California passes bill that classifies gig economy workers as employees

It’s a literal chilling action on small business.

This attitute is exactly why those laws are needed. As a business owner if you want to hire some other human being to work for your company then it should be your natural instinct that wants you to learn everything that makes the life of that other human being easy to work for you, but because you have no intrinsic interest in actually educating yourself what someone might need if they work for you, that is why you have to be forced into learning that by law.

It's sad that all you care about is someone getting your work done, because it's still a human being and that legislation is there for a reason.

So yes, you have to fill out 5 forms, and write 4 checks, every year for withheld taxes.

But none of this qualifies for “it’s sad, it’s getting hard to be a small business”. They’re just things everyone in the US has been legally obligated to do for part time employees for an exceedingly long time.

So I don’t get the tone of this thread.

There are dozens of other major competing payroll services providers.

Why do people on HN expect others to learn PC or Internet security but themselves throw in the towel trying to learn relatively simple tasks?

Now, maybe you'll argue that these are all steps that the government should be doing instead of the employer. And I agree, but they're done this way because there's a whole political aisle in this country dedicated to the proposition that the government shouldn't ever do anything. So someone has to do it, and in our scheme it's the employer.

This is, to me, a very puzzling take. If you hire a contractor, you don't direct how they do the job, only what the job output is like. Hourly contractors are certainly a thing.

> This means a W2 instead of a 1099 [...]

I'm a freelance developer in NY and this isn't the case. When someone requests me to do work for them they tell me what they want done, we scope out the project and then I either bill them by the hour or by the project depending on what's going on. Sometimes I work 50 hours a week on that project, sometimes 5.

But in all cases, they send me a 1099 at the end of the year. I might be considered some type of contractor in their software since most of the companies I work for auto-bill me through some software but in no case have I ever been declared as a W2 employee. Everything you wrote is true if they were a W2 employee, but that means being officially hired and defined as a full time employee.

Also I've paid out a lot of people for contract work as a freelancer and my accountant said it's no problem. I just give the numbers and he provides me the 1099 to send out. It's been working like this without issues for years.

This is partly why freelance or contract workers need to and can get away with charging more per hour. They get no perks of being an employee. Health care is super expensive and we essentially pay double the social security taxes since we're both our own employer and employee. There's also no free lunches or other employee status perks like matching retirement funds, etc..

But on the flip side, getting hired as a freelancer is a huge win for business owners because now they don't mind paying higher rates for a freelancer since they are off the hook to provide all of those W2 benefits and also avoid paying a consistent salary even if there's not much work to do (typical scenario where you're clocking 8 hours a day but only 2 of those hours are productive things). A freelancer might get 5 productive hours in for that day, charge for 5 hours and after a week they clocked 25 hours but a salary worker would have clocked 40 and was productive for less than half (not due to laziness but there's just not enough "real" work to do).

After factoring in everything, if the freelancer is technically 4x or even 5x the salary worker's hourly rate the business still comes out ahead.

Definitely, Definitely get a service there that knows how to handle all of the fine details.

>To determine whether an individual is an employee or an independent contractor under the common-law, the relationship of the worker and the business must be examined. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered.

>Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. These facts are discussed next.

>Behavioral control.

>Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of:

>Instructions that the business gives to the worker.

>An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work.

> - When and where to do the work.

> - What tools or equipment to use.

> - What workers to hire or to assist with the work.

> - Where to purchase supplies and services.

> - What work must be performed by a specified individual.

> - What order or sequence to follow.

>The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

>Training that the business gives to the worker.

>An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.

>Financial control.

>Facts that show whether the business has a right to control the business aspects of the worker's job include:

>The extent to which the worker has unreimbursed business expenses.

>Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer.

>The extent of the worker's investment.

>An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. However, a significant investment isn't necessary for independent contractor status.

>The extent to which the worker makes his or her services available to the relevant market.

>An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.

>How the business pays the worker.

>An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is often paid a flat fee or on a time and materials basis for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.

>The extent to which the worker can realize a profit or loss.

>An independent contractor can make a profit or loss.

>Type of relationship.

>Facts that show the parties' type of relationship include:

> - Written contracts describing the relationship the parties intended to create.

> - Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.

> - The permanency of the relationship. If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship.

> - The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of your regular business activity, it is more likely that you’ll have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.

>IRS help.

>If you want the IRS to determine whether or not a worker is an employee, file Form SS-8 with the IRS.

If you don't opt in to be scheduled you may be lower on the priority list and not have as many rides, but your flexibility still is in your own hands.

