There are new regulations for businesses/hiring entities who engage with independent contractors (ICs) working in Seattle which go into effect September 1, 2022.
The regulations require businesses to provide certain pre-engagement disclosures to ICs, and provide additional information at the time of payment(s). Notably, these regulations will apply to any IC having even a small, transitory connection to Seattle, provided work is actually being performed during their presence in Seattle. The physical location of the IC performing the work is the key factor in determining coverage. Simply travelling through Seattle is not enough, but any greater presence will likely trigger the coverage of the ordinance. ICs working remotely and not located in Seattle will not fall within the regulations’ coverage, regardless of whether the hiring entity is located in Seattle. Like virtually every workplace protection ordinance, any form of retaliation for an IC making a claim is prohibited.
Required Disclosures and Compliance
The ordinance covers both pre-contract disclosures (SMC 14.34.050) and payment disclosures (disclosures made at the time of each payment) (14.34.060).
Required pre-contract disclosures include: the names of the IC and contracting entity, contact information for the contracting entity, a description of the work being performed by the IC, location of work, rate of pay, pay basis (e.g. hourly, piece, deliverables), pay schedule including any incentives and deductions, typical expenses incurred and if those expenses will be reimbursed, and the tip policy if applicable. If the IC’s primary spoken language is not English, the disclosures must be provided in both English and the primary spoken language of the IC. The pre-contract disclosure must be provided in a single document, and while the Seattle Office of Labor Standards has provided a sample form, it is woefully inadequate for virtually all contractual relationships. While this form would minimally comply with the regulation, it would not be sufficient to delineate a contractual relationship between the IC and the contracting entity.
Similarly, ICs must be provided with certain payment disclosure information with each payment. With each payment, contracting entities must include: a disclosure containing party names, description and location of the services covered by the payment, rates of pay and incentives, tip compensation, pay basis (hour, week, piece, etc.), reimbursed expenses, gross payment, all deductions, and net payment. Again, the city has provided a sample form that meets the ordinance requirements. Contracting entities may modify the form as needed, but must include all the required information.
With regard to timely payment, if a contract does not specify when payment shall be issued, the default rule is that payment shall be issued within 30 days after completion of the contract. However, if the pre-contract disclosures have not been provided, the IC’s alleged terms of payment are presumed to control. In this situation, a contracting entity would likely face a double violation – one for failing to include the terms of payment in the pre-contract disclosure, and another for failing to comply with the IC’s alleged payment terms.
Lastly with regard to disclosures, contracting entities must provide a Notice of Rights to all ICs, including those already under contract. For those already under contract as of 9/1/2022, the Notice of Rights must be issued no later than 9/31/2022. While the city’s other issued forms may safely be modified, contracting entities should use the same Notice of Rights form issued by the city as they would with other required workplace notices.
Contracting entities are required to maintain records for three years—the duration of the statute of limitations for a claim under this regulation—or there will be a rebuttable presumption against the contracting entity that it has violated the regulations. That presumption will only be overcome through clear and convincing evidence—a near impossible burden to overcome without the records themselves.
The regulations provide remedies through the Office of Labor Standards, including investigation and enforcement, liquidated damages two times the amount of any unpaid compensation, civil penalties, and interest. The regulations also provide for a private right of action. Investigation and enforcement by the Office of Labor Standards is not an exclusive remedy, and therefore litigation could potentially follow a completed investigation, regardless of the outcome of that investigation.
A schedule of civil penalties has not yet been issued, but penalties should be anticipated to be $500-$1,000 per violation, as with other ordinances. How “per violation” will be interpreted is currently unknown, but because a contracting entity could potentially commit a violation with each non-compliant paycheck, civil penalties could accrue to a substantial sum. Notably, both agency enforcement and private right of action include recovery of attorney’s fees.
If you are unsure of how to comply with this ordinance, or have further questions about how it will be implemented and enforced, please contact our employment attorneys.
The legal issues impacting workplaces are ever changing (Employment Law in Motion!) and since publication, new or additional information not referenced in this blog post may be available. Employers should feel free to call on the Miller Nash team if you have questions or need assistance, and always consult with an attorney for legal guidance.