By Partner Avalyn Langemeier, Foster LLP
For workers who seek more autonomy, more flexibility, or a second income, the idea of a freelance job, or “gig,” may sound like a good option. For employers who can’t provide full-time employment and benefits or who need temporary additional services, hiring freelance and gig workers may also sound like a good option. But U.S. employers must still remember to comply with immigration and antidiscrimination laws when dealing with such workers, otherwise known as independent contractors.
Here are some frequently asked questions and tips for immigration compliance when dealing with an independent contractor workforce, especially in light of even more scrutiny under the Buy American and Hire American (BAHA) executive order.
What is a gig worker?
According to a May 2016 article from the Bureau of Labor Statistics, there is no official definition of a gig worker, but generally the term refers to an independent contractor who is hired temporarily for a single project or task. Gig workers are more common in certain industries, such as in media and communications, where interpreters and translators may be hired to help expatriated employees learn a new language and assimilate into their new country. Gig workers are also popular in the computer and information technology industry, in which someone might be hired for a one-time service, such as to manage a database project, build a website, or develop software. Other industries frequently using gig workers include transportation and material moving, construction and extraction occupations such as a carpenters or painters, or the arts and design industry, in which musicians or graphic designers take on gigs. See https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm.
What is a freelancer?
A freelancer is similar to a gig worker. According to an October 2015 article from the Bureau of Labor Statistics, a freelancer is an independent contractor who works gig to gig or project to project. See https://www.bls.gov/opub/mlr/2015/article/freelancers-in-the-us-workforce.htm.
What is an independent contractor?
The definition under U.S. immigration law is similar to the definition used by the Internal Revenue Service. Under immigration regulations, an “independent contractor includes individuals or entities who carry on independent business, contract to do a piece of work according to their own means and methods, and are subject to control only as to results. Whether an individual or entity is an independent contractor – regardless of what the individual or entity calls itself – will be determined on a case-by-case basis. Factors to be considered in that determination include, but are not limited to, whether the individual or entity: supplies the tools or materials; makes services available to the general public; works for a number of clients at the same time; has an opportunity for profit or loss as a result of labor or services provided; invests in the facilities for work; directs the order or sequence in which the work is to be done; and determines the hours during which the work is to be done.” See 8 CFR Section 274a.1(j).
In addition to the U.S. federal statute and regulations, employers should look to federal case law as well as state statutes and regulations and state case law. The California Supreme Court in Dynamix Operations West vs. Superior Court issued a decision on 30 April 2018 related to whether someone is an employee or independent contractor. The California Supreme Court adopted the “ABC test” and stated: “Under this [ABC] test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (a) that the worker is free from control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (b) that the worker performs work that is outside the usual course of the hiring entity’s business; and (c) that the worker is customarily engaged in independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” For example, if an IT professional works independently from an energy company, the IT services provided are not customarily provided by the energy company, and the IT professional customarily works independently as an IT worker, then the IT professional may be an independent contractor under the ABC test. See https://caselaw.findlaw.com/ca-supreme-court/1894923.html. Similarly, see http://twc.state.tx.us/news/efte/independent_contractor_tests.html (“economic reality” test, “ABC” test and Texas Workers’ Compensation Act).
What does the Buy American and Hire American executive order say? Does it mean U.S. employers must hire only U.S. workers?
The presidential executive order, which was issued on 18 April 2017, states that its purpose is to create higher wages and employment for workers in the U.S. to protect their interests. The order states that it “shall be the policy of the executive branch to rigorously enforce and govern entry into the U.S. of workers from abroad.” See BAHA, at https://www.whitehouse.gov/presidential-actions/presidential-executive-order-buy-american-hire-american/. While BAHA encourages employers to hire U.S. workers, employers are not required to do so. For example, an employer can choose to offer the position to the best or only candidate for the position. If the candidate needs a work visa, the employer can choose to sponsor the foreign national for an H-1B specialty occupation visa, L-1 intracompany transferee visa, O-1 extraordinary ability visa, TN treaty NAFTA for Canadian and Mexican citizens, or other visa. As has been the law for years, employers must employ only individuals who have authorization to work in the U.S., and they must not unlawfully discriminate.
Can employers hire only U.S. citizens as employees and independent contracts if they want to?
With limited exceptions, an employer cannot say it will hire only U.S. citizens. Exceptions would include specific positions that a law, executive order, regulation, or government contract requires to be filled by U.S. citizens. If no exception applies, then an employer could be charged with violating immigration-related discrimination provisions. See question 37 at https://www.uscis.gov/i-9-central/140-some-questions-you-may-have-about-form-i-9.
If an employer doesn’t want to hire someone as an employee, can the employer hire the person instead as an independent contractor?
