Hacker News Reader

Comment by zaroth | Hacker News Reader

Discussing Uber and Lyft is boring because the companies are so reviled, but this bill is much bigger than Uber and Lyft.

It seems the ABC contracting test is pretty detrimental to any kind of contract hiring that is done in an area which is closely related to a company’s core business.

Software development contracting in particular seems like it would be particularly problematic under this test.

I contract out work all the time which I closely manage many aspects of how the work is done, and for work which is core to my business operations, and within my core competency.

Mostly this is to be able to quickly scale up development capacity during a project where there are isolated pieces that can be worked on concurrently. It’s often work that I could do, but for scheduling purposes, would rather hire out.

I’ve also done “micro-contracting” where I break out specific problems which I could eventually figure out a solution but it’s easier to find an expert who can spend 5 hours on it while I keep moving on other pieces of the puzzle.

What I’m doing seems like it’s exceptionally common, and because of how ABC test is a logical AND I’m not seeing the “escape hatch” where it wouldn’t be basically preventing software contracting work for software companies.

View on HN

A lot of people on HN seem to think that this bill mandates (a) full-time employees and (b) fully independent contractors without anything in-between.

There is such a thing as a temporary, part-time job (as an employee). See, e.g., every single Walmart ever. Most major fast food chains. Most retail stores during the holiday season. Etc.

The primary change is that companies will start having to handle payroll taxes for part-time workers rather than pushing these administrative costs onto the workers by claiming that the workers are actually their own businesses.

Temp workers and contractors are very different types of employees...

Yes, they are.

Temp workers are part-time employees that can be performing any task your business requires, including your primary business activity. While working for you, they aren't working for someone else (though they might be working for someone else when their shift ends for the day).

A contractor is someone with their own client base who handles a specific project that is not your primary business activity (though the project may support that activity). While working for you, they could be working for someone else as well (as long as they're not billing both clients for that time if the contractor bills on a period-basis).

These distinctions above are generally how the difference between employees and contractors are laid out internationally, and especially when dealing with cross-border worker classification issues. These distinctions have also been part of US jurisprudence for many decades, though they've only been formally or informally codified relatively recently.

There's an irony that laws set up to protect workers at the low end mess with workers at the high end. As a SW contractor, I never much cared about insurance/time off/sick leave/etc. and was well paid to not care.

From another article:

" b) is doing work that isn’t central to the company’s business, "

Bam. How many contractors lose their jobs from that sentence? Ridiculous.

a quick edit: Now that I think of it, does FTE imply an hourly rate? If so, how do you reconcile an Uber model of piecework with that? Perhaps they could simply rent out an Uber medallion.

Employees cannot be paid a fixed rate per deliverable. They must be paid an hourly rate, or be paid a fixed salary per time interval, regardless of the number of hours worked.

But the employer can mandate when and where an employee works. So, for example, they can require that you are on the road a certain number of high demand (surge) hours. They can also require that you respond to a call to pickup a specific passenger within a certain time period, etc.

So the result will be their algorithm will ensure the hourly rate they are paying a driver is covered in the long term by the rides they are serving, or they could simply fire that driver.

In a complex system, you could specify time slots which you would promise to be available, their system would determine a subset of those slots where they wanted to hire that driver which would work out to be profitable enough for them. Their system could suggest an alternate set of (partially overlapping) times to make a counter-offer of when they could hire you. If the driver didn't show up for work on the peak hours they really needed you enough times, the driver would be terminated.

I think hiring short-term contractors for a quick scale up is the practice most at risk. Let’s take an even more constrained role like customer support - say a company wants to hire more support reps over a period of busy sales like Christmas. Since these people are heavily directed and are just adding capacity to the existing business, it seems likely that would fail the ABC test.

So what are companies going to do in this case? Well, California is an at-will employment state, so maybe they’ll get really good at onboarding and then hire and fire FTEs within one month to cover the busy season.

That doesn’t seem desirable to workers either.

There are temporary or limited term part-time jobs, though. There is no real need to hire and then fire folks. Simply hire as a seasonal employee. This is what retailers do around Christmas, for example. Sometimes they'll hire an employees a permanent employee afterwards, but not always. There are folks that take these jobs year after year - both around holidays and during summer breaks. Sometimes this isn't ideal and sometimes it is pretty perfect for the employee.

