This is nothing new. It has been going on for some time. I personally know someone in the department that enforces it and did business with a company that got busted for it. He is now out of busines..
Let’s say you are a construction business and you don’t want to pay for unemployment, federal withholding, ss and workers comp insurance. So you pay your guys a straight hourly wage and then send them a 1099 at the end of the year and call them independent contractors. Some time later one of these guys gets laid off from a real job so they file for unemployment. They get turned down because they show no income in the previous three quarters. They get mad and say they worked, as an employee, for ABCD Construction for three years.
They still are ineligible for unemployment because they cannot prove they received wages nor did they pay Minnesota taxes on any wages. Both the contractor and employee are in trouble.
Next.the State opens an investigation into ABCD Construction. They want their unemployment taxes. They give the contractors name to the State withholding department as they want their cut. This contractor also gets reported to the IRS and the workers comp carrier. So he is facing four audits and they can go back years. The debt cannot be removed through bankruptcy so he is out of business. I have seen it.
Some of us contractors follow the rules and pay our taxes so I’m glad to see these guys getting busted for being tax cheats. I am tired of paying higher taxes to make up for deadbeats.
The scenario you describe IS employment, at first glance.
Contracting is based on a bid/accept relationship, providing one’s own tools etc. Some autonomy as re: setting own work hours while accomplishing the agreed goals is typical and the lack thereof is a yellow flag to auditors. Many call people contractors who in fact are employees.
...which is an entirely different matter than the gubmint messing with the relationship between those two gainfully active, ‘consenting’ adults.