The Seven Days just published a helpful overview of the Vermont Supreme Court’s June 23 unanimous ruling that “those who operate limited liability companies, or LLCs, don’t count as employees, at least for the purposes of paying for unemployment insurance.”
This means companies don’t need to pay unemployment or workers’ compensation taxes when they hire a freelancer doing business as an LLC.
According to the Seven Days, “In Vermont, a worker qualifies as an independent contractor for workers’ comp only if he or she is doing work that falls outside the normal scope of business and is free from supervision by the entity that hired him or her.”
There are many reasons companies rely on freelancers:
- They can save the business money.
- They can provide niche expertise required for short-term projects.
- They can provide flexibility, which is especially important for companies that deliver custom, contract-based projects (like house builders or companies building web apps).
Likewise, many people prefer freelance self-employment vs. working as a full-time employee. That’s because freelance work fits their skills or lifestyle, or simply because they can net a better income than working as a full-time employee.
(That said, according to a 2016 McKinsey Global Institute report, about 28% of gig workers prefer traditional, full-time employment but are working in independent roles out of necessity.)
How Many Independent Contractors Are There in Vermont?
The ruling that LLCs aren’t individuals could have a significant impact on Vermont’s gig/freelance/independent contractor/consultant economy.
But how big is that economy? Difficult to say, because reliable, current statistics aren’t available.
One image of the modern freelancer is a programmer or tech developer. Jeff Couture, executive director of the Vermont Technology Alliance, cited a 2014 DOL study finding Vermont had more than 3,000 tech freelancers in 2014.
But in Vermont and across the US, most independent contractors don’t work for on-demand jobs like Uber or Task Rabbit. They work as media consultants, photographers, designers, cable installers, homebuilders, specialty construction contractors, and delivery drivers for companies like FedEx.
Vermont’s workforce includes about 346,300 people. If you extrapolate the gig economy of the total U.S. workforce (about 34% of workers) to Vermont, that would equal about 118,000 workers – which seems rather high.
But then again, maybe not. Vermont has about 75,000 small businesses. 54,300 of those have no employees. Many of them are likely some form of independent contractor or freelance-based business.
And Vermont has an exceptionally high rate of citizens with more than one job. Most of the people with second jobs do them by choice, not financial necessity. Many of those are probably some form of gig work.
Vermont isn’t alone in lacking reliable numbers to quantify its freelance economy – the US Labor Department also admits it struggles to define this group of workers.