But these are not contractors. They are employees. The company pays all of the applicable taxes and handles payroll. The company is responsible for workplace injuries and so on. I don't see where this is really a big issue - and hiring these folks as contractors seems more a thing to take advantage of folks.

I think if you hire another software engineer to help you it could potentially fail criteria C: "The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.".

Looking at https://www.thebalancesmb.com/what-is-the-abc-test-for-indep... it appears the intent is to handle trades like construction subcontracting, which is very similar to what you want to do.

Yes, that is one of the three requirements. If it was logical "OR" this wouldn't be an issue, but you need to satisfy all 3 criteria, not just one.

In general you'll very likely have to let go of the "closely control" piece to be able to contract the kind of work you refer to out safely. Contracting to experts would probably be pretty safe. Note that nothing will happen unless someone complains but it's a business risk you're taking.

The reason for these types of regulations is basically that society benefits from people having secure jobs and benefits and the security translates into higher investment back into economy (ie people save, buy houses etc)

I'd suggest to consult a lawyer.

Contractors send 1099 they receive from a company to FTB. They don't need to complain.

This means that a bootstrapped start-up cannot temporarily hire a graphics designer or a coder in California anymore, without the budget to make him an employee. But non-VC entrepreneurship has been hardly possible here for other reasons: building and rent control regulations driving the housing and office space costs. Since the 2006's "web2.0", progressive California regulators are at it for real, pitching entrepreneurship as an enemy of labor: it's no longer a place for small business and non-VC startups. Those have been fleeing.

This means that a bootstrapped start-up cannot temporarily hire a graphics designer or a coder in California anymore, without the budget to make him an employee.

This is so completely wrong.

You know what the difference between a temporary, part-time employee and an independent contractor is, from the business' financial point of view? They have to pay payroll taxes (and in some states unemployment insurance levies) for the part-time worker instead of forcing the worker to handle those costs themselves. And that's it. They aren't required to provide benefits or anything else until they exceed a threshold size in terms of employees (generally 50) or annual income (usually >$10 million/year).

In your specific example, the startup could hire both the designer and the coder as employees or as contractors, so long as both were allowed to work on other gigs while they were temporarily contracting with you and your startup wasn't in the business of graphics design or software. (If your business is a software business, the analysis is more granular: is the coder working on the revenue-generating part of your software, or on a supporting part of the software like the networking code?)

Since the 2006's "web2.0", progressive California regulators are at it for real, pitching entrepreneurship as an enemy of labor: it's no longer a place for small business and non-VC startups. Those have been fleeing.

California went from being the world's 8th largest economy to the world's 5th largest economy over this time. Has lead the nation in small business growth for the past decade. California's regulations basically just filter out all of the fake businesses that don't have enough backing to at least attempt existence.

They have to pay payroll tax and administer payroll. I ran a bootstrapped business, that initially had several contractors, till a day I could afford to replace (in several cases, promote) them to employees, so I know this intimately. Additionally, there are payroll costs and the accounting costs, and the payroll administration burden. For a tiny growing business with no outside capital it matters more than you know.

The 5th largest economy figures come from semi monopolies like Google and Facebook. In the beginning, they get a VC investment, a comfortable office, a payroll admin and Wilson and Sonsini from day one. In the meantime, San Francisco restaurants cannot afford cooks.

I think the delta between "contractor" and "part-time or temporary employee" is a bit steeper than you are claiming.

The tax issues are not minor, to begin with. If I have no property and no employees in a given State, I likely do not pay all sorts of taxes to that state which I otherwise might have to. I likely do not even file an income tax return with that State. As soon as I have an employee living in a State, then I definitely have to file taxes there. I also have to register with their labor department, there are probably state-specific labor laws which I could run afoul of, maybe state-specific postings and notices, etc. It's not simply a matter of the payroll company making the correct deductions.

I have to follow a different hiring practice to hire an employee than a contractor. There are likely to be more requirements on how I must make the job posting, and how I can conduct the interview process. There are additional government forms that must be filled out during the hiring process, and after the candidate is hired. The legal rights of a temporary employee are different from the legal rights of a contractor in important ways that I might not fully understand.

Once an employee is hired, I either have to pay them hourly, or a guaranteed monthly salary. I cannot offer to pay the employee a fixed amount for a certain deliverable. I have to pay the employee on a set time schedule, and not based on deliverables. I cannot withhold payment based on deliverables not being met.

