Oei & Ring: Will Proposed Tax Legislation Tilt The Worker Classification Debate?

Shu-Yi Oei & Diane Ring (On Labor), Will Proposed Tax Legislation Tilt the Worker Classification Debate? 

Tax reform is in the air. On Thursday, November 9, Senate Republicans released a Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation (JCT)), which contains in substance the Senate version of proposed tax reform legislation. Among other things, that JCT description stated that the bill would clarify the treatment of many workers as independent contractors by providing a safe harbor that, if satisfied, would guarantee such treatment. But in the modification to the Chairman’s Mark released on November 14, that safe harbor provision was stricken from the Senate bill.

In a blog post on TaxProf Blog, we expressed concern about this worker classification clarification provision. In brief, our worry was that even though the legislation “clarifies” the treatment of workers as independent contractors and arguably simplifies some aspects of their tax compliance burdens, it also carries potentially important ramifications for broader fights over worker classification that are occurring in the labor and employment law area.

What was the worker classification safe harbor, why were we concerned about it, and could the proposed legislation be revived in the future?...

We do not know why the worker classification safe harbor was dropped from the Senate tax bill. However, the NEW GIG Acts remain proposed in both the House and Senate and the provisions could certainly come back to life. Tax and labor and employment law scholars should work across fields to monitor these types of proposed provisions, in order to appreciate the motivations and risks of tax reforms that appear designed solely to simplify and clarify.