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.
Employers get to deduct health care premiums from pre-tax, whereas freelancers have to pay for premiums out of their after-tax income. It can make a fairly big difference if your marginal tax rate is high (which it probably is in CA).
The opposite is true. If you are a freelancer, healthcare premiums are an above-the-line deduction, which practically has the same effect as a business expense. This is better than a regular deduction because you get it even if you don't itemize deductions. See https://turbotax.intuit.com/tax-tips/home-ownership/deductin...
>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.
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).
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.
> 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.
Arbitrary grouping should be outlawed. It should be based on their entire pool of business. Law of large numbers means some will always be sick. They should make money by preventing sickness not by directly or indirectly increasing the cost of care.
What you're calling insurance (insuring people who have pre-existing conditions, or are known to be very expensive) is not insurance. That's just plain old welfare/socialism.
I'm fine with welfare, but keep it out of insurnace. Let insurace be for insurance (i.e. known but unpredictable risks), and welfare be for welfare.
Also if you don't have a mortgage or kids. Freelancing is great when you're young, single, and have few long-term obligations. When you get older, well there's a reason mid-life people working mediocre jobs at large corporations don't up and quit for freelance life en masse.
Depends quite a bit on how much the "freelancing" brings in, doesn't it? There's a potential self-contradiction to this view that I'd like to tease out.
Say you're "freelancing" and doing well enough that you can afford to pay not only the extra self-employment tax, but also to pay full market rate out of pocket for every single benefit that a stable employer would provide.
How many clients would you need to make that happen? In my experience, the most successful high-end freelancers - and your comment implies to me, at least, freelancing at a skilled professional level - have a small rotation, or maybe only even one, major repeat client(s).
The dynamic very quickly shifts to one of where the freelancer might as well, for all practical purposes, be an employee of those clients or that one major client, right? Except paying more for everything an employer otherwise would pay for.
As someone who is not an at-will employee, being a non-American who lives somewhere with at least vaguely sensible labour laws, I'm very glad to have some security of employment provided for by law, which I would not get as a freelancer or contractor.
You only think healthcare is overrated until you need it and find out there is no free market there and you owe 5 or 6 figures for something you thought was routine.
There’s a reason that medical bills are the #1 cause of bankruptcies in the US.
The downside to these rulings is that it has the potential to cause unemployment for these gig workers. As the saying goes, the least exploited people by employers are the unemployed.
It is like in American Samoa when the federal minimum wage was passed. It crushed their economy (dominated by tuna canning) since the tuna canning mills couldn't afford to pay top dollar for the raw tuna from the fishermen. The fishermen ended up going to Vietnam and southeast asia where their catch could be sold for more. The Vietnam mills were able to pay more because of the lower labor costs. The end result was that the unemployment rate in American Samoa skyrocketed to over 40% and even to this day it is still at around 20%-30%.
This general line of reason is based on a flawed idea that all of these employers would be willing to offer the same number of full time, full-entitlement positions, if it weren’t for the option of contracting. Everybody who’s in a contracting position is benefiting from having the option to do so, otherwise they wouldn’t be doing it at all. If you restrict people’s ability to freely enter into contracts with one another like this, you are absolutely guaranteed to be taking peoples jobs away from them. This is never discussed here, and it’s not obvious that the benefit to the smaller number of people who are left with employment after the fact is a worthwhile trade off.
Obviously there are going to be fewer actual employees.
Its not certain that the situation will be better if the companies stop misclassifying. However, how certain are you that the overall situation will be worse? Because we know right now the taxes and health insurance issue is a killer for misclassified employees.
With minimum wage it's kind of the same thing. Should we set the minimum wage to $1 an hour to ensure as many jobs as possible?
I agree that companies taking a hike creates a real problem. But it is hard for me to accept that the solution is to let them do whatever they want and workers have no protections from them.
> However, how certain are you that the overall situation will be worse?
It will quite obviously be worse for everybody who is left without employment.
Also, as this article points out, jurisdictions that pass these laws tend to be competing with other jurisdictions to attract business. For the case highlighted in the article (freelance writers), the outcome was that nobody’s working conditions were improved, and that the residents of the jurisdiction in question simply all lost their jobs.
Setting a minimum wage poses the same problems. Set it too high, and you kill jobs and business. All such restriction have the same consequences. The question that should be asked is whether it’s reasonable for people to enter into freelance contracts. I don’t think it’s reasonable to deny people who could benefit from them the opportunity to do so. I do however think it would be reasonable to deny people the opportunity to enter into a working arrangement where they’re paid $1/hour. I don’t think the two are equivalent at all, and I think that most discussion around ‘compassionate’ ideas like this do a very poor job of weighing up such pros and cons.
