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July 2022: Independent Contractor Protections Ordinance to Go into Effect in September

07 Jul

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Update Applicable to:
All employers with independent contractors in the city of Seattle, Washington.

What happened?
On June 14, 2021, Seattle City Council passed SMC 14.34, the Independent Contractor Protections (ICP) Ordinance, which requires covered hiring entities to provide independent contractors with disclosures prior to entering a contract and at the time of payment.

What are the details?
Effective September 1, 2022, hiring entities (broadly defined as any person or business “regularly engaged in business or commercial activity,” including nonprofits) will be required to provide independent contractors with certain disclosures prior to entering a contract and at the time of payment. In addition, hiring entities must provide timely payment under the terms of a contract, the terms of the pre-contract disclosure, or within 30 days of contract performance.

The ICP Ordinance also requires covered hiring entities to provide timely payment to independent contractors and creates a cause of action for retaliation.

The ICP Ordinance creates a series of rebuttable presumptions in favor of independent contractors. For example, without the required pre-contract disclosures, if the independent contractor performs the agreed-upon work, a rebuttable presumption arises that the independent contractor’s terms and conditions of the relationship govern.  If a hiring entity fails to retain specific records, there is a rebuttable presumption that the entity violated the ICP Ordinance.  Most importantly, if a hiring entity takes adverse action against a person within 90 days of the person’s exercise of rights under the ICP Ordinance (including asking for a written statement of pay), it creates a rebuttable presumption of retaliation. 

Required Disclosures
Under the ICP Ordinance, Seattle will require the following pre-contract disclosures to any independent contractor:

  • The date;
  • The independent contractor’s name;
  • The hiring entity’s name and contact information;
  • A description of the work to be done;
  • The location of the work to be done;
  • The rate or rates of pay;
  • The pay basis;
  • A description of the tip and/or service charge distribution policy;
  • A statement of any expenses of the job that are reimbursed by the hiring entity;
  • A statement of any deductions, fees, or other charges the hiring entity may subtract from payment and accompanying policies for each type of charge (if applicable);
  • The payment schedule; and
  • Any other information is required by the Director of the City of Seattle’s Office of Labor Standards (please note, as of the time of publication, the administrative rulemaking process is ongoing). 

In addition, at the time payment is made, the entity must disclose:

  • The date;
  • The independent contractor’s name;
  • The hiring entity’s name;
  • A description of the services covered by the payment;
  • The location of services covered by the payment;
  • The rate or rates of pay;
  • A statement of tips, compensation, and/or service charge distributions;
  • The pay basis;
  • A statement of any expenses reimbursed;
  • The gross payment;
  • The deductions, fees, or other charges;
  • Net payment after deductions, fees, or other charges; and
  • Any other information is required by the Director of the City of Seattle’s Office of Labor Standards (please note, as of the time of publication, the administrative rulemaking process is ongoing).

Timely Payment
In addition to the disclosures, hiring entities must provide timely payment to independent contractors, which means:

  • Pursuant to the terms of the contract;
  • Pursuant to the terms of the pre-contract disclosure; or
  • Within 30 days of the independent contactor’s completion of services under the contract.

Partial Exclusion for Transportation Network Company Drivers
The ICP Ordinance’s disclosure requirements, and only the disclosure requirements, do not apply to transportation network company (e.g., Lyft, Uber, etc.) drivers; however, all other provisions of the ICP Ordinance (e.g., timely payment, anti-retaliation) do apply.

For more information, please see the links below:

Independent Contractor Protections Ordinance

Article 1

What do employers need to do?
Employers should review the links provided above and ensure that your disclosures and recordkeeping are accurate once the law goes into effect on September 1, 2022.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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