California Supreme Court Transforms the Test for Who Is an Employee
news.bloomberglaw.com
news.bloomberglaw.com
> If A, B, or C isn’t present, the worker is considered an employee.
> A. Freedom from control over how to perform the service
> B. Service is outside the business' normal variety or workplace
> C. Worker is engaged in independently established role
So if any one of those conditions isn't the case, you are an employee under the law. I see people in this thread wondering how it'll affect companies like Uber/Lyft/whatever -- and I think it will actually be good for them, because now they'll use some of that warchest to hire the the best lawyers to figure out exactly how to best navigate the law (in california at least), and write their contracts in whatever way that best makes sure all 3 are present and they still get a healthy supply of drivers. Other smaller gig economy companies will then follow that lead so they can stay afloat and not purchase the legal work done by Uber/Lyft.
If I was invested in Uber/Lyft, I would welcome this, because it removes an avenue of risk, stabilizing the lawsuit risk.
[EDIT] - In the article there's a link to the decision from which the test comes from:
https://www.bloomberglaw.com/public/desktop/document/Hargrov...
'B' is downright apocalyptic for contract developers in all sorts of roles. Sounds like massive judicial overreach to me. If your summary is accurate, I wouldn't expect that particular guideline to survive appeal.
Labor law is meant to protect those in the employer <-> employee relationship, and most contractual work explicitly weaken this relationship a lot. So contractual work really shouldn't be the norm in a business.
If you can't provide your main business without this set of people, then those people are probably your employees?
This doesn't make any sense. Farmers are not employees of grocery stores. Factory foremen are not employees of drop shippers. Amazon warehouse staff are also not employees of drop shippers. Comcast cable layers are not employees of YouTube.
You think farmers aren't employees of grocery stores because the stores could buy the same food from different farmers? That's just as true of the IT company and its contract developers.
This matches some conrractors, of course. But it also extremely doesn't match many contractor developers.
Are you required to be online 4-6 hours a day? Do some of the companies employees not even know if you are actually a contractor? Are you the one picking up the metaphorical phone when the company's client is calling with a support issue? You might actually be an employee
If you show up with a deliverable , can go on vacation without clearing it with anyone, and are actually your own boss... Well that's different of course
It was different, but my point is that the 'B' clause ("Service is outside the business' normal variety", whatever that means) can be interpreted to remove this distinction.
A lot of people are cheering for this bullshit without thinking it all the way through.
That's not the case. A home builder may exclusively hire various sub-contracting companies to assemble a home, put in electricity, add finishings, etc. Those sub-contractors contract for many other home builders or landlords and are not employees of the home builders. That is the case, even though a home builder would go out of business without the sub-contractors.
Here is a different example. If a programmer works for one tech firm which calls the programmer a contractor, then if the programmer also create a personal website or side project for income, they may have established themselves as contractors.
They wouldn't, because they could drop in a replacement contractor. In your example the house builder relies on contractors but not the specific set of people doing the contracting (as in the parent), so any contractor can be replaced readily from the pool of contractors.
In theory a contractor can send someone else in to do the work, as long as the work in the contract is completed. If you demand a specific person to do work then they're likely an employee.
All you've done is restate my comment.
> In theory a contractor can send someone else in to do the work, as long as the work in the contract is completed. If you demand a specific person to do work then they're likely an employee.
That theory is wrong. If Business A depends upon the specific person B, and B does other work outside of A, then B is not necessarily an employee of A. There are many people with specialized knowledge that others do not have. The acquisition of that knowledge doesn't make them employees. It makes them valuable.
One class is "contract employee". These people are basically treated as second-class employees (with just enough arbitrary restrictions to enforce that) of the company they effectively work for.
The other class is "employee of a contractor". These people are real employees of a company that hires them and provides them benefits. The company they work for then sub-contracts to various other companies and uses those people to fulfill the work under that contract.
Since both cases use the term "contractor", and the former is far more common in the minds of everyone here, its easy to get the two distinctions confused.
Maybe we need better terminology?
In my experience "contract employees" normally work for a third party company that gets contracted by the hiring company. Then, the third party contracting company pays their employees after deductions and taxes. Otherwise, if not working for a third party company those individuals may be classified as independent contractors. When they are classified as independent contractors there already are limits on the number of hours that can be worked before they get turned into employees.
Also some type of lawyers are self employed if it's ok for a Barrister why not me.
The problem is when you get mcjob companies who abuse minimum wage staff - its well paid individual contractors that get hit.
https://www.bloomberglaw.com/public/desktop/document/Hargrov...
I honestly am not 100% sure of the ramifications, but I am sure that these companies are going to act in their best interest, and with the current imbalance in the labor market (some might argue that the markets are right where they should be), I'm relatively certain that will mean employees being turned into contractors, or worst case they'll take the walmart route and make everyone work "part-time", drivers will think they're pulling a fast one by working for more than one company but they'll really just be driving their own wages and benefits down.
If anything, this makes it easier for contractors to prove they ought to be employees.
The answer is it won't affect them, because they'll do what it takes legally to act in their best interest, like they have always done (and have had way more resources than the average worker to do). So nothing will change, outside of a likely reduction in lawsuits for companies most able to navigate the new legal climate.
