In June 2021, Seattle’s City Council passed an “Independent Contractor Protection Ordinance”, requiring certain information to be provided to an independent contractor prior to being hired, and upon payment, for work done in Seattle. The threshold for value of services is $600. If the compensation is to be $600 or more, and the work takes place in Seattle, the ordinance applies. It will be enforced by Seattle’s Office of Labor Standards. The ordinance can be found at Seattle Municipal Code § 14.34, and takes effect September 1, 2022.
Seattle’s Office of Labor Standards will make model disclosure notices available in English, Spanish, and other languages, by September 1, 2022.
Who has to provide the disclosures? What kind of contractors get the disclosures? What information has to be disclosed? In short:
Who must provide the disclosures to contractors? Businesses large and small, including nonprofits. If the “hiring entity” is “regularly engaged in business or commercial activity [and] owns or operates any trade, occupation, or business, including a not for profit business, or holds itself out as engaging in any trade occupation or business”, then the hiring entity must follow the ordinance when it hires someone to provide services within Seattle. S.M.C. 14.34.020. If a company is based inside of Seattle or outside of Seattle and hires an independent contractor to perform work within Seattle, the company must comply with the ordinance.
However, those businesses who purchase services from “hiring entities that hire platform gig workers to provide prearranged services” don’t have to comply with the ordinance. That is, customers of companies that hire gig workers do not have to provide the required disclosures to the workers. If Company A uses Company B’s mobile app to get someone to help install office equipment, Company A, as the app user, does not need to comply with the ordinance. It is Company B whose app is used and who dispatches the worker to the customer’s assignment, that must comply with the ordinance.
It should be noted that the ordinance does not apply to people hiring contractors for personalprojects. For example, a homeowner hiring an interior designer to help with redesign of their Seattle home does not have to comply with the ordinance. But a company hiring the same interior designer to work on the remodel of a Seattle office must comply.
Which contractors are entitled to the notice requirements? For purposes of this ordinance, an “independent contractor’ means a person or entity composed of no more than one person, regardless of corporate form…that is hired…as a self-employed person or entity to provide services in exchange for compensation.” S.M.C. §14.34.020. For example, a janitorial service that has two or more employees is not an “independent contractor” for purposes of this ordinance, and is not covered by it. But if a cleaning service is purely a one-person business, with no employees other than its owner, it is entitled to the protections of the ordinance, and to receive the mandatory disclosures from businesses that hire it. This is just one example. The idea is that any business that hires a solo independent contractor will have to provide the disclosures.
What information or disclosures must be given to an independent contractor? The ordinance requires the hiring entity to disclosures at two points in the relationship, “pre-contract” disclosures before work begins, and then provide “payment disclosures” when paying the independent contractor.
The required pre-contract disclosures include:
- date of the disclosure;
- independent contractor’s name;
- hiring entity’s name and contact information (physical and mailing addresses, phone and/or email);
- description of the work;
- location of the work;
- rate or rates of pay;
- pay basis (e.g., hourly, daily, weekly, monthly, fee per project, piece rate, commission);
- tips and/or service charge distribution policy, if applicable;
- typical expenses incurred in the course of work and will will be paid or reimbursed, if applicable;
- deductions, fees, or other charges that the hiring entity may subtract from payment, and accompanying policies for each type of charge, if applicable;
- payment schedule, and
- any other information that the Director of Seattle’s Office of Labor Standards may direct
Disclosures must also be provided with payment. The “payment disclosures” are are:
- date of the disclosure;
- independent contractor’s name;
- description of services covered by the payment (e.g., description of project, tasks completed, hours worked);
- location of services covered by the payment;
- rate of pay;
- tips and/or service charge distributions, if applicable;
- pay basis (e.g., hour, day, week, etc, with accounting of methods for determining payment earned during the pay period);
- expenses reimbursed, if applicable;
- gross payment;
- deductions, fees, or other charges, if applicable;
- net payment after deductions, fees, or other charges, and
- any other information that the Director of Seattle’s Office of Labor Standards may direct.
Does the Ordinance require anything else? Of course! There is more to the Ordinance, but for now, be aware that failure to comply with it can lead to fines and penalties, or a lawsuit from the independent contractor. Also, don’t retaliate against a contractor who is entitled to the notices (for example, don’t fire a contractor for requesting the pre-hiring or payment disclosures). Adverse actions can lead to penalties.
The ordinance goes into effect September 1, 2022. Here is a link to a “fact sheet” about the ordinance, published by Seattle’s Office of Labor Standards: http://www.seattle.gov/documents/Departments/LaborStandards/Fact%20Sheet_ICP_FINAL%20.pdf