The City of Columbus, Ohio, has enacted a new code conferring legal rights to gig workers, also known generally as freelance workers. Freelance workers now constitute almost forty percent of the national workforce. The increase in this gig economy is driven by both the changes in the nature of the workforce and a new generation of workers with different priorities than their predecessors. Businesses are hiring freelance workers due to labor shortages, to fill labor gaps to maintain productivity, and a need to reduce business costs.
Workers are often looking to supplement income or to obtain greater work life balance. However, such workers are often engaged under verbal arrangements with indefinite terms and which provide unpredictable income streams. Following New York City and Los Angeles, Columbus has now imposed legal obligations on businesses that engage freelance workers to provide more structure to these work arrangements and assure that both parties understand the nature, duration, and compensation for the work to be performed.
Pursuant to this new code provision, Chapter 2337.01 et seq, any freelance worker engaged to perform work with a value of $250 or more, either by itself or when aggregated with all contracts for services with the same hiring party during the immediately preceding 120 days, must be provided a written contract which includes:
- The name and mailing address of both the hiring party and the freelance worker;
- An itemization of the services to be provided by the freelance worker;
- The value of the services to be provided pursuant to the contract and the method of compensation; and
- The date on which the hiring party must pay the compensation or, if not a specific date, no later than 30 days from when the contracted services are completed.
Rights and Obligations
These rights cannot be waived by the freelance worker. Noncompliance with these provisions will not render the contract void or voidable or otherwise impair any obligation or right related to the contract.
The term “hiring party” means any person including the City of Columbus who retains a freelance worker to provide any service but does not include any other governmental entity or political subdivision.
The term “freelance worker” means any individual or organization comprised of no more than one person that is hired or retained as an independent contractor by a hiring party to provide goods or services in exchange for compensation, but not including a sales representative as defined in the Ohio Revised Code, section 1335.11 or an individual or organization engaged as a prepaid entertainment contract under section 1345.41.
The pivotal issue for the hiring party is whether the worker is truly an independent freelance worker subject to this new Code as opposed to an employee. That is a legal and factual determination that when incorrect has cost many businesses penalties under the Fair Labor Standards Act. Chapter 2337 expressly provides that it is not to be “construed as providing a determination about the legal classification of any individual as an employee or independent contractor.” That leaves it up to the hiring party to determine whether it is engaging an independent contractor and not establishing an employment relationship governed by the Fair Labor Standards Act and Ohio law.
For purposes of employment, the Department of Labor (DOL) defines when a worker is an employee as opposed to an independent contractor. The DOL takes a very broad view tending towards finding an employment situation absent substantial evidence to the contrary. Generally, when a worker is economically dependent on the hiring party and the hiring party directs the work, provides training and tools, and pays expenses, the worker will be found to be an employee.
On the other hand, independent contractors are responsible for their own business expenses, provide their own tools and equipment, control how they do their work, pay their own employment taxes, and are not entitled to benefits such as health coverage from the hiring party. Ultimately, the decision is based on the particular facts of the engagement. Any hiring party considering engaging a freelance worker should first conduct this analysis to assure it is compliant with the DOL and the FLSA. Penalties for misclassification include liquidated damages of 100% and reimbursement of the employee’s legal fees.
Prohibition and Enforcement
The City Code also prohibits:
“Retaliation against or discrimination against any freelance worker or take any other action that penalizes or is reasonably likely to deter a freelance worker from exercising or attempting to exercise any right guaranteed under this chapter.”
Enforcement will be through the Wage Theft Prevention and Enforcement Commission. Upon the finding of a violation and rendering an adverse determination the Commission may impose any legal, equitable or contractual remedy.
If you need assistance determining whether your business is subject to Columbus City Code Chapter 2337 or whether your worker is an employee under the FLSA please contact Maribeth Meluch (MM@kjk.com; 614.427.5747) or one of our other attorneys in the Labor and Employment Practice Group.