Because you can make an reasonable argument that prohibiting such arrangements would not cause much harm. Personally, I think that people should be free to enter into any employment agreement that they want to. Anytime you implement a minimum wage that’s higher than the market value of somebody’s labor, you’re restricting their ability to find employment.
Of course there’s the risk that if there was no minimum wage, that large portions of the working class would only be able to gain very low wages. I don’t think that’s very realistic though. People won’t enter into an employment arrangement that doesn’t benefit them, and will tend to seek out the best opportunities available to them.
But in any case, I don’t think a minimum wage in general is entirely unreasonable, but it can become so when it starts to have a significant effect on access to minimum wage jobs.
That's two self contradictions and a reference to a 'working class'.
No, no one gets to decide what others elect to do with their time. Especially here, where many people work for zero monetary compensation on open source projects.
What next, ban open source projects? It's work and there are no benefits. Blasphemy?
Contributing to an open source project isn’t necessarily an employment arrangement, neither is volunteering, or being an unpaid intern. This comment of yours doesn’t contribute much to the discussion.
Yes, "working class" is offensive. Like just about any other classification criteria is. Are you not woke enough to see this?
Your two self-contradictions are
1. "you can make an reasonable argument that prohibiting such arrangements would not cause much harm" vs "Anytime you implement a minimum wage that’s higher than the market value of somebody’s labor, you’re restricting their ability to find employment"
2. "People won’t enter into an employment arrangement that doesn’t benefit them" vs "I don’t think a minimum wage in general is entirely unreasonable"
That's pretty much the case for every new legislation, most of which abound in unintended consequences.
At the least they could have been a little more thoughtful and and added exemption clauses if you choose your own hours, own working materials, and similar.
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.
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.
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.
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.
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.
> 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.
I've been a freelancer, temp, or contractor for most of my working life. This spans about 20 years. For the past 10 years it's been almost all remote freelancing.
I also prefer freedoms to the degree that I can get them.
I've also lived in California for most of my life.
In about 75% of the projects I have been brought into, projects were not short term, and the non-employee status was maintained long term as a way to avoid paying for benefits. In some cases I was also building a startup, i.e., I was effectively serving the role of technical cofounder over a period of many months or a few years, but the freelancer status was leveraged as a way to ensure I did not try to gain any business interest or profit.
I'm sure people will say that it's my fault for allowing people to take advantage of me. However I do the best I can and since I do not have a large social network or savings, it has almost never made sense to quit a project and therefore drop my only source of income, on the basis of not receiving benefits or equity or whatever.
Doesn’t seem fair, the way you’re describing companies that operate like Uber/Lyft/etc...
Drivers opt-in on their own accord and it requires zero skill whatsoever. You can work whenever you want for as long or as little as you’d like.
How is this somehow unethical or immoral? You used the word wrong.
These people are not employees, they’re temporary/ephemeral contractors. If you work for an hour a month - you’re not my employee - and I’m not going to give you health insurance.
Sure, but what about people that work 2-4 hours a day, to supplement their main job? Or once a day on the weekends? Or a mom whose daily routine is to drop the kids off school, and drive Uber until the kids are done with school?
This is the problem with extending employee benefits to gig workers. Employee benefits are an overhead cost, so now it becomes unprofitable for Uber, Lyft, DoorDash, etc. to have workers working sporadic hours. If their workers get classified as employees, then they'll have to start setting hours for employees. This put a lot of people who need flexible hours out of work.
Sure, but what about people that work 2-4 hours a day, to supplement their main job? Or once a day on the weekends? Or a mom whose daily routine is to drop the kids off school, and drive Uber until the kids are done with school?
Those who stick around are driving more than occasionally. The "vast majority" of those buying into this "gig economy" bullshit only last a few months at most.
Low wages correspond to a high turnover rate. While more than 800,000 people drive for Uber in a year, the average driver lasts around three months and drives less than half time, or only 17 hours per week.
Ok, but that doesn't refute anything I said. The whole point is that it's not a FT job.
Most drivers are work for a few hours a week in addition to their other job/school/etc. It's perfectly valid for people to drive when they need extra income and stop as their situation changes. That's what the flexibility is for.
