Street Talk: Costly freelance standards

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Michigan small businesses and entrepreneurs would be hurt significantly if a proposed U.S. Department of Labor (USDOL) independent contractor rule goes into effect, according to the Small Business Association of Michigan.

On Oct. 11, the USDOL announced the proposed rule that would rescind the existing pro-small business independent contractor analysis, replacing it with a complicated and subjective system. The proposed change would be detrimental to entrepreneurs operating as independent contractors and small businesses who use independent contractors, SBAM said.

“Enacting this needlessly complicated and restrictive system on entrepreneurs and small business owners is shortsighted and harmful to our entrepreneurial economy,” said SBAM President and CEO Brian Calley. “These proposed subjective rules were clearly developed by government workers who have no experience in business. Independent contractors are a vital and substantial part of our economy, and these proposed rules hurt their ability to be successful.”

According to a recent survey by Upwork, 59 million people — or about one-third of the U.S. workforce — did some freelance work last year, contributing $1.3 trillion to the country’s economy.

The proposed rule establishes a more overreaching “economic reality test” than the previous rule, including what SBAM called six different, often subjective factors that must be met to be an independent contractor. Calley said these restrictions exert excessive restrictions on small businesses operating as independent contractors as well as small businesses who use the services of independent contractors. 

A few of the new factors included in the proposed rule are:

  1. Opportunity for profit or loss depending on the managerial skill
  2. Considering the degree of permanence of a work relationship
  3. Determining whether investments by a worker are entrepreneurial in nature
  4. Whether the work being by an independent contractor done is necessary or integral to the business 
  5. The degree to which the independent contractor does or does not use specialized skills in performing the work

Calley said SBAM is urging the federal government to rescind this proposed rule and go back to the drawing board. If the independent contractor rules are going to be changed, he said, they must work for small businesses or they don’t work for Michigan.

Legal aid

The Justice for All Commission has issued a new report examining the value of legal aid services throughout Michigan. The report, titled “Michigan Legal Aid Organizations: Social Economic Impact and Social Return on Investment,” is the result of a JFAC study that examined the immediate and long-term value of legal aid services and compared them to the overall money invested in legal aid throughout the state.

Data shows that legal aid services yielded a 669% return on investment in 2019 and 2020 — the years covered in the study. More specifically, for every $1 invested in Michigan’s civil legal aid services during those years, they delivered $6.69 in immediate and long-term consequential financial benefits, the report stated.

Legal aid organizations statewide, the report states, provide services in more than 100 types of legal problems, including family-related concerns — divorce or custody, housing, health care, public benefits (such as Social Security insurance), consumer protection and many others.

“Thanks to years of dedicated advocacy by many organizations, including the State Bar, Michigan residents are fortunate to have an array of civil legal aid resources available to help meet their needs,” said Michigan Supreme Court Justice Brian Zahra, chair of the JFAC. “The data about the effectiveness of legal aid we have compiled in this vital report will go a long way toward helping us achieve our goal of ensuring 100% access to justice in Michigan.”

The study examined the social value of these services in 2019 and 2020 both in terms of immediate value to parties and the long-term consequential value to the community as a whole. These long-term benefits are substantial and include savings in community support costs; reductions in community medical care expenses; additional community and income and taxation revenues from benefit programs; savings in housing and support costs for homeless families; and savings in community law enforcement, court systems and other government agency costs.

The combined immediate and long-term value was then compared to the money invested in legal aid, resulting in a measurement of the social return on investment (SROI), an internationally standardized and accepted process for measuring and understanding the financial impacts of a social services organization.

Other key report findings: 

  • In 2019, $28 million in funding for Michigan civil legal aid operations generated more than $213 million in total net value.
  • In 2020, for every $1 invested in Michigan legal aid, the people of Michigan received $5.82 of immediate and long-term financial benefits.
  • In 2019 and 2020 as a whole, the SROI for Michigan’s legal aid organizations is higher than the comparative values for many other types of social service agencies, based on the many types of legal services delivered that resulted in significant future costs savings or additional income to the state of Michigan, and the high SROI directly related to the significant number of volunteer hours of legal services delivered by Michigan attorneys.

Looking more closely at several specific services provided by civil legal aid, the study found that over the two years:

  • In more than 8,400 cases involving divorce, separation, or annulment, Michigan residents received more than $7.2 million in immediate direct benefits and nearly $80 million in gross long-term consequential financial benefits.
  • In more than 25,000 cases involving housing issues, Michigan residents received more than $19 million in immediate direct benefits and more than $160 million in gross long-term consequential financial benefits.
  • In more than 5,300 cases involving public benefits like Social Security Disability Insurance, Michigan residents received more than $2.2 million in immediate direct benefits and nearly $84 million in long-term consequential financial benefits.

“From child custody to housing issues, civil legal cases can often be life-changing, and too many of our friends and neighbors are left to navigate a complicated legal system without adequate resources or information,” said JFAC Vice Chair Angela Tripp, of Michigan Legal Help and the Michigan Advocacy Program. “As we work to close the civil justice gap in our own state, the JFAC will use this data to ensure that resources are available where they are most needed.”





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