I will have to update my worker's compensation policy. Depending on the size of my company and the state, I may have to enroll this person (and their family) to provide health benefits, life insurance, disability, etc. Also, certain states impose family and medical leave requirements on employees which would not apply to contractors. Federal discrimination regulations only apply to employees. I'm sure the list goes on and on...

And here I was, just wanting to get some help mocking up this new UI screen, or porting some code from one language to another, or making a new logo for my site, or updating the CSS to work with latest device X, or...

Over the last decade I've spent mid-6-figures on sites from Rent-a-Coder to Upwork and it's been a game changer for being able to quickly tackle big problems which arise due to a new R&D effort, or closing a new customer contract which our current feature set doesn't quite support, or just getting logos and wireframes because I'm not a designer and don't have nearly enough work to justify hiring one.

In short, contractors are super fucking important, and the "ABC" test seems to fundamentally mischaracterize a lot of tried and true contract work. Someone that I am hiring to perform a specific task, who is working remotely, who I will not be on-boarding, who will not be working closely with many employees, and who is paid upon completion of that task and then goes away, should be a contractor, even if they are doing work that is central to my business, and even if I closely monitor or specify how the work is to be completed.

Someone that I am hiring to perform a specific task, who is working remotely, who I will not be on-boarding, who will not be working closely with many employees, and who is paid upon completion of that task and then goes away, should be a contractor, even if they are doing work that is central to my business, and even if I closely monitor or specify how the work is to be completed.

Right, they would probably be treated as a contractor under the ABC test and the new law.

You're hung up on the "central to business" part of the test without paying attention to the nuance. Laws aren't black and white, they're many shades of grey.

If you're in the business of doing X, say programming widgets, then if you hire someone to do X (i.e, program widgets) for you, then that person will be an employee for all purposes of this law. Because they should be. They're literally doing your business activity for you, and there are plenty of legal reasons that you should be liable for their work--you're passing off their work as your own to the end customer.

OTOH, if you hire a contractor to program your back end, that guy wouldn't become an employee under the test, because you're not in the business of programming back ends. That back end may still be central to your business, but it's not your primary business activity (i.e., it's not your revenue-generating activity).

even if I closely monitor or specify how the work is to be completed.

This is the most misunderstood part of the ABC test. The ABC test doesn't require that the contractors have free reign to do whatever. It simply provides that a contractor should have free reign to accomplish the work unless the manner in which the project is completed is a relevant part of the contractual requirements. For example, specifying that a contractor program your backend in Node, with spaces instead of tabs, use git, and make use of specific AWS APIs, to match your standard coding practices in the rest of the project would be fine. Another example: telling a designer they must use Illustrator and specific design tools within Illustrator to match the processes or products of other designer work is also fine.

Monitoring work for purposes of quality assurance or quality control is also acceptable under the ABC test and is indeed even expected by the courts--not conducting QA/QC has been used as a factor indicating that the worker is an employee.

> OTOH, if you hire a contractor to program your back end, that guy wouldn't become an employee under the test, because you're not in the business of programming back ends.

I have zero faith in the courts’ ability to distinguish this. In the case of Uber, their business is providing the back-end, and their revenue is a commission for doing all the back-end work. They are not in the business of driving cars — no Uber employee drives a car — and yet this bill would make the car drivers employees.

Similarly, I would have to expect someone working on any instrumental part of the product which generates revenue will fail the ABC Test.

If my product is a web API and I hire contractors to port my library to 17 different languages, pretty sure that is failing the ABC test.

If my product is food ordering, and I hire contractors to key in local restaurants’ menus into my database...

"I have zero faith in the courts’ ability to distinguish this. In the case of Uber, their business is providing the back-end, and their revenue is a commission for doing all the back-end work. They are not in the business of driving cars — no Uber employee drives a car — and yet this bill would make the car drivers employees."

I find this an interesting interpretation of how Uber defines their business. If Uber only provided the back-end for their work, the common consumer wouldn't know about Uber, you would know the driver directly and reach a deal with the driver directly. I would relate this most closely to things like in China where you can pay via WeChat or elsewhere with Square where they just facilitate the transfer of funds. They would be a distant party to the work actually being done.

