What Are My Rights as an Independent Contractor or Freelancer?

Independent contractors and freelancers enjoy greater independence from employers than employees, but they also lose out on many of the legal protections employees have. For example, while employees have recourse to state agencies that enforce employee rights, independent contractors typically have fewer options to turn to state agencies and often need to rely on contracts and legal action.

As an independent contractor, it is important to know your rights to protect your financial interests. For help enforcing your legal rights as an independent contractor, talk to an employment law attorney for legal advice.

Understanding the Role of an Independent Contractor

Independent contractors and freelancers enjoy many work freedoms that employees do not, including:

• Acting as their own boss
• Setting their own work schedules and locations
• Taking on multiple jobs at the same time
• Receiving tax deductions for business expenses

Along with the benefits of independence are the downsides of working on your own. When business is good, freelancing is profitable. If you get sick, injured at work, or have trouble collecting timely payment, independence is more challenging. Downsides of working as a freelancer include:

• Paying self-employment taxes, including Medicare taxes, Social Security taxes, etc.
• Having more complex income tax obligations and filing requirements
• Lacking labor law and employee rights protections

Independent contractors also lose out on many of the perks employees get, such as unemployment benefits, workers’ comp, and wage and hour protections. Independent workers also don’t get employee benefits like health insurance and pension plans.

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Contracting Rights and Obligations

Independent contractors should use specific legal contracts that cover all necessary legal terms and lay out the rights and obligations of each party.

While most employees work at-will, meaning they can leave their job at any time and for any reason, freelancers are bound by the terms of any contract they sign. Walking away from a job can expose the contractor to financial and legal penalties in a breach of contract claim.

When independent workers are starting out, they may use a basic contract template. However, your contract should address the individual needs of your services. Contract terms to consider include:

• Payment terms
• Scope of services
• Timelines and deadlines
• What constitutes a breach
• Legal remedies
• Choice of law
• Intellectual property protections
• Termination clause
• Insurance and indemnity

Limited Legal Protections for Independent Contractors

There are many employee rights laws that do not apply to self-employed individuals, including:

• Protections against employment discrimination
• Protections against sexual harassment
• Protections against wage and hour violations
• Workers’ compensation
• Unemployment benefits
• Workplace safety protections
• Health insurance and employee benefits
• Retirement plans

Businesses may try to take advantage of independent contractors’ non-employee status to avoid liability for workplace injuries, illness, or accidents. In response, some states have extended protections to cover freelance workers:

• The New York City Human Rights Law extends employment discrimination and sexual harassment protections to independent contractors. Disabled contractors in New York can get reasonable accommodations to do the essential functions of the job.
• California’s Fair Employment and Housing Act protects independent contractors against sexual harassment and discrimination.

Unfortunately, most states lag behind in considering the legal rights and protections for independent contractors. To find out if your state has legal protections for independent contractors, talk to a local employment law attorney.

Misclassified Employees and Contractors

Misclassifying employees as freelance workers can save employers a lot of money in payroll taxes, workers’ comp, and overtime pay. But just because an employer calls you an independent contractor doesn’t make it so. Nor is it legal for employers to misclassify you as an independent contractor.

Even if you have a written contract saying you’re a contractor or subcontractor, the Internal Revenue Service (IRS) or U.S. Department of Labor (DOL) may classify you as an employee based on several factors. Generally, classifying workers depends on the worker’s level of independence and control. There are a couple of tests courts use to determine whether a worker is an independent contractor or employee:

1. Common Law Factors

Common law factors used by the IRS start with a presumption that the worker is an independent contractor. Factors to determine employment status include:

• Level of behavioral control over the worker and the work done
• Employers financial control over the job and compensation
• Working relationship more typical of employer-employee or contractor-client relationship

2. The ABC Test

A number of other states follow the ABC test, starting with a presumption that the person is an employee. The ABC test is based on:

• Absence of control. The worker is free from the employer’s direction.
• Business of worker. Worker’s service is not part of the the employer’s usual course of business.
• Customarily engaged. Worker is normally engaged in an independent service provided to the employer.

Legal Advice for Independent Contractors

It is important for you to understand your rights, obligations, and where to turn when things go wrong. An employment law attorney can explain your independent contractor rights and legal options. If your employer misclassified you to avoid benefits or liability, and attorney can take legal action to make sure you get the legal protections available.

Contact a local employment lawyer who understands state labor laws and can help protect your legal rights.