But how does that follow? You're essentially saying that no law can ever affect them, since they'll always "do what it takes legally to act in their best interest".
What I was trying to say is that this legislation is unlikely to affect the most successful gig economy companies very much, if at all, because they'll likely find the best way to circumvent it. Even if they don't there's already very large corporations doing their best not to pay employees higher wages by taking advantage of the differences in protection for part-time and full-time classified workers.
Basically, the most upside I see for the worker with this legislation is every driver in a company like Uber needing to become an "employee". Let's assume that happens. I would expect Uber or any of the other companies to immediately take steps to reconfigure to evade this -- which I think in the "worst" (for the company, as in they weren't able to evade well) case is accepting employees but limiting them to part-time status -- it's already worked very well for companies like Walmart (and badly for the communities and workers there).
On the other hand, there is also an upside for Uber/gig economy companies -- the reduction in risk in the legal arena makes them much more attractive as an investment. Up until now, it's been an open question -- this will do much to close it. That benefit will ripple to the other lesser gig economy companies, because they will have a playbook to follow.
That said, I'm not sure I agree that part-time wouldn't be that bad. It works for Walmart because their employees have low fixed costs for working (essentially just the commuting), so working fewer hours is still worthwhile.
But Uber depends on drivers buying new cars, which often they pay off by driving many hours per day. Once you limit that, they will lose everyone except the casual drivers.
The alternatives I see to this are not great for Uber: they either have to (1) buy and maintain their own fleet, or (2) accept competition so that drivers can fill up their daily schedule by working for multiple companies.
I definitely agree with the rest of your comment -- but I think the affects of (1) and (2) might actually be net positives for Uber:
(1) More fleet for their self-driving efforts seem like not a bad thing, also I don't really want to do the numbers but the 10k spent in a year on the cars as capital instead of employee benefits might look at lot better on a balance sheet (especially tax wise).
(2) I think this is only true if the supply stays the same as now -- when people hear "oh uber pays more now", I think the supply might increase a little. The increased cost per worker will be spread over all the competition, and as long as the per-worker cost isn't too high for part-time vs contractor.
As an aside to all this, uber has also started (long ago?) charging people what it thinks they can afford so that's also a factor, it's not even a single consistent percentage anymore (if it ever was).
(1) "10k spent in a year on the cars as capital instead of employee benefits" - Right, but nowadays they are spending on neither :)
(2) Right, but that means Uber can't take over the market. That's a pretty big blow.
It's a California state law issue and this is a decision of the California Supreme Court upholding the decision of the Court of Appeals, which had upheld the Superior Court. This has already survived the whole chain of appeals.
So you're saying it can't possibly raise any (US) constitutional questions?
As an example, consider what happens when one of the affected contractors is in another state. That makes it a Commerce Clause issue. You can wave your hands and sputter indignantly all you want, but Wickard and Filburn are going to wave right back at you.
Devs don't care simply because the pay is high enough and there are a ton of jobs available.
When I was an employee I always had to beg to do anything, as well as suck up whatever shite projects the accounts would figure out would mean a sweet billability streak... dammit, the humiliation...
Another good test is, are you allowed to subcontract your work or not?
Several years ago Italy introduced CoCoCo contracts to capture this concept of temporary professional employment, between an employee on your payroll and a butcher you buy a stake from.
Eventually companies abused it and applied it to completely subordinates such as call center operators. It was - rightfully, given the circumstances - repealed.
I wonder if we could have something like that again, it would be easier than this pantomime.
That said, my (non-lawyer, pre-coffee) reading of what B actually says is that while it won't turn consultants into employees of the place they consult for, it will turn specialists into employees, whether or not they work on site. If a company occasionally submits patches to an open-source project they use, and then they hire a maintainer full-time for a few months, that sounds like B would require them to hire the maintainer as an employee.
For A, does that only mean working hours (i.e. can't make someone work 11am-7pm EST)? Does that affect scheduling milestones or tasks to be completed?
For C, what does 'independently established role' mean? Like job title?
Thanks in advance.
C: The contractor (ideally) works for many companies (i.e. has many clients) and not just for you. Is the contractor (individual or company) independently established? When determining C, the authorities might look specifically at things like whether the contractor has an established business location, whether the contractor has employees, how much work the contractor does for any individual client, etc.
- dictate how job performed
- dictate when performed, on a very regular basis
- oftentimes work is identical to other teams members, only difference is pay structure
https://corporate.findlaw.com/human-resources/employee-or-in...
The IRS' concerns aren't exactly the same as the state law concerns, but the lists they use to qualify contractor versus employee seem pretty similar, just with the CA state law test being more simplified (though IANAL, the more simplified CA state law list seems no less likely for companies to run afoul of with this sort of relationship).
In many tech companies you can't even tell the difference between who is an employee and who is a contractor, unless you ask.
Many employees skip the financial meeting. Contractors are often ignored when they sneak into the holiday lunch. For most contractors the bonus is the biggest difference, and the courts tend to agree that is not enough and force the contractors to get the bonus as well.