Yes, the employer can choose to hire the person as a freelance worker, gig worker, or more generally as an independent contractor. However, the purpose must not be to circumvent immigration law. For example, you can’t hire someone as an independent contractor – or an employee – to work in the U.S. if you know the person is not authorized to work. See question 3 at https://www.uscis.gov/i-9-central/140-some-questions-you-may-have-about-form-i-9.
Should an employer that does hire someone as an independent contract and wants to make sure the person is authorized to work in the U.S. give the independent contractor a Form I-9 to complete?
No. A Form I-9 is an employment verification form that must be completed by employers and employees who are hired after 6 November 1986 to work in the U.S. Independent contractors are not employees and so do not complete a Form I-9. See https://www.uscis.gov/i-9-central/complete-correct-form-i-9/who-needs-form-i-9. If an employer does make its freelancers, gig workers, or independent contractors complete a Form I-9, then completion of the Form I-9 could be a factor in determining whether the worker is correctly classified and should instead by classified as an employee.
Can an employer hire a person as an employee or independent contractor if the employer suspects someone does not have work authorization – perhaps because they have an accent or the employer has only heard them speak a language other than English?
Employers may not treat individuals differently because of their native language or accent, or because they are perceived as sounding or looking “foreign.” Under immigration law and according to the U.S. Department of Justice’s Immigration and Employee Rights Section, formerly the Office of Special Counsel for Immigration-Related Unfair Employment Practices, “All U.S. citizens, lawful permanent residents, and other work-authorized individuals are protected from national origin discrimination.” See https://www.justice.gov/crt/types-discrimination.
If an employer hires someone as an independent contractor and then learns that the person does not have work authorization, what should the employer do?
It is against the law to employ someone whom you know lacks work authorization. Once you know that an independent contract lacks work authorization, then that contractor is deemed an employee under immigration law. See 8 CFR Section 274a.5, use of labor through contract: “any person or entity who uses a contract, subcontract, or exchange entered into, renegotiated or extended after November 5, 1986, … to obtain the labor or services of an alien in the United States knowing that the alien is an unauthorized alien with respect to performing such labor services, shall be considered to have hired the alien for employment in the United States in violation of Section 274A(a)(1)(A) of the Act. See https://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title08/8tab_02.tpl#0-0-0-18297.
What does “knowing” mean?
“Knowing” includes actual knowledge and also knowledge “which may fairly be inferred through notice of certain facts and circumstances which would lead a person, through the exercise of reasonable care, to know about a certain condition.” Constructive knowledge may include, but not limited to, situations in which the employer fails to complete or improperly completes the Form I-9; the employer has information available to it that would indicate that the person is not authorized to work, such as a Labor Certification application; or the employer “acts with reckless and wanton disregard for the legal consequences of permitting another individual to introduce an unauthorized alien into its workforce or to act on its behalf.” See 8 CFR Section 274a.1(1)(1).
If an employer does hire independent contractors, gig workers, or freelance workers, what can the employer do to make sure they are authorized to work when they are hired?
The employer can require the company providing the independent contractors to attest that it has Forms I-9 for its employees, timely reverifies the Forms I-9 when needed prior to the expiration of work authorization, and conducts periodic audits. More importantly, the employer also can require the independent contractor company to attest in writing that it believes that its employees and its contractors, if any, are authorized to work. When a person contracts with an employer directly as a solo freelancer or gig worker or independent contractor, the employer can require that the contractor attest in the contract that he or she has authorization to work in the U.S. and will stop working if that work authorization ends.
What can an employer do when it notices that there are some people on the worksite who are not its employees and assumes they are independent contractors?
The employer should determine who on-site is not an employee and then determine whether it has a written independent contractor agreement related to its nonemployees. The employer should consider retaining a list of the names of those contractor individuals and companies as well as their independent contractor agreements in a separate file. If the government comes to the employer’s worksite, the employer would then have their agreements readily available and the Form I-9 with supporting documentation separately available as well. U.S. government immigration agencies that could conduct a site visit include USCIS (U.S. Citizenship and Immigration Services, ICE (Immigration and Customs Enforcement), and HSI (Homeland Security Investigations). If an employer is visited by the government, the employer should contact is immigration counsel immediately.
With BAHA, there continues to be rigorous enforcement of the laws. Compliance with immigration law continues to be important for employers, not just for business needs but because following the law helps limit an employer’s potential civil and criminal liability. Be prepared. Be proactive. Determine who are your employees and nonemployees. Review your agreements with your gig workers, freelance workers, and independent contractors. Get training on Form I-9 compliance. Create an immigration compliance policy if you don’t already have one, and follow it. Having a compliance plan that is impossible to follow or simply not followed is not helpful, especially in this day of increased enforcement. Hiring independent contractors may fit your company’s business needs, but only if the hiring is consistent with immigration law and other laws.