
A class-action suit imperils California freelancers - gok
https://www.cjr.org/united_states_project/california-freelancer-dynamex.php
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mdorazio
On one hand, I appreciate the spirit of this ruling. It's meant to prevent
companies from outsourcing their core business to "freelancers" who are really
people who do all the work of normal employees, minus healthcare, retirement,
job stability, etc. and force the state to cover these things in part. On the
other hand, it's getting increasingly difficult to tell who is freelancing
because they prefer that setup and are secure with it vs. who is freelancing
because the market for stable, _good_ jobs cratered in their industry.

~~~
randyrand
I’ve long thought the distinction was dumb.

Everyone should just be treated as a freelancer. Id rather pay for my own
health care thank you very much.

There’s practically no advantage to having health care, retirement, etc
dictated by your employer and plenty of downsides.

~~~
marcinzm
>There’s practically no advantage to having health care

Only if you're young and healthy and have no pre-existing conditions.
Otherwise, enjoy the fun of paying massive premiums for shitty care because
you no longer have the group rate from your employer.

~~~
kgwxd
If those employer group rate things didn't exist, the whole system would be
different. The insurance companies would still want peoples money, they'd just
come up with some other arbitrary way for people to group up or do away with
the grouping all together (which is how it should be).

~~~
marcinzm
Why would they, if they know someone will cost them a lot of money then what
incentive do they have to ever insure them for non-exorbitant amounts if they
can avoid it? Every other form of insurance would either not insure them or
charge them massive fees (home owners, renters, life, car, etc.).

Group rates are a hack if anything and insurance companies have no incentive
to make less money by having their own version of it.

edit: To explain further. Let's say insurance company A has a group plan and B
insures people individually. A is then forced to charge half their clients
more than B as the average rate is identical. Thus it's in those people's
interests to move to company B and pay less. Now those left on A's plan have
even more average risk (as all the low risk people have gone to B) and the
rate needs to go up. Rinse and repeat until A has no clients or is bankrupt.

~~~
AnthonyMouse
> To explain further. Let's say insurance company A has a group plan and B
> insures people individually. A is then forced to charge half their clients
> more than B as the average rate is identical. Thus it's in those people's
> interests to move to company B and pay less. Now those left on A's plan have
> even more average risk (as all the low risk people have gone to B) and the
> rate needs to go up. Rinse and repeat until A has no clients or is bankrupt.

The problem is the same thing happens with employers. Employer A provides high
quality health insurance, so everyone with a preexisting condition takes a job
at employer A while employer B out-competes them by providing less/no
insurance and picking up all the healthy employees who choose them because
they can pay better wages. Then it's employer A rather than insurance company
A that goes out of business and the remaining employers are the ones that
don't provide health insurance.

You can try to get out of that by requiring all employers to provide health
insurance, but it really has nothing to do with the employers. It would be
superior to require all individuals to buy health insurance instead, but
people seem to hate that.

The other option is to require insurance not to deny coverage or set rates
based on the existence of a condition _if_ the individual had insurance
coverage at the time when the condition became known. Then as long as you were
carrying insurance you're covered, which most people will then want to do for
exactly that reason, which would thereby prevent the death spiral. But if you
don't want to buy insurance, well, then you don't have insurance. See what
happens if you wait to buy fire insurance until after your house is already on
fire.

------
cutler
In the UK we have IR35 legislation which the government, in its wisdom, is
using to cast an ever widening net around the contracting sector. It's become
so farcical that a lot of contractors won't touch anything in the public
sector while public sector recruiters are bending over backwards to convince
contractors that what they're offering is "outside IR35". So the government is
effectively trying to find ways round its own stupid legislation. One of the
factors which helps mitigate IR35 is a substitution clause, ie. you're
replaceable.

------
ilaksh
Companies had come to the conclusion that they could just save lots of money
by using contractors or freelancers as cheap long term employees since they
didn't have to pay benefits. It was obviously wrong, but everyone was doing
it, and no one was stopping them, so it became normalized as a business
practice.

There are some companies like Uber that have their entire business model based
on misclassification.

The issue of people blacklisting California freelancers though now becomes a
real problem for some people.

Maybe other states will make similar laws.

~~~
jameslk
> It was obviously wrong

It sounds obviously wrong by the way you phrase it, but it's not so black and
white. As a freelancer myself of the past 5 years, I prefer the independent
life, being able to negotiate things as I'd like, having more varied work and
having more freedom to work when and where I like. Perhaps I could make more
and have better benefits as a regular employee, but that's not what I want.
Maybe you don't understand and so this is "obviously wrong" to you, but not
everything can be bucketed into "wrong" and "right" for everyone. This may
help some but it will definitely screw over others.

~~~
jacobolus
The concept of freelancers isn’t the problem. It is entirely legitimate to be
a freelancer and entirely legitimate to hire a freelancer.

The problem is de-facto employees who are classed as freelancers as a way of
avoiding taxes and worker-protection laws.

~~~
jameslk
Yes, I would be classified as an employee according to this CA precedent for
some of the clients I've worked for. I don't want this.

> But it’s part B that presents a problem for freelance journalists: someone
> is an independent contractor only if they perform work “outside the usual
> course of the hiring entity’s business.” In the archetypal example, a
> plumber fixing a restaurant toilet clearly qualifies. A freelancer
> journalist writing a column for a magazine? Not so much.