Things like knowing when the contract ends aren't visible.
I was a contract consultant for over a decade; I didn't hide any work. I usually didn't work out of their office, but when I did use their resources my working assumption was that any artifact left behind was theirs, modulo any agreement to the contrary.
Intermediate documents, experimental code, etc. weren't offered to customers, but I can't imagine what I'd want to hide. (Aside from my shame, given how a couple projects went.)
The differences between employees and contractors may reside in the work they do, but doesn't need to, it's in the legal basis of their employment - which other workers can't see. Just like you can't see the wage another worker is getting, rat doesn't mean they're getting the wage you think they are.
The way you know someone is a contractor is they leave after a few months, or they retired and still work there. You can't necessarily tell by their work output.
If an employee and contractor are digging ditches the only difference is likely to be in the paperwork; though possibly the contractor uses their own PSE and tools, but not necessarily.
Different agencies have different criteria, but the IRS considers several factors:
https://www.nolo.com/legal-encyclopedia/independent-contract...
The agency [IRS] is more likely to classify as an independent contractor a worker who:
can earn a profit or suffer a loss from the activity
furnishes the tools and materials needed to do the work
is paid by the job
works for more than one company at a time
invests in equipment and facilities
pays his or her own business and traveling expenses
hires and pays assistants, and
sets his or her own working hours.
can be fired at any time
is paid by the hour
receives instructions from the company
receives training from the company
works full time for the company
receives employee benefits
has the right to quit without incurring liability, and
provides services that are an integral part of the company’s day-to-day operations.Though as presenters they have a better chance of beating ir35 as they can legitimetly work out side of the BBC in a way that a developer cant - eg pa's at events etc
EDIT: typo
(1) the employer neither exercised control over the worker, nor had the ability to exercise control in terms of the completion of the work;
(2) the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise; and
(3) the individual has a profession that will plainly persist despite termination of the challenged relationship.
Element B is a little less clear, but I think it would be difficult for Uber/Lyft to overcome. Drivers would argue that the normal workplace is actually the streets. Uber/Lyft could of course argue that it's HQ, but given the number of drives on the street and the number of employees at HQ, this is no slam-dunk for the companies.
Background: I am a (former) lawyer who worked on employee/contractor issues in the realm of tax law (which uses different tests than state law).
EDIT: They might be able to redefine themselves as purely a software company for the drivers to remain contractors.
The service is not outside of business standard variety. Other cab companies have client driven matchmaking systems too now... They also employ office workers. The workplace for a cab driver is his car.
Therefore, what Uber does would make them a cab company that abuses contractors instead of employing employees.
However, the key point here is the test A. If Uber is specifically telling the drivers to pick up specific fares or otherwise forcing them to pick up fares beyond the number and/or time, they are actually employees not contractors. Fudging with scoring system to fire those who do not follow such orders indirectly could be construed as such as well.
"the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise"
Regarding other cab companies, most cab drivers have been traditionally classified as contractors. The idea that Uber introduced this practice is propaganda.
To iterate; the statement sets out two conditions, either of which are sufficient independent of the other, and claims that each of a number of services met one of those conditions.
Usually, when a statement of "choose either x or y" is made, then the only valid options are exclusively x or exclusively y (None and Both are not valid).
Though, when the statement of "if either x or y then do action" is made, then the action is done with any of three valid options: x, y, or x and y (only None is not valid).
To change the second statement to mean the first, you could say "if only x or only y then do action." The "only" cancel Both as being an option.
Either-or does imply exclusive-or, but it is often used less formally, so you will sometimes see it made explicit as "either x or y, but not both."
Surely companies must be allowed some method to ensure the quality of work they desire.
E.g. It's the difference between: a scoring system that uses a coding style standard and unit tests on the resulting code to build a score; and a scoring system that uses hours logged into the computer manipulating the IDE and lines of code written per hour to build a score (the contractor could use that as a way to score himself and for billing, but not the company).
If I’m an independent developer, and I frequently refuse to accept your contract work, you might “punish” me by not offering me as much work in the future. That doesn’t change the fact that I always have the choice to accept offered work or not.
It means that the driver is unable to choose their work, which was one of the key differences between a contractor and employee.
If I run an advertising agency and I've got 4 freelance film makers I regularly use and one of them stops taking my calls or almost always says no, I'll eventually stop calling him and add someone else to my regulars. It's just business, no point me wasting my time calling him.
I think there's a load of companies abusing the gig economy at the moment, but Uber aren't the worst and definitely not for things like they provide a GPS or set the rate, it's all the delivery companies and the gas-servicing people who all have to wear uniforms and work full days.
But that's different than the situation with Uber/Lyft. In your story, the person has the ability to find new clients. If you're an Uber/Lyft driver, you can't exactly "go it alone", so to speak. You're kinda stuck with Uber/Lyft.
"I think there's a load of companies abusing the gig economy at the moment, but Uber aren't the worst and definitely not for things like they provide a GPS or set the rate, it's all the delivery companies and the gas-servicing people who all have to wear uniforms and work full days."
