The National Federation of Independent Business (NFIB), Michigan’s leading small business advocacy organization, testified before the Senate Labor Committee today in opposition to Senate Bills (SB) 6 and 7 that would drastically hike penalties against small business owners for violations of wage and benefits laws, severely limit the use of independent contractors, and require employers to provide private employee wage information.

While sponsors indicated they were working on a substitute that would narrow the scope of the independent contractor legislation, no language was available for review, so testimony revolved around the introduced bills.

“Given the economic stresses facing Michigan small businesses, introducing bills that would essentially eliminate independent contractors and threaten employers with massive fine increases and the threat of jail time and felonies seems rather tone-deaf,” said NFIB Michigan State Director Amanda Fisher.

Currently, small business owners who cannot afford or do not have enough work for full-time employees are able to use independent contractors as long as they meet the
“economic realities test” established by the Department of Labor. Many small business owners who are sole proprietors work with independent contractors, which allows them flexibility they would not have as an employee.

Fisher said, “After California passed a similar law, they have had to add at least 109 exemptions due to the unintended and unwanted consequences of making it nearly impossible for anyone to be an independent contractor. Why would we want to do that in Michigan?”

Fisher also noted that this issue is often considered a construction issue, but the proposed law is broad and would include truck drivers, medical professionals, hair stylists, language interpreters, and gig workers such as ride share and grocery delivery drivers among others.

In addition to the elimination of independent contractors, SB 6 also includes a provision that will block employers from having the opportunity to know who has filed a complaint against them, preventing a small business owner from being able to defend themselves as well as a requirement to, if requested, provide an employee with the salary and benefit information of other employees in similar positions. SB 6 and 7 increases the fines and penalties from a maximum of $1000 to $10,000 and includes some violations as felonies. Finally, if an independent contractor misclassification is alleged, SB 6 presumes the employer is guilty and must prove that they did not violate the act.

“Many small business owners serve in multiple roles in the business, including HR, and may make unknowing mistakes. These bills would expose them to massive fines that could include jail time. At a time when policymakers want to limit time spent incarcerated for violent offenders, these sanctions are disproportionate at best and, at worst, offensive,” continued Fisher.

“All told, Senate Bills 6 and 7 will place onerous new burdens on small businesses that will cost time and money, ultimately jobs, and lead to closures. If passed into law, Michigan’s small business owners and entrepreneurs will be presumed as bad actors to regulate and investigate and fine. That is not an environment that creates jobs, innovation, and recovery.

“These bills are not on the agenda of any lawmakers who value Michigan’s Main Street businesses and their workers. These bills are harmful to small businesses, free enterprise, and Michigan’s economic health.”