When is someone an employee and when are they an independent contractor? The law is pretty clear, and New York Governor Eliot Spitzer is setting the stage to lay it down.

The New York task force seeks to unite various government agencies responsible for enforcing different aspects of employment law — and which have never coordinated their activities. The task force will issue recommendations in early 2008.

The WNYC news story I heard implied that the construction industry would be targeted. Hopefully the task force will seek input from The Freelancer’s Union as well; knowledge workers are also affected.

When I was the director of a small yoga business in lower Manhattan, we paid payroll taxes even for teachers who only taught a few classes a month. Apparently this was not a common practice — we had complaints from teachers for withholding taxes and thus paying them “less” than other businesses. We told them that they would understand it better at tax time, when they had to pay self-employment taxes on their earnings as independent contractors.

Why put up with this grief (and it was grief)? Because it was the right thing to do.

Spitzer’s press release quotes Greg Tarpinian, Executive Director of Change to Win:

“Misclassification of workers is theft. Outlaw employers steal compensation from workers, security from their families and taxes from their communities…”

(My early August post gives more detail on the legal distinction between employees and free agents, also check out Change to Win’s simple 5 question test.)