I disagree; I feel setting the price unilaterally is a huge part of why they're abusing things. By doing that, they are kind of dictating the wages that the driver can earn. If Uber/Lyft decide to change the per mile rate, there's nothing the driver can do. By contrast, something like Angie's List allows the different providers to set their own rates.
Of course, I imagine that sort of process would make it much harder to actually get a ride and make it far less interesting to the users.
I pessimistically assume, however, is that assuming the A/B fight is a lost battle for gig economy compnaies, the next step is to limit these employees to being part-time with some kind of <20 hours per week or something rule.
Background: I am a spitballing layman
How does 20 hrs/week factor in here? I didn't see a reference in the Bloomberg article. Though this is actually a good point — if time spent working isn't a factor, then someone who works for Uber, Lyft, Grubhub, and Google Express could end up as en employee of all of these companies. That seems like kind of a weird result.
Walmart used the part-time distinction to great effect to increase their profits and decrease workers wages. Much has been written about this.
And in general quality issues can be handled by ratings. If a driver takes bad routes or has a dirty car they’re going to get complaints / bad ratings.
I’d be surprised if they couldn’t offer drivers “suggestions” on how to receive good ratings.
My guess is that B comes down firmly on the side of Uber/Lyft drivers being employees, unless they can convince a judge that their business is merely "providing an app that lets people find car companies" and not "giving people rides."
And there are a host of companies that offer similar services. They derive their value from being able to facilitate business interactions.
Angie's List is another example, and I can totally see similar businesses passing the "B" part of the test, because although they may implement some quality-control measures, such as requiring the independent contractors to abide by certain terms or meet certain standards, they are pretty hands-off in terms of HOW the recommended plumber fixes the clogged drain, or HOW the recommended carpet cleaner schedules its appointments.
But with Uber/Lyft, the HOW is much more like an employee relationship.
By comparison most point of sale (POS) venders just provide hardware and software don't involve themselves in the actual business enough though they may provide phone apps etc. Marketplaces like App stores or Amazon get more involved, but they don't dictate prices.
So yeah, I agree that Angie's List is clear of B and Uber/Lyft much less obviously so.
While I agree element B would be difficult for them to overcome I would give it around 50/50 that they can successfully argue the drivers are not a part of the normal workplace.
To put it another way, if you're a plumber who is working for a plumbing company, are you doing your plumbing in the office?
> equally dumb
I was defending why I think there is a 50% shot that Uber could make part B not apply. It seems like you think it is more like a 1% shot which you might be right, I am not a lawyer.
What about the Post Office??
This is going to create an interesting situation for the supremacy clause.
(B would be a surprising change for consultants and trainers if it were about location, but it seems to avoid that.)
I'm framing this as an argument that the plumber could be considered an employee of the plumbing company, not the retail store.
(I'm not sure if/how this breaks down if company 2 exists solely to provide people to work for company 1 and has no meaningful independent existence, which ... is probably the case for many Uber drivers now, so that's a relevant question.)
If the companies can convince the people to want a new labor classification badly enough then they can get it. Of course things will swing back if it turns out to be crap that is bad for enough people and good for too few.
The arc of progress is long.
People sleeping in their cars in between working at an Amazon distribution center or driving deliveries don't want a new labor classification. They don't want to die in poverty and are just trying to survive this ceaseless assault.
But there's no need for it. These companies not wanting to pay people what the law requires is not a need.
"But I feel they are also not a regular employee."
Why not? Many of the things people cite (get to choose hours, use own equipment, etc) are things that many regular employees also have. How many of us here have flex time?
"It gives both sides rights under the law."
What rights would the employees have under this law? Would they get a minimum wage for the hours that they're logged into the app? Would they get vacation time? Would they get sick leave? Cause unless they get more than they get now, I don't see how this would benefit them.
It is a fundamental contradiction - the perks of standard employment is exactly what makes it more expensive and less dynamic. You can not solve this fundamental tradeoff by introducing some new classification - whatever classification you choose, you'd have to place it somewhere on the spectrum between complete isolation (like ads board having nothing to do with advertised businesses) and complete integration (like full-time union employee).
Whenever you place it, it would be a tradeoff between the interest of the employer, the employee and the consumer. In ideal unicorn-rainbow world, the optimal points would be decided by a free market. In real world the fixed points would probably be negotiated by courts, lawmakers, unions and brazen new companies like Uber finding new optimum spots on the spectrum not explicitly prohibited by the regulators. Of course, the regulators can prohibit those spots then, and that's what is smart for Uber to fight - without it, they're back to existing spots and then what's the point in them being there?
For coders, is this because they’re objectively somehow worse programmers? Given all the emphasis in hiring on avoiding “bad” hires at all costs, it seems like there’s a conflict between paying for people who are “worse” than a FTE but still accepting their contributions. I realize it’s a strategy that gives the companies more leeway to expand and retract their workforce, but then stigma that is attached throughout the industry around contract workers shouldn’t exist, right?
Yes, e.g., firms whose main line of business is contracting out employees who are programmers hire programmers as subcontractors in addition to regular employees to round out special skills needed in contracts.
