A tweet from Mike Hruby, this morning, caught the attention of a number of conservative-leaning Rhode Islander’s:

The State of Rhode Island, oceanside home of 1.1 million Americans, just muscled into the front lines of job-killing legislation.

RI has attacked its 190,000 self-employed independent contractors with this $50 form to fill in for each client. All info is public information.

As somebody who is very happy to be an independent contractor, it certainly caught my attention, representing further evidence that legislators and the governor in Rhode Island are constantly edging us toward a cliff of unemployment, with the only escape being to accept terms that are favored by the state’s powerful labor unions.  Knowing that the state is always on the lookout for such opportunities can (and should) discourage businesses from setting up in the state and workers from seeking to build a life here.

That said, we do not appear to have reached the point of tyranny that Hruby suggests.  Most prominently, I can find no indication on the Department of Labor and Training’s relevant webpage or in the relevant law that filling out the form comes with a $50 fee.

More broadly, the relevant state statute, 28-29-17.1, has been around since 2000, so this form is nothing new.  However, as part of a favor to the unions this session making independent contractors much riskier for businesses, the General Assembly and governor did modify this section of the law.  House bill H5710A and Senate bill S0427B made three material changes:

• They required the department to make it possible to fill in the form electronically.
• They instructed the department to send its list of independent contractors to the state department of taxation every year (the better to squeeze every penny from workers).
• They added a requirement that the contractor “shall be required to file the form annually, regardless of how many forms are filed.”

That third change slips into the insidious mess that is sloppy legislating and a scheming bureaucracy.  On its own, one might conclude that every contractor must file this form for each of his or her clients.  In context, though, one could make a strong case that annual filing is only required in order for the form to remain valid.

Notice this language that remained in the law from 2000:

The filing of the notice of designation shall be a presumption of “independent contractor” status but shall not preclude a finding of independent contractor status by the court when the notice is not filed with the director.

That means Rhode Islanders can still be independent contractors whether the form is filed or not.  For context, if ever somebody challenges a person’s independent contractor status, courts consider a range of factors like whether the person has only one client/employer, what sorts of benefits are given, whether paid time off is part of the deal, if the company supplies the tools, and so on.  This form requires the court to find a very good reason to say somebody is an employee if he or she and the client insist it’s a contractor relationship, but the absence of a form doesn’t mean the balancing test doesn’t still apply.

Naturally, because Rhode Island’s state government is always scheming against the people in favor of special interests, the instructions on the form practically invert meaning of the law (emphasis added):

Warning! This form is for purposes of Workers’ Compensation only and completion of this form does not mean that you are an Independent Contractor under the rules, regulations or statutes of the Internal Revenue Service or the R.I. Division of Taxation. Information on this form will be shared within the Department of Labor and Training, the RI Division of Taxation and the Internal Revenue Service.

One can infer that — knowing most people lack the time and experience to trace these forms back to original statutes or the resources to run such things by attorneys — the RI Department of Labor and Training wants people to conclude that hiring independent contractors is always a risk.  And it is.  The aforementioned gift to the labor unions was to make the consequences for misclassification a terrifying felony, with up to three years in prison in addition to financial ruin.

For that reason, independent contractors may find that some of their clients want the additional protection of this form, but if that’s the case, they’ll be accepting, up front, the fact that they’ll be searchable online.  A better approach may be for independent contractors to include language their contracts emphasizing their status.

Even with that protection, however, this sort of legislation will likely cement the general feeling businesses have that hiring independent contractors isn’t worth the trouble.  That means less work for contractors, less reason for companies to set up shop in the Ocean State (especially with an innovative business or business model), and less opportunity for Rhode Islanders.

In other words, it’s just another stick on the fire as elected officials and the bureaucracy slowly roast our economy for the unions’ consumption.

ADDENDUM (July 14, 2023, 12:57 p.m.)

Note that the original version of the legislation does, indeed, include a $50 registration fee.  However, although the language is typically sloppy, it appears that it would be $50 per contractor, not per client.

Featured image from Shutterstock.