Instead the average consumer knows Uber, goes to Uber with the goal of fulfilling their need of getting personal transport door-to-door, and the act is delivered by their contracted driver. They expect Uber to handle the complaint escalations, money handling, route planning, and basically everything related to that goal. If Uber provided only backend you could create your own frontend/theme to Uber for your local town (like you would a wordpress for a SMB) and create a business around just that. While there may be some back and forth on interpretation I think the real test is that based on all those steps that have to happen if the ride itself was omitted from all the services they created would Uber still be able to function and the answer is no which would make it part of the "usual course of the hiring entity's business." If Uber (not counting their other lines of business) didn't actually arrange rides for people, they aren't a company providing a marketable service anymore.

If the CSS was omitted from my website it wouldn’t function very well either.... But I still think I should be able to hire a web designer on a contract basis to setup my CSS.

This is exactly why I think the ABC test is so disingenuous. It papers over the whole reason contracts are great — providing a single well defined service for a fixed price, and then moving on with life without worrying about a million regulations and forms and paperwork and insurance and hiring practices and workplace blahbity blah.

What do you mean “society” benefits from people having secure jobs? The people with the jobs are the only ones that benefit.

But that’s only as long as companies have customers.

Economic growth usually depends on (1) increase in consumption (2) increase in investment in long term assets (housing, markets) which lowers cost of borrowing for new businesses.

Both happen more when people have somewhat secure earnings.

> Mostly this is to be able to quickly scale up development capacity during a project where there are isolated pieces that can be worked on concurrently.

Hasn't this been proven to rarely ever actually work? I've been on multiple corporate projects with strict deadlines / late penalties approaching where management from every angle wanted to "just throw as many contractor bodies as possible" at the problem. How did we get the product shipped without missing the deadline? A handful of really high level, non-contractor full time engineers swooped in and saved the day.

Another use case at the same company:

Stuff is blowing up all of the time in prod. Who is around to fix it? Contractors who have no clue what is going on and only make the code worse. The stuff is blowing up in prod in the first place because of pure lack of competency.

That's my contractor experience at least. Probably worked with 1-2 good contractors out of 100-200. Most couldn't pass FizzBuzz, knew nothing about the concept of consistent style / linting. $75/hr+ to just got tossed from project to project/fire to fire, on average making things worse.

I see your logical out being close to (IANAL):

1. with a contractor you are creating a contract around the deliverables and the time frame for those deliverables. You do not have the ability to reach into the contractor and have any say in how the work gets done (e.g. can Bob work on this task Tuesday instead of Thursday even though it's not related to interfacing with me). To me this satisfies the "person is free from the control and direction of the hiring entity in connection with the performance of the work" part.

2. "the person performs work that is outside the usual course of the hiring entity’s business" is the tricky one, but I think it more has to do of what you explain your business to be. If you are running a SaaS platform and enter into a contract with someone who provides software development expertise the relationship between your business and the contractor is different. In the cleaner case in one of the other trajectories there is a difference between someone providing supplemental cleaning services for existing cleaning businesses and someone who provides cleaning services. The relation is probably distinct enough to be interpreted this way, as someone pursuing to sell their capacity to someone else is different than a business acquiring a contractor to deliver the goals of their business.

In the Uber case a driver who works for Uber to deliver their core business is different than a company formed to provide taxi service capacity to other companies who are running a taxi service.

3. Then the last clause "the person is customarily engaged in an independently established trade, occupation or business" I think for software development this is easy to say when someone is trying to demonstrate themselves as a contractor vs. someone who is 'hired' as a contractor.

I think if you are worried about really the first case that is just something that should enter your contract language as a deliverable of the other entity. The relation between you and the entity you are contracting is different than discussions with the downstream contractors. Since the smaller contractors inevitably have this end up being the same person this could be confusing. Based on the writing of this rule I feel like you would be able to ask the entity for updates, information related to the deliverables, schedule meetings, and so on. You may be able to ask for accurate accounting for hours worked but you can't have any say when those hours were because the entity would be billing you the number of hours.

For the second case I think you would be fine if you were soliciting someone to contract some hours to work for you because the other person would be representing themselves as a consultant who has hours to sell. You would be buying hours of work in expertise X which is different than your goal of selling Y. If the relationships were built this way then I think this satisfies the third clause as well as because then this contractor would be in an independent business who could satisfy the terms of a contract between entities.