I have been in a position (for which I'm super grateful) in which young startups didn't have the funds to pay me my full-time rate, and so instead chose to pay me a weekly rate to work one week out of the month. I like to believe that I provided substantial value in that configuration - usually landing to review code, mentor newer programmers, and help chart direction for the subsequent three weeks (during which I'd be absent).
In this case, I was being paid quite a bit more than the full-timers, not less.
In time, they grew to be able to afford a more complete full-time cadre, and they people I worked with weren't so junior anymore.
I did this... I think half a dozen times. It was a great work config for everybody. If you can afford to travel to the work and you can really bring the fight for 5-8 straight days, I highly suggest it.
That's a very solid case for contractors and almost nobody will have a meaningful problem with it. I've done similar things in the CAD / data management space.
A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny.
The full time peeps should be taking you out for a lunch or two to network and gain some easy, high value mentoring, contacts...
I would in a second, and have had others invite me for this kind of thing. Some have remained in touch for years, and as they grew, have helped me as I did them.
If we had more of that going on, it would benefit nearly everyone.
But we don't.
The majority case boils down to head count quotas, and cost of labor factors. Often, these are both under specified, leaving managers to find contractors to fill gaps. The larger companies do this and it's chronic.
Such a contractor would likely meet the new "ABC" standard in the linked article, though. Those aren't the positions that are in danger of being eliminated, it's the "grunt contractor" folks who are contractors only because the employer wants to keep a buffer of positions that are active but can be terminated easily.
I think that, taken literally, I'd be 0/3 in the ABC system.
Either to cover a need for a project that won't last long term or to fill the demand for more fingers on keyboards right now.
Is that not how the US uses them? Then again UK programmers seem to earn much less than US programmers. Outside London it's like £50k for a senior dev ($70k?).
You can go check on any job site, indeed, cwjobs, whatever. CWJobs claim the average is up to £62k for London now, and that's of all dev jobs, not just senior ones:
https://www.cwjobs.co.uk/salary-checker/average-csharp-devel...
Not so sure I disagree with CA overall.
You're missing the most important word there. I'm honestly not sure which one is intended.
Factor in overtime, or the lack thereof, and you can make more or have far more work/life balance than FTs. That weekend app release? There's an extra $500-$1k that the FTs aren't getting. Company doesn't allow contractors to work over 40 hours for budgeting purposes? Leave at 5 everyday without anyone complaining.
They submitted a total cost of employee as part of their employment request to HR. Their bog standard expenditure for an employee sitting right next to me was 50k/yr higher than I was making (my 1099 rate was the official standard for the position and not negotiated). $15/hr less (given unofficial hour cap), but with good insurance (group rates are also lower for the same insurance compared to individual), bonuses, vacation, 401k, etc.
Most companies simply refuse to pay out the same for a contractor as they would for an employee.
A large programmer union could do wonders for the industry.
But, the FT senior developer spends a quarter of his/her time in meetings, is expected to be a "team player" in regards to internal politics, and can't do any side projects without running it by the business.
Both sides working 45 figure is kind of a fairy tale too. Having been on both sides, usually either FT or contractors are working all the extra hours. If it's open-ended contracts, then the FT are working many extra, unpaid hours and the contractors get a work/life balance (worth multiple $10k, IMHO). If it's short term contract, the contractors work 50+ hours a week, within the project window, make out like bandits, and go on to the next gig.
It's all preference. Neither side is objectively better.
This hasn't been my experience. Those games can just as easily involve whether or not to renew someone's contract, or whether to terminate it early.
- Those who aren't good enough to get a full time job.
- Those who are too good to settle for a full time job.
The two groups are treated quite differently.
The former are typically a group of second-class employees companies use as a way to "trial" someone before hiring them for real, or simply to skirt the requirements of employing someone full-time. They also tend to work for some shell company you've never heard of, at least on paper.
The latter tend to be older folks, and often experts in various fields. They also have little trouble finding another "gig" almost immediately after their current one dries up. These people are usually self-employed.
So in the end it worked out about the same.
If the law requires contractors to get the same benefits, etc., the result will be the contractors will get paid less. The ones I knew wanted the higher pay / no benefits circumstance, and they'd lose that option.
There was a very interesting NY Times article last fall about that issue. They contrasted janitors at Apple, who work for a contractor and have no prospects for advancement in Apple, and Xerox's janitors in the 1980s who were employees, and one of whom is now Xerox's CTO:
https://www.nytimes.com/2017/09/03/upshot/to-understand-risi...
To veer off on a tangent, I suspect it's connected with a new elitism in the U.S. What used to be the celebrated 'Land of Opportunity' where anyone could live the "American Dream' through hard work, regardless of where they started (even if very poor immigrants), is now a place where the children of the wealthy go to college, those of the working class are encouraged to go to trade school, and immigrants are more commonly discouraged.
The 'youths' want to go to college, and in a free country and a free market, it's believed that they know and decide their own best interests.
Businesses in fact highly value college education; they pay people with college degrees much more than people without them. The incomes of people without degrees has been stagnant for decades, and there's concern among economists that their job prospects will become more difficult due to automation. If it had reached a point of diminishing returns (really, small marginal benefit), then the wage differential would be small.
