The Obama Administration seems to be playing its own rather peculiar game with the nation’s small businesses, one that might best be described as I give with one hand and take away with the other. So, while Administration officials have been singing the praises of small businesses and describing the Presidents pro-small business proposals, there have been a few other proposals that haven’t been so friendly. A couple of examples involve mandates: there was that employer mandate that was written into the health care reform bill and, more recently, an automatic IRA mandate was proposed as a plank of the Administration’s Middle Class Task Force initiative. Besides all this annoying stuff, the fiscal 2011 budget submitted by the White House contains a set of proposed regulations that would be something of a triple-whammy for the ecosystem that has evolved between microbusinesses and the independent contractors they often hire as needed.

First, businesses that hire independent contractors would be required to notify those contractors in writing with explanations about the worker protections and conveniences they are giving up by being independent contractors. Second, proposed rule would require that any independent contractor for whom a business owner would be required to file IRS Form 1099 can make their business/client withhold federal income taxes at a flat rate of their choosing from their gross earnings. And, finally, the President has proposed giving the IRS the authority to issue guidances on classification of workers, down to the industry level and even for specific jobs. It’s pretty clear from the tone of these proposals that the Administration is concerned about unscrupulous employer firms. But you have to wonder what is going to happen the first time the IRS re-classifies some independent contractor who has chosen to be an independent contractor and has no desire to be labeled as an employee?