It would give incentive on the individual to want to opt in for the hours at the loss of personal freedom if that is what they want to choose.

This is such a weird response. Like Uber would institute some schedule out of spite, and why even.

I think, really, progress often comes when a side of a contested issue gets it two ways.

Which of course, I don't mean that one side getting it both ways is always progress, just that it's not a real argument.

- Setup incentives (e.g. bonuses) so that drivers get paid better after they have offset the overhead costs for a month. Perhaps this could be setup as a sliding scale or threshold system.

- Reward (but do not mandate) drivers for scheduling certain times/dates in advance (e.g. to optimize driver supply)

Uhhh... nearly every other country other than the US has had some form of national health service for decades and they spend less on healthcare per capita for comparable quality.

What you're spouting is nonsense.

If anything there is more changing, and stricter controls on (if you don't include departments like defense)

- government projects often have multi-year funding commitments legally bound by legislation; virtually no private enterprises have such guaranteed runways

- goals of government projects are often not "survive then maximize profit at all costs"; in fact, the idea behind infrastructure projects is for extreme long term payoffs, virtually impossible for from-scratch private projects due to lack of capital whereas .gov projects don't have the survival component

- because of things like infrastructure and overhead, there is evidence that public utilities with monopoly-like properties make more sense than rampant theoretical capitalism (imagine 100 sewer companies with 100 sets of pipes, ...)

One thing that is easier to evaluate is the cost of delivering equivalent care - the US system turns out to be quite inefficient that way, which implies the potential for significant cost savings at least.

You're likely paying something similar whether you realize it or not. When I quit my job the COBRA cost of the insurance was like $600 or $700/month. It's just that your employer is hiding that cost from you and giving you "free" medical insurance. And when you quit your job, you lose your medical insurance after 6 months. That means you lose access to your doctor and you may have to change who you see. Sometimes the new doctor is way worse, and there is a very real cost to you in terms of their standard of care.

So it's pretty disingenuous to argue that this would be a new tax. And making it illegal for employers to offer health insurance while also expanding Medicaid to all Americans would actually remove a major barrier to quitting your job and EG starting a company or working for a small company.

I guess what you mostly get is a very expensive military.

This is not good, it distorts the market too much. Look at the negotiating power Spotify and Pandora have over musicians. Pandora negotiates rock-bottom prices with musicians on behalf of its consumers and the consumers think it's great because low prices. Long-term you've decreased compensation for becoming a musician, sound engineer, etc. and harmed the entire music ecosystem.

It's a trade-off between clear short-term gains and diffuse long-term costs.

This is kind of a pointless question, because the answer is complex and includes things like 'gerrymandering' and 'vote suppression', but it's still a fact that many elected representatives from both parties actively fight public health care.

If Uber deals with many companies, they can just reduce demand at the company with the bad driver and increase demand at another one. The company with the bad driver can then retrench him, saying they need to cut someone.

(Disclaimer, I know very little about Uber and the US and it may not work for them specifically. But the idea certainly applies to other companies)

Believe it or not, they did think of issues like this when drafting the law. Especially since almost all of these other issues brought up in the comments are decades old and already addressed by existing labor laws.

When I look at any market where the labor code is excessively protective, I see high unemployment rates specially among the young - Brazil, Spain, France[3]... I don't know about causation but clearly there is a correlation between employee over-protection and unemployment rates. I think it is the law of unintended consequences[4] in action: the legislator intention was good (protecting employee) but the net result is negative.

[1] https://www.jonesday.com/en/insights/2017/12/brazilian-labor...

[2] https://www.capital-ges.com/an-insider-view-of-the-brazilian...

[3] https://countryeconomy.com/unemployment

[4] https://en.wikipedia.org/wiki/Unintended_consequences

The answer to this is to form a bigger union so that only the bigger contracting companies can survive, and then have high-paid union executives who can negotiate large industry-wide contracts between employer and labor provider that provide some minimal level of protections but largely protect the status quo.

Then, those in the employer camp can donate to conservative causes complaining about unions and regulation, and those in the labor provider camp can donate to progressive causes complaining about evil corporations and lack of worker rights.

From here, the leaders in the two factions will variously ping pong and vacillate and make various and sundry unfruitful negotiations while taking the advice from various lobbyists about how they might improve the state of affairs and generally enrich themselves through back channel dealings with their benefactors from either camp.

The federal minimum wage is $7.25/hr. But certain cities are much higher, for example New York City is $15.00. In San Francisco, it’s $15.59.