As I pointed out above, it's really economic discrimination: Education depends, more than anything, on family wealth. So the outcome of what the parent advocates is that the wealthy classes go to college and the lower classes don't get that opportunity. Usually it's wealthy people with college degrees that say college isn't needed; but tell them that their kids shouldn't go to college and you'll get a much different response.
> The percentage of Americans with college degrees has never been higher.
That's great. We want people to be better educated, more productive, and live better lives. That's the 'American Dream'. We don't want the economy stuck in the 1980s, but to move forward.
It also makes the economy more productive. For example, Silicon Valley can't get enough talented developers, yet the United States (and world) is filled with kids with no access to education, many of whom probably could fill that talent gap. We need more education. High skill, high-paying jobs will go where there are more highly educated workers; if the U.S. cuts college education, it will go elsewhere. New businesses and industries that we haven't yet imagined will arise when they have that resource of educated people.
Education also makes people healthier, better citizens, better parents, etc. HN celebrates knowledge; it's hard to suddenly discount it in this case.
> It's a disaster.
By what measure? The only disaster is that education is too expensive and not available to people without money.
...but many of us pass on full-time offers nearly constantly. It's not like contractors are just waiting for the day when they are "selected."
Given all the emphasis in hiring on avoiding “bad” hires at all costs ...
Make that no benefits. In my 35 years in the tech industry I've never seen a contractor that got benefits, since it's the primary reason contractors exist.
Let's not assume that because the cost to the employer goes up, they will drop all the former 'contractor' positions. Employee rates are based on what the market will bear, subject to law and regulation; they are not based on 'cost-minus' - cost to the employer, minus a profit. Using a very simple case of the cost and benefit: If the employer can hire you for $10/hr, they will, regardless of whether they make $20/hr or $200/hr from your labor; if the law increases your rate to $15, they still will employ you. Of course, if they only make $9/hr from your labor, they won't hire you at $10/hr in this simple theoretical case. Reality is more complex: They may be happy to absorb the loss for other reasons, such as completing a major project, pleasing an important client, acquiring or maintaining market share, developing talent, your compromising photos of the boss, etc.
It's similar to the mistake people make about pricing: They assume goods are priced at 'cost plus' - the seller's cost plus a profit - and that therefore if the seller's cost increases then the price must also (businesses encourage this misconception - 'if regulations increase our costs, then everyone will have to pay more!'). Really goods are priced based on what the market will bear. That is, goods are priced as high as possible (i.e., at the level which maximizes profit). If they can charge you $10,000 for an item costing them $100, they will. If they have to charge $50 for it, they will do that too; $50 is better than nothing. If their costs change, it doesn't change what the market will bear.
I'm not sure what you mean by that. Could you flesh it out? To me a "sunk cost" is something you've already paid for and can't get back - like your investment in that boat that sunk to the bottom of the ocean. Hiring is about future costs, not past ones.
I actually couldn't hire someone once because they required a contractor relationship.
My own familiarity with this (through family who have experienced it) is in the healthcare field, where new graduates who are hungry for experience have little leverage vs established employers, and don't push the issue of how they are incorrectly classified as contractors.
Their only alternative would be to report the misclassification to state employment authorities, but again, they are often not in a position to make that worthwhile.
But neither of those scenarios is really comparable to the ones low wage contract workers find themselves in.
In her case she was on an educational visa (with employment rights ) at the time of the contract to hire.
She had sought employment for months after completing her degree so was really not in the best position to negotiate.
Does anyone actually do "try before you buy" in California? It doesn't work in a hot job market, and the job market is currently hot.
Yes. It's called C2H - Contract to Hire.
Over 2,000 Tech Jobs in CA that are C2H on Dice.com https://www.dice.com/jobs/advancedResult.html?for_one=&for_a...
I said then yes, I'll do it for a set period of time at $250/hr, and it can't be canceled by either party until fruition.
To my surprise, they didn't like that offer. Contract to hire is a fucking joke.
The alternative is hire somebody for a few weeks of contract, and if they are good give them an offer. Note that I specified two weeks. One of my past bosses said he knew faster than the new guys co-workers: when he asked the rest of the team how the new guy was doing, if the guy was good on the 3rd day you could see the mental shift as the team realized the guy hadn't been on the team for years (even though he was asking the teammate who had come to ask when the new guy's computer would arrive). If the guy wasn't good there would be several weeks of he is "getting up to speed".
I think A & B would catch most film tv and theater professionals the gaffer gets told what lighting effect to go for also everyone on a show gets told when and where to show up on the call sheet.
I contract out work from my company. You know what I don't require? Them to come and work at my office from "core hours". I don't have a dress code. I only have specs on what they're creating and the tools, which they provide.
They bill per job and do it at their leisure as well.
Just like when I built homes, my contractors provided everything they needed and I provided materials. I scheduled them but they showed up whenever it fit in their schedule based off their other contract jobs.
They're also required to carry their own GL and Worker's Comp if I hire them or go through their own LLC/Corp.
You confusing say a brickie, sparks or a chippie who can use the same tools from job to job - with an it job where you might have to buy new software / hardware.
