Advocacy News – Jan. 31, 2025
Legislation to make sweeping changes to how employers classify employees is back – this time in the Michigan Senate.
Why it matters: Senate Bill 6 (SB 6)would create an “ABC test,” limiting the ability of ALL employers to use independent contractors. Among other things, the bill specifies that for a worker to be properly classified as an independent contractor, companies would need to establish the individual meets all three components of the ABC test:
- “The individual is free from control and direction of the payer in connection with the performance of the work, both under contract and in fact.”
- “The individual performs work that is outside the usual course of the payer’s business.”
- “The individual is customarily engaged in an independently established trade, occupation or business of the same work performed by the individual for the payer.”
California, which adopted an ABC test in 2019, now exempts over 109 types of workers. Additional exemptions are under consideration and are dragging out what has already been a prolonged, unnecessary and messy process. Additionally, these exemptions have not solved the issue and instead created a system of winners and losers. Some of CA’s exemptions include most outside salespeople; insurance underwriters, auditors, and risk managers; medical professionals; other licensed professions (e.g., lawyers, engineers, accountants); investment advisers; grant writers; graphic designers; freelance writers; real estate professionals; most bona-fide business-to-business relationships; and more.
Go deeper: Here are other details to now about the proposal –
- No exemptions. Unlike California, SB 6 contains no exemptions.
- Doesn’t track the new federal test. Michigan’s current economic realities test mirrors the Biden Administration’s independent contractor rule, which went into effect in March of 2024.
- The bill contains steep penalties for misclassification — including prison time. SB 6 would drastically increase the penalties for misclassifying a worker and could even result in years-long prison sentences. The fines for such violations would also increase ten-fold and encourage workers to bring their own complaints of misclassification under the legislation (and obtain 3x the amount of wages and fringe benefits wrongfully withheld). Finally, the legislation directs the Attorney General to establish an enforcement unit and allows whistleblowers to get a bounty (up to 30% of the penalties collected through such enforcement).
- Adds a new wage transparency mandate. SB 6 would require employers to provide employees with three years of wage information for “similarly situated employees,” upon request. While the bill allows the employer to redact names, a “similarly situated employee” is defined as “employees who are within the same job classification as the employee requesting the information or whose duties are comparable in skill, effort, responsibility, working conditions, and training to those of the requesting employee.” Wage information would need to cover salary and hourly wage information, as well as information about bonuses, overtime and other forms of compensation.
- The bill negatively impacts workers. If the Legislature forces more employers to classify more workers as employees, those individuals may lose the flexibility they desire (e.g., more control over how, where and when they work and/or how they carry out their duties) and jobs may be lost. The California law has proven unpopular with voters, who repudiated the state’s similar law as applied to gig-economy drivers by passing a constitutional amendment (Proposition 22) to overrule California’s law.
Looking for further information? Contact Wendy Block at wblock@michamber.com.