I feel like as long as you treat the other party as a business and not a person, and the other party understands this you are able to operate normally. You may have to emphasize this nature more to be compliant with this rule and focus on milestones and deliverables and contractual obligations (it is still fair to say to enter a contract that says it has to be delivered by 2pm Friday), but you have to keep your hands off defining hours to be available/hours on call/punch in and punch out times, etc. I would stick with buying and selling hours of work for some contractual outcome.

>"the person performs work that is outside the usual course of the hiring entity’s business" is the tricky one, but I think it more has to do of what you explain your business to be. If you are running a SaaS platform and enter into a contract with someone who provides software development expertise the relationship between your business and the contractor is different.

This argument seems too general. One way of looking at Uber is that it's a taxi service. Therefore, Uber and an Uber drivers are engaged in the same line of business. Another way of looking at Uber is that it's a platform to connect drivers and passengers. Therefore, Uber and Uber drivers are engaged in different kinds of business.

If you need to explain what your business is in a particular way, then you're on thin ice.

I'm okay with this.

Software development contracting, as it is right now, is intensely problematic at pretty much every level.

Hiring closely-managed contractors to work on-prem basically creates an underclass in the industry: they're just like employees, except they get no insurance or PTO, and they're excluded from most company functions, and it looks bad on a resume because they're rarely at one company for long. Hell, they tend to get treated differently because they typically wear guest badges instead of employee badges. This is simply harmful, and while a lot of companies may feel like they're financially pressured into doing so, society has a vested interest in stopping this practice.

On the other hand, hiring a remote consulting company where you give them a requirements sheet and say "do your thing and get back to me with something that fulfills this"—i.e., actual, proper contractors—inevitably turns into a nightmare. I've seen these consultants go incommunicado for weeks at a time, find every excuse to push deadlines back, and when they do turn something in, they turn in a pile of awful code that needs to be rewritten by the actual engineering staff. My experience with these people has lead me to start referring to them as "dairy farmers" because they just milk their clients, and every one of my colleagues who I've introduced the term to has fallen in love with it.

Honestly, I think software engineering contracting should just go away. Either you create and exploit an underclass or you get screwed by dairy farmers.

The only way I can see to save this situation is to legally delineate "temp employees" as a class. Temps would be employees in every way except that they have a fixed term of employment stated up front (where "fixed" can mean either a set amount of time or until a specified project is delivered). They would have benefits and PTO, just like other employees. They would be employees for the purposes of who can attend company events, what kind of badges they wear, etc. It still wouldn't be perfect because the short length of employment would look bad on a resume, but it's a far cry better than the current situation. And if it costs companies more to hire them, then that's just the cost of doing business in a society. I've seen the same arguments used to demean basic dignities such as minimum wage, overtime laws, mandatory sick leave, paid vacation time, etc., and they're all spurious.

In my case, the situation is hiring a remote contractor (an individual contributor, not a company) to perform a well defined task at a fixed price within a specified timeframe.

The job will be closely monitored and controlled to ensure progress is being made, and the job is being done in a way that the final product can be successfully integrated into the code base. The work is central to the company, but may be outside an area of expertise, or an added work item beyond the scheduled capacity.

In otherwords... pretty much any software-related contracted task, done by any bootstrapped startup, ever.

I worked as a contractor for many years, and the opposite was true. We were brought in to help the in house devs improve their systems and frankly clean up their code.

In a lot of places, the hiring company had counterproductive requirements placed on their devs, stuff like mandatory CS degree, mandatory clock in and out time, and not paying enough to get the best talent. We were able to come in and not subject to those requirements, do better work.

It sounds like you've worked at some bad companies who were not able to make effective use of contractors, and due to this limited experience you are advocating for a law which would make many mutually beneficial business relationships illegal. You want the state to come in and use an extremely blunt law to help you grind an axe about your boss or something.

> to help you grind an axe about your boss or something.

I like my boss just fine. Please refrain from personal swipes on Hacker News.

Sorry, you’re right. I meant to say that some employees who have had a bad experience with bad management of contractors at their workplace want the state to come in with a really blunt law that harms contractors who have nothing to do with their badly managed workplace. This strikes me as short sighted and unnecessary.

Reply on news.ycombinator.com