One Democrat-led state has passed a law that adds costly registration fees and privacy concerns to those who work as independent contractors or freelancers – and labor experts warn this is just the “test run” for other states.
“Shock and horror is what I’m hearing,” New Jobs America President Mike Hruby told Fox News Digital about worker reaction. “There’s a lot of background with a bill like this, but there is nothing positive to say from any freelancer, any self-employed person, any driver or delivery individual about this law. It is just a state power grab, as far as I can see.”
In its latest regular legislative session, Rhode Island Democratic Gov. Daniel McKee signed State Bill 427 into law. The legislation requires any person who is considered an independent contractor to file a designation form each year and pay a $50 fee to the state’s Department of Taxation.
The law’s text also indicates that failure to file the designation or reclassify as an employee – starting next January – will result in a felony charge.
“It seems like another type of carve-out to single out independent contractors who comprise a good chunk of the small business workforce,” Independent Women’s Forum senior fellow Gabriella Hofmann also told Fox News Digital.
“Over a quarter of the small business workforce [are] contributing millions, if not billions, of dollars to the state economy annually,” she continued. “And so even though the fee is very nominal and minimal, it can be seen as a barrier to entry to do this.”
Rhode Island’s more than 85,000 self-employed gig workers make up 27% of the state’s small business demographic, according to 2022 data from Neilsberg.
“I actually don’t think this was on the governor’s personal wishlist or on the legislatures. I believe this bill was written somewhere else,” Hruby argued. “It was done very carefully. It meets all but one of the drafting standards that unions normally apply, which is sort of vague, very harsh and completely contrary to the benefit of anyone who wants to be a self-employed independent contractor.”
Along with the designation form comes a public, searchable database which the state’s website claims will list “the relationship between a contractor and the business hiring the contractor.”
According to both Hruby and Hoffman, this provision could violate a number of individual privacy rights.
“They say the form is going to be reported,” Hruby explained. “So everything on that form… This country does not want date of birth as a public piece of information. You don’t want your address. This is just rife.”
An anticompetitive issue also exists with the database, the experts agreed, in that it could indirectly promote client poaching or intimidation.
“Let’s say someone wants to target an independent contractor because they don’t like them, or maybe they’re outspoken against force reclassification or what have you. This is a tool [for] labor unions… a way to perhaps punish opponents of labor causes,” Hoffman said.
“I think that if they proceed, they will be harassed. The forms are going directly to the revenue department in Rhode Island. And I have good friends who deal with them all the time, not as clients, but Rhode Island’s taxation department is very hostile to business, period,” Hruby added. “All of this makes for a very, very challenging situation.”
The experts predicted that many independent contractors will likely miss the January 31 filing deadline, causing a decrease in the state’s self-employer numbers or forcing independent workers to move their families and business across state lines.
“You spend all your time as a small and mid-sized business person attending to payment and regulatory deadlines. So Rhode Island comes along and says: we’ll give them another one because we’re sure a lot of them will miss it,” Hruby said. “It’s mean.”
“It’s going to have widespread consequences and downstream effects and deter people from wanting to maintain their independent contractor status,” Hoffman said. “It’s going to create some problems and dissuade people from wanting to do this.”
The New Jobs America president also noted that this law may serve as a “test-run,” for other blue states like New Jersey, New York, Massachusetts, California, Minnesota and Colorado.
For independent workers in Rhode Island who may be worried about how to approach the controversial bill, the experts reminded contractors that help is available and there could be standing to sue the state.
“There are two [legal] avenues. One is to start in state court and just say this is a terrible violation of my privacy,” Hruby pointed out. “The other approach is to, for instance, claim that this is an interference in interstate commerce.”
“If they want to know their rights in cases like this, our lawyers could potentially help them as well,” the Independent Women’s Forum senior fellow said. “I think, also, they should try to register for the system and see what kind of quirks and kinks come out of it – if there are invasive questions, what it looks like going through the process.”
Gov. McKee’s office did not return Fox News Digital’s request for comment.
However, Hruby reminded the governor he’s signed off on a short-term decision.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
“Independent contracting fits many people who are creative, high energy, perceptive, eager to work. If you have initiative and you’re impatient to get things done, if you like to study problems and solve them, there are many, many recruiting folks in independent consulting that reward the individual,” New Jobs America’s president said.
“It is a fabulous opportunity if handled well. And it has been getting a bad rap from a very small number of bad actors who want to malign it,” he continued, “and want to chase people out as this legislation in Rhode Island is intended intent on doing so.”