Also worth mentioning that most of these averages are not taken from drivers working full-time (40 hours per week). So while they may be able to make near minimum wage on an hourly basis, they may not be able to achieve that hourly rate for a full 40 hours per week due to fluctuating demand for rides.

[1] https://www.ridester.com/how-much-do-uber-drivers-make

Once the ride starts with a paying client in the car, the hourly earnings are easily above minimum wage.

But what about the time spent logged into the app waiting for a ride? If you take a standpoint that's friendly to Uber, that is not billable time - the driver could potentially be working in other capacity (including doing gigs for direct and indirect competitors, like Lyft, Postmates, TaskRabbit, etc.) If you take a standpoint that's employee-friendly, this is similar to a store register clerk being by the register with no customers in the store - they're still present to perform their duties when necessary and therefore must be compensated.

How do you factor in the car related expenses? And what about depreciation and other expenses beyond the direct out of pocket costs?

It is certainly possible to spend more than 8 hours trying to get rides, and end up with less than 8 hours worth of minimum wage pay after subtracting vehicle costs.

Looks like the final changes to the code exempt doctors, insurance brokers, securities brokers, and sales people under certain conditions. Far less of a carve-out than I was expecting.

It takes serious mental gymnastics to say a driver is not simply an employee of the company, in terms of operational workflow. Drivers aren’t going off and figuring out everything (or even hardly anything) about giving rides at their own discretion, or even just with minor intervention from a central dispatch. The whole thing is constantly controlled in lock step by the central dispatch, and Uber, Lyft, etc., employ data scientists and other experts specifically to make it more centrally coordinated based on data.

Frankly the only thing the driver controls is the financial risk of the car itself and clocking in / clocking out overall (though this is also manipulated with incentives).

However companies like Airbnb (hospitality) and Uber (ride sharing) will be able to hire programmers as contractors because writing software is not main source of income for those firms.

This seems to be saying the same thing: https://smallbusiness.chron.com/true-owner-llc-cannot-w2-inc...

HMRC provide this tool to determine employment status:

https://www.gov.uk/guidance/check-employment-status-for-tax

Could uber work around this by having everyone form their own LLC to be an uber driver, and making that process painless for people? (or making it painful and not caring about the long term ramifications)

I.e., Uber could not outsource driving if it calls itself a transportation company, but it could outsource accounting functions.

For example a Software Developer can't start a professional corporation in California like a lawyer, architect, civil engineer, accountant etc...

It's a proffesional level job, but reconisation usually means being a member of some sort of proffesional body - no idea what the software one of those would be?

The items are already part of California's contract law well before this current gig economy bill.

California classifies 'independent contractor' as [1]:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;

2. Whether or not the work is a part of the regular business of the principal or alleged employer;

3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;

4. The alleged employee's investment in the equipment or materials required by his or her task or his or her employment of helpers;

5. Whether the service rendered requires a special skill;

6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

7. The alleged employee's opportunity for profit or loss depending on his or her managerial skill;

8. The length of time for which the services are to be performed;

9. The degree of permanence of the working relationship;

10. The method of payment, whether by time or by the job; and

11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

The key line for software developers who are independent contractors is "Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;"

Contractors that work in a home office, using their skills to bring to a company for a project, at their own place, time and tools, that is an independent contractor.

It could be argued that drivers that own their cars, that can choose to accept or deny a particular task, without it hurting their competitive rating, could be seen as an 'independent contractor'.

I think the gig economy bill from OP is targeting known companies that are taking advantage of this by wanting 'independent contractors' that they can schedule and dictate their day and use metrics against them when they aren't available at the time. They should pay people as employees if they need people available then have contractors fill in when needed. This will probably lead to some fulltime Uber/Lyft and the rest floaters that can be like the current gig setup.

[1] https://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm

What if the consultant is forced to attend every single meeting the client (via PM/other manager) decides to schedule? That seems to violate the spirit of "control over performance" part of it.

Curious because it is recently relevant to me..

I'm confused. You seem to be applying (B) to the contractor somehow, where my reading is that it applies to the company doing the contracting. It doesn't matter what the contractor is doing; if a company makes widgets, they can't hire a contractor to make widgets. It doesn't matter if the widgets are a different color or if the contractor only ever makes widgets for any given company for a few months at a time.

There just really isn't that much demand for a $20 2-mile ride in the city. Uber has show that there is a HUGE demand for the same trip at $4.

This assumes gig companies haven’t exhausted their runway by then. Humorously, Uber and Lyft thought they might extinguish taxis if they waited them out long enough, and then the California government did the same to them.

