"What they're doing is tearing at the fabric of the New Deal protections that have been in place for decades to protect workers," said Shannon Liss-Riordan, a partner at Lichten & Liss-Riordan, a Boston firm that's sued businesses including strip clubs, cleaning franchises and trucking companies on behalf of independent contractors.
Labor laws prevent companies from classifying workers as independent contractors if the freelancers have the same responsibilities as current employees and aren't allowed to take other jobs.
Authorities are starting to crack down on companies that violate these laws. President Obama's budget for fiscal 2011 earmarks $25 million for divisions in the Department of Labor, including the Wage and Hour Division and Occupational Safety and Health Administration, to investigate businesses that misclassify workers as independent contractors.
Two separate bills in Congress also seek to punish companies that misclassify workers. And the Internal Revenue Service said it would audit 6,000 random employers this year to calculate how many companies overall might be misclassifying independent contractors.
The government is now paying close attention because "this is worth billions of dollars in lost payroll cost, and everyone's looking for ways to raise money," said Catherine Ruckelshaus, legal co-director at the National Employment Law Project, a nonprofit organization that advocates for low-wage workers.
Ruckelshaus estimates that the number of freelance workers has risen to at least 13 million. The actual number is difficult for the government to track, said David West, director of the Center for a Changing Workforce, a Seattle nonprofit that monitors employment trends.
The 2005 estimate of 10.3 million contract workers was made by a Bureau of Labor statistics survey of contingent workers. That was an increase from the bureau's previous estimate of 8.6 million contractors in 2001.
Responding to the trend, the Freelancers Union in New York is advocating for freelancer-friendly policies across the nation, such as abolishing taxes on unincorporated businesses (many freelancers operate this way) and cracking down on employers that don't pay contractors what they're owed.
"We have to recognize this is a trend, just as it was a trend when people were leaving the family farm in the 1800s," said founder Sara Horowitz, who said membership had swelled 40% in the last year, to 130,000.
