Tony Parker, a self-described “typical entrepreneur who jumps around to a lot of different things,” was working in Internet marketing and sales at his buddy’s startup when it ran out of money last year. He filed a claim for unemployment benefits, and received his first check six weeks later.
It’s far from an unusual story these days, except for one thing: Parker wasn’t technically an employee of the firm. Rather, like a growing number of workers these days, he was classified as an independent contractor, working on a freelance basis.
That means he didn’t get benefits or other perks most full-time employees get — but he didn’t see why he shouldn’t get unemployment benefits, having essentially been working as an employee for four years. After a pair of phone interviews, the state Department of Labor agreed, and he started drawing weekly checks.
Parker learned something many laid-off nonsalaried workers don’t realize. Whether they’re termed freelancers, contract workers or temps, they may be eligible for unemployment benefits, if they can demonstrate that they served in a role similar to that of a full-time worker.
“Fewer than half of the unemployed are getting benefits, and we believe as many as 50 percent of those not applying would qualify,” says Jon Bloom, executive director of the Workers’ Defense League, which provides free legal counsel on unemployment issues. A significant number of these, he said, are laid-off contract workers who think they’re ineligible.
But just because you get a 1099 at the end of the year instead of a W-2 doesn’t mean you can’t draw unemployment. I learned this lesson personally after being laid off from my job as a blogger for the gossip site Gawker, and being told by various know-it-alls that I couldn’t collect because I’d been paid as a freelancer. I applied anyway, and while I had to wait six months for the board to make a ruling, I finally started drawing checks, a $405-a-week lifeline.
So what determines whether someone is (or was, in this case) an employee, who merits benefits, or an independent contractor, who doesn’t?
There’s some gray area, but in essence, as Bloom puts it, “The issue is who controls or directs the work. If you report to a workplace and they tell you what your tasks are and you do them, you’re an employee.”
More specifically, a number of factors come into play. The IRS has a test that pinpoints 20 criteria it weighs to determine if someone is an employee or a contractor, such as whether he’s required to work specific hours and whether he’s provided with an office and tools of the trade, like a computer. Among the biggest issues is whether your efforts relate directly to the enployer’s main business — say, if you write posts for a Web site rather than fix the computers.
“One of the bigger questions they asked to determine my status was if I had a business card with a company logo on it,” said Parker. (He had several.) Other questions included whether he’d worked for other people during the time he was there (no) and whether his income all came from the same employer (yes).
Wherever you draw the line, it’s a question that’s gotten more attention in recent years, as employers increasingly rely on freelancers and contract workers. Both New York and New Jersey have made moves in recent years to crack down on employers who misclassify employees.
If a nonsalaried employee applies for benefits and is found eligible, his employer is susceptible to an audit by the Department of Labor, and could end up owing back taxes for unpaid unemployment insurance, says Ed Hernstadt, an attorney who often does employee-side employment litigation. (Which may explain why Parker says his friend, the company owner, was “not happy with me” for pursuing benefits.)
So, if you’re a recently laid-off freelancer and think you have a valid claim, how do you negotiate the labyrinthine bureaucracy?
First, apply. You can file online, and will likely be sent questionnaires and paperwork to fill out. Answer promptly. If you don’t have pay stubs, you can send bank statements showing direct deposits.
Be patient but persistent: The recession has hit New York state’s understaffed unemployment office like a hurricane, and my six-month wait for my case to be evaluated is not unusual.
If you’re denied benefits, it’s not over yet. You can request a hearing — an informal trial before an administrative judge, where you can easily represent yourself and make your case.
You can even apply if you were laid off months ago, though your benefits start when you file your claim — you won’t get paid retroactively.
Anyone deemed eligible is entitled to 26 weeks of benefits, plus extensions. Remember, that weekly check isn’t just to make your own life easier — it’s for the greater good. Unemployment benefits were part of the 1935 Social Security Act, created in response to the Great Depression.
“These benefits are not just for the unemployed worker,” says Bloom. “It’s also to pump money into the economy.”