Just like if you hired someone to paint your fence, you do have control over how you want it (what color, for example), but not necessarily over how it gets done (if they end up tricking a bunch of other painters to do it because they say how fun it is).
But in theory I could make the same arguments for it contractors I am told what to achieve not exactly how to do it No?
In Germany also the legislation oftentimes is not competent. Many laws are made, that are without value, after they where on trial. So, at least in Germany, courts are oftentimes a second law maker, because they have to check, how all these rules fit together (in the best of all worlds, the legislation should do that beforehand).
Germany is built on a foundation called Civil Law [2]. In this system, judges are encouraged to uphold principles and rule on the specifics of a case, regardless of previous cases that may have found in some way or another. Just as with common law, I'm sure judges may consult precedents as they find useful, but they aren't bound to them, and are, I presume, much less likely to mention them in judgments as they are not anywhere near as relevant.
This also applies in a fairly obvious fashion to Hermel's post that is a sibling to what I'm replying to. In Civil Law, which Switzerland also operates under [3], instructing judges to imagine reasonable laws is a reasonable thing to do. In Common Law, judges just imagining laws to be the way they believe they should be strikes at the foundation of the system.
(Perhaps ironically, it's probably easier for Common Law courts to function as de facto legislatures precisely because of the respect for precedential law, despite the fact they are nominally not supposed to. A certain court can make a decision and apply some test like this, and it tends to spread around the country unless some legislatures take explicit action to prevent it. It can even spread between countries, because common law courts can look at other country's common law courts and consider their precedents as well, though more weakly than their own. By contrast, while a civil law judge at first seems to be taking a legislative role when they make some decision based on laws that essentially only exist in their head, they are binding the future far less and the decision carries less global weight, making it much harder to truly "legislate from the bench" in the way we complain about in the US. Second order effects can be pretty twisted!)
[1]: https://en.wikipedia.org/wiki/Common_law
[2]: https://en.wikipedia.org/wiki/Civil_law
[3]: https://en.wikipedia.org/wiki/Civil_law_(legal_system)#/medi...
Even while linking to Wikipedia articles, you manage to get the common law / civil law distinction almost completely backwards: the common law is a body of judge-made law resulting from judges acting as “de facto legislatures” (which is the source of the respect for precedent, as the prior decisions are themselves incorporated into law), whereas civil law is a system in which the law is strictly created by legislative bodies, and thus courts are expected to look exclusively to the acts of the legislature, and not prior court decisions.
Unfortunately for those in California, CA requires an $800/year minimum fee for a corporation. It’d be nice if these changes forced a change in that law.
(By the way, just to head off a common misconception: You cannot just “incorporate somewhere else” to avoid the $800 fee. If you are a California resident doing work in California, even if you have a “foreign corporation”—California’s term for corporations from other states—you must register it in California and be subject to the $800 fee.)
It makes a huge difference if you can retroactively change the terms of the original agreement (“because I wasn’t classified right”) and get the other party to have to pay you back for (half of) those taxes.
Source: I used to be a tax lawyer.
Else, when a software developer freelancer is working directly in a company with software developer employees, the criterion will be difficult to fulfill.
In Germany we have a similar situation, because we also have this discussion, who is an employee (for social security matters). One big criterion is remote work, but still many employers are holding back, since they fear to loose control over the contractor, when he can not look over his shoulder.
Who is really affected by this? Any concrete examples?
By the way, that’s really good for Uber drivers. If they had to be employees they would get paid less and couldn’t deduct many expenses
I don't know about the rest of them, but your information is totally wrong about UPS. The "delivery" people are most definitely employees. Union employees, Teamsters in fact. Which means that UPS doesn't get to push them around all that easily. But which also means that the relationship is occasionally more confrontational than it should be.
Half the time with FedEx you have no idea why a random truck is stopping to drop off a package. We also at my office always have to call them to do any pickup, the UPS guy just grabs outgoing when it delivers the incoming.
Which "FedEx" do you mean? That's the problem with them, there are multiple entities sharing the name.
FedEx Ground was an acquisition and re-branding. They operate using "independent business owners". Want to deliver packages? Buy a route!
I still remember the huge Microsoft settlement[1]. Well, huge for the time.
Employers want to commoditize the jobs they offer. It's in their best interest to be able to hire/fire with as little risk as possible. The dream for many companies would be "all employees are contractors" and no one gets benefits. Except, of course, management. They'll get huge salaries and great benefits. (I'm an officer of a 35 yr old corp.)
[1] https://www.nytimes.com/2000/12/13/business/technology-temp-...
How they expect to stem the flow of businesses moving out of the state while not honoring simple contracts is beyond me.
Can you explain why California is thriving when people incessantly predict the imminent collapse due to every employer moving out of state?
Please, tell me more about these jurisdictions that enforce void (not voidable, void) contracts.
I don't see a lot of productive progress being made on this question. Judges constantly try to apply conflicting standards of whether someone is "really" an employee, but you can't make progress on that question until you can measurably answer why you're asking that question to begin with.
For another context, take "is alcoholism really a disease?" If we don't want to be stuck in unproductive talking-past-each-other, we have to transform that into a more concrete query, like, "are alcoholics responsive to social pressure?" or "does the urge to drink stem from a chemical imbalance?"