If workers in this field want to call themselves "software engineers" and gain the benefits of a professional title, like lawyers and architects, they're going to have to start following the other practices of professional fields. Just because a college dropout makes a popular webpage that sells a lot of advertising, that does not necessarily make him an "engineer".

In that case, C is irrelevant because you've already failed B AFAICT. This law makes it so that it's simply not possible for a software company to contract out software jobs to individuals. It has to either contract the software to another company, or do the job in house with W2 employees.

C, if my reading is correct, means that (ignoring licensing issues) you can't contract a carpenter to fix your plumbing.

They can't be "fired", since they were never properly hired in the first place! They were never regarded as employees. That's exactly what this legislation is setting out to change!

I think it is possible that we will need a new paradigm for society, since jobs are a core aspect of the current one.

I look forward to day when corporations support universal health care from purely selfish grounds: if government takes care of employee's health, companies won't have to deal with it, or worry whether driver crosses the threshold of working over 30 hours a week.

You just hit the nail on the head. The real problem is that California is grossly under-represented in government, thanks to the founding fathers and gerrymandering. We have to slap together these hacks because otherwise we would wait centuries to get any real change out of the Fed.

As for "USA's democracy", screw the USA and its' democracy. As a Californian, I care about California's democracy, not the GOP's federalist plutocracy.

Republikans look at California as a rich man to mug who won't fight back. These laws are how we fight back. The USA needs us, we don't need them.

As for immigration, the main issue that is that many California families are a mix of American citizens and illegal aliens that have lived here for decades

It depends on the country of origin, but for many, moving between EU countries is about as moving between states is now. There's some bureaucracy to deal with, but it's not like moving between states in the US is hassle free. Most US states require immigrants from other states get a local drivers license and local car registration, which requires multiple proofs of residence. Don't forget the nightmare of having to deal with two states' taxes (where applicable).

Ironically, it came about because of wage freezes imposed by the government during WW2. Employers had to find something to offer to attract workers, and employer-paid insurance did the trick.

The trap, though, was that employer paid insurance was paid with pre-tax dollars, while if you bought it yourself you'd pay in post-tax dollars, making it far more expensive.

This, 100%. It wouldn't solve everything, but it'd be a huge positive step to roll back tax incentives that encourage this.

Only if they are rich enough to post a rather large bond.

Most of the policies are high-deductible, which means you’ll end up paying for the “scratches and sniffles” yourself but have a per-year maximum-out-of-pocket that can be planned for.

It’s not perfect but it at least provides an option whereas before if you had any non-trivial pre-existing condition you couldn’t find any insurance at all.

You can't be serious. There is a housing affordability crisis throughout the first world.

Housing and food are rights. They should indeed be funded by government, through comprehensive social welfare, and in the case of housing, publicly owned housing.

The people lauding the wonderful beautified “universal healthcare” (which, btw, they lied to you about never wanting to implement during pre-Obama care con job that made the Health sector rich and the middle class poorer) do t ever actually account all the costs when discussing it, and I will just assume you are doing the same from a point of ignorance, and not intentional deception.

Here is a representative example of a wonderful splendrous worker with universal healthcare in Europe.

1), as surveys here too show, for the same job, you’ll be making about 50-75% the salary of an American equivalent (see following points).

2) Your tax burden on that immensely lower income will be approaching 30% effective income tax (FYI, e.g., the 42% tax rat starts applying at €55,000, just for a reference point … and no, that is not a typo)

3) on that lower income and higher taxes amount, you then get to pay huge retirement taxes too, on the order of effectively approaching 20%, with heart wrenching and soul sucking outcomes when you see the “pension” people are given after a life of paying into an utterly incompetent and failed retirement system. For reference, think of paying into a retirement system at going on 20% of your income and then getting about 1/4 of your salary to live off in “retirement”. It’s sad and sick and immoral. If people had been able to simply invest their own money in a global fund, they would probably be swimming in money in retirement, but instead they were pillaged and plundered in order to give them a pittance in “retirement”. It’s really a morally bankrupted and depraved system.

4) so now that we’ve reduced your already lower income by around 50% from taxes and a con job retirement system, let’s talk about the health care system cost that will run you about €300 per month in employee costs every month just for a single person, not counting the employer contribution of another ~€900; again, for a single individual. And on top of that, you are also going to have copays to see the doctor (albeit about 1/2 to 1/3 of the cost in the USA, so you get to save $5-15), but you also get to go to a doctor for a prescription and a pharmacy to buy things like basic over the counter medications like ibuprofen .… that comes in blister packs of 20 you get “for free”(see tax burden and health insurance costs above for reference of level of “freeness”). Again, no, those are not typos or errors, they are very much representative examples.

