Council looking at new protections for contract workers

Based on recommendations from the city’s Labor Standards Advisory Commission, the City Council is considering draft regulations that would add new requirements for those employing contract workers: pre-contract disclosures, timely payment, and written disclosures to accompany payment.

The effort is being led by Councilmember Lisa Herbold, and it had a hearing in the Finance and Housing Committee this morning. They are considering a draft bill, not yet introduced into the Council’s formal legislative process, that would codify the new requirements. It would apply to commercial hiring entities engaging an independent contractor for “services as part of the commercial hiring entity’s business or commercial activity”; the current version of the bill would also explicitly include an hiring entity who is hiring an independent contractor for domestic worker services, but apparently the Council got ahead of itself and has neither done the due-diligence with its Domestic Worker Standards Board nor cross-referenced the bill with the “domestic worker bill of rights” that it passed in 2018, so Herbold agreed to pull that provision from future drafts. The bill would also exclude attorneys, medical professionals, and other independent contractors working in professions that are governed by a code of ethics (as determined by the Office of Labor Standards). It would include platform gig workers, such as Uber and Lyft drivers.

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Hiring entities would be required to provide a pre-contract written disclosure, with the terms and conditions of work, to the independent contractor before work is begun. It must be provided in both English and the contractor’s primary language (the Office of Labor Standards would provide model disclosure forms in multiple languages).  The disclosure would need to include:

  • the current date;
  • the names of the hiring entity and contractor, along with their contact information;
  • a description of the work;
  • the location of the work;
  • the schedule, basis and rate of pay, including tips and service charge distributions if included in the terms of payment;
  • the policy for distribution of tips and service charges;
  • typical expenses and reimbursements;
  • deductions, fees and other charges, along with policies for each.

Contractor payment would need to be in the amount specified in the pre-contract disclosure or a written contract, on or before the specified date. If no date is specified, then payment would need to be within 30 days of the completion of work.

An itemized written disclosure would also need to accompany each payment, again in both English and the contractor’s primary language. The information provided would need to detail pay (and rate of pay), tips and service charge distributions, expenses reimbursed, gross payment, deductions, fees, other charges, and the net payment.

All written records would need to be kept by the hiring entity for three years.

The Office of Labor Standards would be charged with enforcement of the ordinance, as it is with the other city labor laws. In addition, contractors would have a private right of action to sue if the requirements in the ordinance are not met. If a hiring entity does not provide a pre-contract disclosure or if actual payment doesn’t match its terms, there would be a legal presumption in favor of the contractor’s claims for payment, which would be rebuttable by clear and convincing evidence such as a written contract.

There are several issues with the ordinance that were brought up this morning that the Council still needs to wrestle with. They include:

  • What’s the difference between the pre-contract disclosure document and a written contract?  In practice, probably very little, so why create a new thing rather than simply require hiring entities to provide a written contract? The answer to that comes back to the value that either hiring entities or contractors (or both) see in the speed and flexibility associated with verbal contracts.
  • Is this too much overhead for small businesses? As currently written, it would cover all hiring entities that retain one or more employees and one or more independent contractors, or retain five or more independent contractors on a consistent basis, but do not retain any employees. A sole proprietor business with no employees might not have any familiarity with contracts, and this might be a lot of work and headaches for a short-term contract.
  • To that end, Councilmember Teresa Mosqueda raised concerns this morning about the scope of work that this should cover: for instance, if a business needs to bring in an electrician or IT specialist for a couple of hours of work, under the bill as currently drafted that would require the pre-contract disclosure (and all of the other requirements too). The Council will need to wrestle with whether to limit the size of business this applies to, as well as the size of the job.
  • The effective date of the new requirements. Currently the bill specifies an effective date of March 1, 2022, but the Office of Labor Standards has asked for a full year to ramp up, write the model disclosure forms and have them translated, and conduct outreach and education for hiring entities and independent contractors.

There are also a couple of issues with the bill that did not come up in this morning’s committee hearing. First, this would add to the Office of Labor Standards’ already heavy workload in enforcing the ever-increasing pile of labor regulations passed by the Council, without providing any additional staff or other resources with which to complete that work.

Second, the bill excludes one notable class of hiring entities that makes heavy use of contractors: governments, including the City of Seattle itself. An earlier draft of the bill would have applied to all hiring entities, including the City of Seattle, but the most recent draft narrows that down to just “commercial” ones. The city’s two utilities, Seattle City Light and Seattle Public Utilities, would likely be covered since their activities are “commercial” in nature. But other city departments would not. The City of Seattle is already notorious for breaking its own rules in that it often asks contractors to begin work before a contract is officially signed — precisely the situation that this new bill is intended to correct. It is the height of hypocrisy for the Council to write a new set of rules for other employers of independent contractors, but exempt itself.

The Finance and Housing Committee has a packed schedule through the summer as it decides how to allocate about $120 million in federal American Rescue Plan Act funding, so Herbold is trying to squeeze the bill in quickly. Look for it to be included on the Introduction and Referral Calendar either May 10 or May 17, and taken up in committee on May 18.

There is one more provision in the bill that is worth mentioning: it specifies the Council’s intent to regulate “platform gig workers” late this summer, with the expectation that it will pass legislation before the Council begins work on the 2022 budget in late September:

Recognizing that more than 40,000 gig workers in the City of Seattle, including people of color, immigrants, workers with disabilities, LGBTQ+ workers, and single parents are currently paid subminimum wages for their work, depend on the flexibility and accessibility promised by the platform gig economy, and that the community depends on these essential workers to deliver groceries and food and provide other valuable services, the City Council intends to address this inequity by expanding the City’s labor standards to ensure that these gig workers hired as independent contractors are paid at least the City’s minimum wage under Chapter 14.19 of the Seattle Municipal Code plus reasonable expenses, with flexibility protections, and meaningful transparency. The City has consistently expressed its intent to promote greater economic opportunity and end barriers to workplace equity for all workers in Seattle and for all workers to have access to the protections of the City’s existing labor standards. To accomplish these goals, the Council will seek to engage stakeholders in the spring and summer of 2021 on legislation that will address these inequities and ensure that more workers are protected by minimum wage standards. The Council intends to discuss the legislation in committee in July and August 2021 and consider the legislation for a full Council vote before the start of the 2021 budget deliberations.

Since Mosqueda’s Finance and Housing committee will be busy throughout the summer, Herbold plans to run that legislation through her own committee instead. However, Council President Lorena Gonzalez voiced skepticism this morning about that plan, calling it “overly ambitious” and noting that Herbold’s committee is also very busy through the summer months. Gonzalez warned Herbold not to set expectations with stakeholders “that we can get this over the finish line this summer.” Mosqueda said that she shared those concerns.

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