Those questions, you can actually -- in principle -- make progress on. Maybe you find some chemical under which alcoholics stop drinking because it doesn't appeal to them anymore. Or maybe you find that shunning changes their behavior, and the appeal to "alcoholism being a disease" maps to a specific game-theoretic strategy.
Or maybe shunning just turns out to make alcoholics miserable and resort to more expensive, covert techniques to get their fix. Or maybe the evidence is perpetually ambiguous. But at least you can make progress on those questions.
What are the corresponding criteria for the question "is this Uber driver really an employee?" How would you know you got it wrong? What are you really optimizing for when you legislate a distinction between contractor and employee?
For example, let's say you proposed a new test A, under which every purchase of labor makes someone an employer and employee. You buy a haircut? Great, you need to send this amount to this fund to pay for their unemployment insurance. And you need to give them this notice about their rights as a worker. And you need to pay into this worker's comp fund.
Or let's say you proposed a test B under which the buyer is the sole decider of how to classify, and every employer/buyer in the world elects to classify the provider/worker as an employee, and screams in glee as they offload all the liability and expenses onto the worker. By what standard, concretely, do you know you erred?
It doesn't work to say "that's absurd". What's important is to say the specific desiderata that make that situation absurd.
I have yet to see someone propose a (satisfying) standard/desideratum to ground the employee/contractor distinction in law. The closest I've seen is "we want to make sure workers don't get oppressed" (or some equivalent expression), but that doesn't suffice -- there has to be some reason you don't go with the A test above. What is that?
Think beyond wage and hour. Customer #2 gets cut by scissors, suffering serious bodily injury. Who does she sue? The barber, sure. But these actions were performed during the course and scope of employment. So now (per 400+ years of common law) the employer — aka previous customer - is now on the hook for those damages.
I’d certainly never get my hair cut there. It might cost me $100,000.
Ok so change that law, but now you’re ditching a few centuries of agency law and getting exactly what in return? A system no more efficient than what it’s replacing.
That's exactly the reasoning I said doesn't work. You can't just say that a situation is "absurd". Why is it absurd? What's the standard so you can derive the boundaries?
>Customer #2 gets cut by scissors, suffering serious bodily injury. Who does she sue? The barber, sure. But these actions were performed during the course and scope of employment. So now (per 400+ years of common law) the employer — aka previous customer - is now on the hook for those damages.
No, Customer #2 would be a second employer.
>Ok so change that law, but now you’re ditching a few centuries of agency law and getting exactly what in return? A system no more efficient than what it’s replacing.
I don't know what that's responding to. I wasn't ditching anything. I was asking for what grounds the distinction.
Read the actual decision.[1] The discussion of this issue starts at page 62. The Court discusses why there should be a distinction, and why it needs to be less ambiguous than the "multifactor test".
The closest it comes to addressing my points is when it talks of “evading wage and hour” laws. But that’s my point: Why do you count it as “evading” anything when you buy labor from someone who offers it as a freelancer, and that rate is under the minimum? What desideratum does that violate? Why do you let anyone offer services, at all, in any capacity (including as a business) when they might earn less than minimum wage, or even negative amounts?
It is being abused though to offer full time jobs for reduced pay or for tax benefits to the company.
Working for less than minimum wage is against the law. Are you actually suggesting that minimum wage is a bad idea, and so of course the rest wouldn't hold up. In this case, a minimum wage is considered a premise of the entire decision.
I cannot see an issue about gifting people something. I do see an issue with allowing paid work at less than the legal minimum wage, which I expect is why this was framed as an evasion of the wage and hour laws.
To go very off topic, my quick reason for why minimum wage laws are desired is as follows (note I don't think any of this works as follows in real life, but this is the reasoning I can come up with):
We as a society do not actually want to subsidize businesses where they shunt the cost of their employees to the public but privatize the profits - i.e. if Walmart only "makes money" because the local governments have to pay 1/2 the employee wages in poverty avoiding benefits - we don't want Walmart to succeed. So we set a wage minimum in law where if you make that amount society thinks you wouldn't need welfare etc. It may also be seen as a moral value that an employee should make enough to survive at a job. I.e. we should treat employes "this good" in a developed country.
No, it's not. You can absolutely set up a proprietorship, and sell labor, such that the pre-tax proceeds per hour of labor are less than the minimum. That is legal. It's just not legal for an "employer" to be the payer of that income, hence begging the original question.
That's my whole point: why does this distinction exist?
It's pretty trivial to defend any tiny part of the system in isolation. The problem is to explain why you have this employer-contractor boundary. That needs more (as justified in my original comment) than "I don't want workers to be oppressed" or "I don't like businesses shunting costs onto the public".
These confused rulings are exactly what you expect in the absence of such a mooring. They can't give a reason why my rules A or B are absurd, except for whether they match some hard-to-parse guidelines.
Example: If the employer requires you to bring your own tools, that somehow makes you more of a contractor, even though that's a greater burden on the worker, but someone decided that such instances "feel" more like contractors. Exactly what confused governance and legislation look like.