4) gasoline is taxed at 100%, in most European countries or more, with talk of increasing it. And no, again, that is not a typo. For reference, in the USA gasoline is taxed at around the 20-25% range. The reason I mention that, is because it’s not only a taxation on mobility, it again sucks the disposable income of the lower income people dry.

And none of that even goes into the fact that medical care is determined by the insurance that pulls typical insurance things where when it’s time to pay out all the sudden the medical care is deemed not necessary.

The saddest thing about the health care cost debate is that it seems to be driven by a con job to trick people into a trap that will enslave them to authoritarian control even more without any benefits from it, if not only more detrimental effects like Obamacare that only served to drive up costs and then peg them at new levels that made health insurance companies and the medical sector richer, while Medicare fraud and pull pushing has run amok.

I actually find it curious that especially this community would not realize that the ideal system is not a centralized monolith running on a con job and no backups, but a highly competitive decentralized system forced to be transparent and accountable. But I guess whatever is driving the centralization of power and control among the tech tyrant FAANGs, seems to have also latched onto people’s minds here maybe.

Please excuse any errors because English is not my first language

The American system costs way more for comparable care, precisely because of our insane system. Every single dollar or hour spent on medical billing issues and dealing with insurance and arguing over who pays is total deadweight loss.

I don't think it's abnormal not to want to pay those rates.

$1,000+ a month is absolutely insane for health insurance and at $2,000 a month you're now beyond the cost of most rent for something that you'll hopefully never need to use for decades, but more importantly you have no options. It's either pay massive fees (+ copays, etc.) due to no real competition or go without insurance. For the last few years no insurance also came with paying thousands upon thousands of dollars a year in fines too.

I am an uninsured freelance worker too for reference. But that plan definitely wouldn't work out if I had a family to insure, and then the costs are astronomical to the point where you would be in debt and have no savings unless you were absolutely crushing it.

Worth noting that American per capita spending on healthcare is much higher compared to European countries despite a lower life expectancy.

Before Obamacare and without the ability to bargain as a large scale employer, my insurance options were limited to "defined benefit" plans where the maximum they'd pay out in an emergency was limited to about what you paid in in about a year or so. Effectively no emergency coverage, just incidental stuff.

Another fun feature: preexisting conditions. For which insurers will pay $0. It's pretty horrible, and one state where I lived passed a law so the pregnancy could not be considered a preexisting condition for insurance purposes. Which meant that if you were pregnant you were denied coverage at all. By everyone. Without exception.

I do agree without reservation that linking healthcare to employment is crippling for independent contractors. As I understand it, the setup allows employers to deduct substantial costs from taxable income. So basically governments are subsidizing the obscene profitability of health insurers, the pharmaceutical industry, and some provider sectors.

Back in the late 90s, I was able to get ~affordable health insurance through AFL-CIO SBWA Local 125. But that service went down in flames, so I ended up paying ~$1K per person. As I recall, I could deduct 50% of medical expenses, but it was still the largest expense after mortgage and taxes.

And if it had been $5K per month, I couldn't have managed it.

You're telling me if I were disabled and could not work I could just move to Europe and live on the healthcare system? That's not at all true.

Secondly, EU freedom of movement isn't as strong. See Directive 2004/38/EC, such as the points reproduced below which AFAIK some countries already take advantage of:

"Union citizens should have the right of residence in the host Member State for a period not exceeding three months without being subject to any conditions or any formalities other than the requirement to hold a valid identity card or passport, without prejudice to a more favourable treatment applicable to job-seekers as recognised by the case-law of the Court of Justice."

"Persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host Member State during an initial period of residence. Therefore, the right of residence for Union citizens and their family members for periods in excess of three months should be subject to conditions."

>this was the best part for me in the gig economy where I can drive Uber and rent on Airbnb and make money doing multiple gigs.

What about being a contractor makes this possible? Many people work multiple jobs by being a direct employer of the company? Also how does rental properties come into this?

Even at the Federal level, the taxes net out the same. For employees, your employer pays half of your social security contribution, but as a contractor, you have to pay the employers half on your taxes.

The only thing I can come up with is unemployment insurance, which contractors don’t pay, but they also can’t collect unemployment.

If I’m missing something, please clarify.