at the office, then the law would most likely consider them an employee.
• If the worker has other clients or contracts, then the law will consider them a freelancer or an independent contractor.
• If the worker used their own materials, tools or own expenditure to complete the work, then they will be considered an independent contractor or freelancer.

For more information regarding employing freelancers and contractors, visit AHRI ASSIST.