In my case, I've been a contract developer working for agencies before.
Sometimes I want work like this.

~~~
chrstphrhrt
My understanding (and experience as a contractor) is that for the service
provider the benefit is being able to control the what and how of the work.
This is better for the client as well especially if there is asymmetric
knowledge as is often the case in tech.

However, if your are working full time and end up being made to follow the
client's schedule, don't get to address technical debt, have useless meetings
etc. then you might be considered an employee anyway. Which I can't understand
why you _wouldn't_ want that, because it could mean overtime pay for all those
crunch times that result from bad management.

So independent contractor is probably best for a tech worker if you're able to
set boundaries and have autonomy, but not at all if having to work overtime
and not take vacations.

~~~
AnthonyMouse
> then you might be considered an employee anyway. Which I can't understand
> why you _wouldn't_ want that

Because it comes with a significant reduction in flexibility. If the employer
has to provide health insurance then they'll pay you proportionally less, even
if you already have health insurance through your spouse. If they have to pay
you overtime then they may cut your hours instead, or lower your base pay to
compensate, which may be worse for you than being able to continue working at
the original wage.

Meanwhile if you did prefer some aspect of the arrangement the law would
require then there is nothing stopping you from negotiating that to begin with
in exchange for the correspondingly smaller amount of cash money. Few
employers have any objection to providing you with health insurance in lieu of
the same amount in cash that they would otherwise still have to pay you in
order to get you to work for them.

But some employees would prefer the cash -- and the employers take some of the
loss when not being able to do what both parties prefer makes the employee
walk away, so they don't like it either.

------
Animats
The article glosses over what the decision really says.[1] This strict test
applies only to "wage orders", which means minimum wage and overtime laws.
Anybody who bills at $40 an hour does not hit this problem. It reaches mostly
the subminimum wage "gig economy". Uber, Lyft, delivery drivers, and other
exploited "freelancers".

[1]
[https://www.laboremploymentlawblog.com/2018/10/articles/inde...](https://www.laboremploymentlawblog.com/2018/10/articles/independent-
contractors/dynamex-abc-test/)

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hn_throwaway_99
I realize I should probably work on this instead of posting to HN, but I see a
nice potential startup idea here: A matchmaking service where small groups of
freelancers can form their own companies. Instead of being independent
contractors, they are employed by their own 3 or 4 member LLC or S-Corp that
this service would help set up.

~~~
jaden
There's the Freelancer's Union which offers some group benefits

[https://www.freelancersunion.org/benefits/](https://www.freelancersunion.org/benefits/)

~~~
zrail
Freelancers Union doesn't offer anything compelling for health insurance,
which is the biggest expense for most freelancers and contractors. All they
have is an ACA portal.

------
theptip
When this ruling came out the naive reading seemed to me to rule out most
software engineer consulting/contracting in California. Will be interesting to
see how this pans out.

(Of course, many "contractors" are actually employees of a contracting
company, but much true freelancing seems incompatible with this law).

~~~
Gibbon1
> but much true freelancing seems incompatible with this law.

If you're a true freelancer with multiple clients you have generally nothing
to worry about.

In the past I've had clients where I ended up just working on their stuff and
after a few years they ended up just hiring me full time. That is totally
normal for non sleazy companies. Then you have companies that try to get out
of paying the costs associated with normal employees. These companies are all
skeazy and deserve to get slapped.

------
tomrod
Why couldn't this journalist create a small corp.? Hiring magazines would then
hire the company, not the person. If I understand there are also tax benefits
under the current US tax policy.

What am I missing?

~~~
mdorazio
You're missing that they don't want to because it's a pain to setup, requires
an extra layer of paperwork, and costs more at tax time (minimum $800
franchise tax). But as far as I can tell that would solve this problem.

~~~
rubbingalcohol
It does solve the problem, I've done it, but the $800 tax totally killed it in
years that I wasn't as active freelancing. California was just a terrible
place to do business, and I'm much happier since I moved out of state.

------
carlsborg
Silver lining: these laws force freelancers to incorporate and think about
building a business around that service. The reporter in that story could
easily rebrand as a newswire LLC and get her old customers back.

~~~
Cakez0r
Does Uber not already require drivers to start their own company? I can
definitely understand all the outrage if Uber is trying to classify workers as
independent contractors and those contractors aren't even registered
businesses (and thus effectively being paid money under the table and avoiding
taxes).

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gok
I'm curious what folks who think that TNC drivers can't possibly be
independent contractors think about this.

~~~
Pulcinella
This just further supports that Uber and Lyft drivers are indeed not
contractors? For example Uber drivers don’t set their rates, have not
negotiated a contract with Uber in any way, are engaged in work that exists
only because of Uber, and their driving is basically the entirety of Uber’s
business.

Compare to a plumber: plumbers and plumbing companies set their own rates,
hours, often provide estimates and negotiate a price and contract with the
company, don’t engage in work solely setup by the company (e.g. the pipes are
already there; company is not in the business of manufacturing broken pipes),
and fixing plumbing is not any portion of the vast majority of companies.

~~~
dmode
Uber and Lyft can claim that they only provide an online marketplace where
drivers are free to join and leave as they please. In terms of setting their
own price, Uber can make pricing an opt in "smart pricing" suggestion and
drivers are free to set their own price. And also most drivers offer their
services in multiple platforms. In essence, they are eBay

------
temp99990
My understanding is this is actually what’s exacerbating the “two-class”
system at big tech cos like Google where something like half of all workers
are contractors. Like it was bad before, but from what I hear it’s even worse
now because companies want to make you look as little like an FTE as possible.

------
RcouF1uZ4gsC
I am sure every business that abuses its employees by classifying them as
contractors can come up with a few cases where the people state they like
being contractors.

However, in the United States with its tying of healthcare to employment,
unless you are single or have a spouse that has coverage, not being an
employee has downsides.

I would guess that while some high-profile freelancers might be worse off, a
significant number of freelancers would be better off as employees.

