As a reminder to companies with independent contractors performing work in Seattle, the city's Independent Contractor Protections Ordinance, SMC 14.34, which expands protections for independent contractors, went into effect on September 1, 2022.
The ordinance applies to all hiring entities and covers any independent contractor who performs work, in whole or in part, in Seattle. Importantly, the ordinance requires companies to deliver the following information to such contractors: pre-work written disclosures, a notice of rights, as well as compensation itemization disclosures each time a contractor is paid. The ordinance also imposes new penalties for untimely contractor payments.
Pre-Work Disclosures
First, the ordinance requires a hiring entity to provide certain written disclosures to independent contractors prior to the contractor performing work. These disclosures are intended to summarize the scope of work for which the contractor has been hired, including the following information:
- date of the disclosure;
- names of the parties;
- contact information for the hiring entity (including physical address, mailing address, telephone number, and email address, as applicable);
- description of work;
- location(s) of work and regular place of business of the independent contractor or hiring entity;
- rate(s) of pay and any variable/incentive compensation terms;
- pay basis (hour, day, piece rate, etc.);
- tip/service charge distribution policy, if applicable
- typical expenses that would be incurred by the independent contractor, specifying which, if any, are reimbursed by the hiring entity;
- any deductions, fees, or charges the hiring entity may subtract from payment to the independent contractor, and the policies for each type of deduction; and
- payment schedule.
These disclosures requirements can be satisfied by including the required information in an independent contractor, consulting, or other similar agreement, so long as the agreement is executed prior to the commencement of services. Otherwise, a hiring entity can use the model disclosure issued by the City of Seattle.
Contractors who had already begun performing work before September 1, 2022, must receive these written disclosures no later than September 30, 2022, if they had not previously received them.
Notice of Rights
Second, the hiring entity is required to provide each independent contractor with a notice of the rights established by the ordinance. Similar to the pre-work disclosures, contractors hired on or after September 1, 2022, should receive this notice prior to beginning work, and contractors who begun providing services before that date must receive this notice on their next pay date, but in no event later than September 30, 2022.
Timely Payment and Payment Itemization Disclosures
Third, the ordinance requires a hiring entity to provide timely compensation for work performed, either as provided under the terms of the contract or, if the payment terms are not specified in the contract, no later than 30 days after completion of the work.
At the time of each payment, the hiring entity must include a written disclosure with itemized payment information, including the following:
- date;
- names of the parties;
- description of services covered by the payment;
- location(s) of services covered by the payment;
- rate(s) of pay and any variable/incentive compensation terms applicable to the work covered by the payment;
- pay basis (hour, day, piece rate, etc.) with accounting of method(s) for determining payment earned during the pay period;
- tip compensation and/or service charge distributions, if applicable;
- expenses reimbursed, if applicable;
- gross payment;
- deductions, fees, or other charges, if applicable; and
- net payment after deductions, fees, or other charges.
Hiring entities can provide these disclosures in a form of their choosing, including the model itemization form issued by the City of Seattle.
Violations
A hiring entity that violates the ordinance will be liable for full payment of any unpaid compensation with interest and may be subject to civil penalties and fines. The Office of Labor Standards has authority to administer and enforce the ordinance and will promulgate administrative rules and create model disclosures and notices by September 1, 2022.
Next Steps
Companies that engage independent contractors to perform services in the City of Seattle should work with counsel to update their standard agreements to include all of the required informational disclosures, develop compliant payment itemization forms, and ensure the timely delivery of notices of rights and informational disclosures to all existing and future independent contractors.