It is a full-time job in that the so-called "core" drivers drive for Uber full-time. There are a lot of part-time employees too, and they're just as deserving of minimum wage, social security contributions, workers comp insurance, unemployment insurance, health insurance, and the whole host of other benefits that come with being classed as not-a-contractor.
It's perfectly valid for people to drive when they need extra income
There've been part-time jobs with flexible schedules since before Boober was even a glimmer in Kalanick's horny eyes. The difference is that when you work as a part-timer for a real company you are subject to things like minimum wage. Driving for Uber is nowhere near as profitable as their marketing is claiming. For instance:
Across all of those cities less than 30% of the drivers are making what Uber claims they can make. That's before the usury that Uber engages in (20% APR on a new car lone? for fucks sake).
Employee vs contractor is not about time, it's about control.
You can work on a freelance project for 40 hours a week but that doesn't suddenly mean you're an employee. If you want flexibility then you're a contractor. Part-time isn't an answer because it still has the strict control of FT.
Most drivers of uber want flexibility, not a job where they have to show up at certain hours. You're arguing for something without even discussing it with the people you're supposedly arguing about.
So where do you draw the line?? The reason Uber and the like operate the way they do is they don’t need to worry about that overhead. It’s simple and easy, unlike having people on your permanent staff.
So you say: well, we don’t like that, we will stop it. If a person works more than X hours a week for you, you owe them benefits. “Okay no problem,” Uber says, “drivers can no longer drive more than X hours per week in this municipality” and then boom supply goes down and pricing (revenue) goes up and then people start getting fake accounts etc... or just get fucked like this article eludes.
So in the end the business will always succeed and protect itself, the “employee” or “contractor” gets the short end of the stick.
Do you realize that anyone can be a full-time driver? The job has been available for a century now, and has plenty of demand still.
The people driving for Uber do not want a full time job, that's the point. They want the flexibility of working whenever and wherever they can, usually because they have a day job, are retired, in school, or some other situation. Ask your next Uber driver if they want an 8 hour shift where they have to show up on time at a location that Uber chooses. See how that goes.
The low rates are due to an over-supply of drivers, something that happens because it is low-skill flexible work. All that Uber needs to do is limit the drivers on the platform, but that has its own challenges which is why it hasn't been done.
Ask the tens of thousands or perhaps million of full time taxi drivers that had to quit their jobs and start 'freelancing' for Uber because there was no more business.
Being a taxi driver was never a good job but taxis still exist, along with limos, shuttles, buses, trucks, ambulances, construction vehicles, and many other transportation positions.
Jobs change over time. Driving for a living is slowly declining in demand and you can't legislate your way out of it. How to give people new job opportunities is real valid concern but completely separate from the fact that the vast majority of Uber drivers are not looking for a fulltime driving job.
> limos, shuttles, buses, trucks, ambulances, construction vehicles
You realise they all require a more expensive, more limited and different form of driving license, one that usually requires many thousands of dollars to acquire, right?
The people complaining about Uber destroying taxis were the taxi companies who owned the medallions. The drivers themselves were paid crap before and they still are. They actually get a higher percentage of the fare now than they did as a taxi driver. But now the fares are lower because the medallion owners aren't artificially constraining supply, which means more people can be drivers.
In principle this should result in higher compensation for drivers, because without a huge margin wastefully going to the rent seeking medallion holders there is more demand for car service, which means more demand for labor, which means higher prices for labor. But Uber drivers may not be a large enough percentage of the overall unskilled labor pool to move the needle much on their own, so the low wages are still low.
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".
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.
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.
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).
> 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.
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.
"If a company signs an agreement with an Independent Contractor S corporation to perform contract work, the link between the company and the individual worker is broken.
"By default, the way the Independent Contractor S corporation operates, there is no link between the company and the worker. The Independent Contractor S corporation is the employer of the worker. Even if that is an S corporation of one person. As the Independent Contractor S corporation employs the worker, it sets up its payroll which will deal with things like overtime compensation, itemized wage statements, compensation for business expenses, meal breaks and so on.
"Again, it is the responsibility of the S corporation that hires the worker to make certain it complies with all applicable wage and hour laws. Labor code violations go out the window because each the Independent Contractor S corporation has its own employee(s). The S corporation has its own payroll from which the worker is paid. The S corporation has its own Worker’s Compensation Insurance Policy.
"Clearly, there are some costs associated with contractors converting to S corporations. However, there is also a range of benefits. The savvy business owner currently working directly with 1099 contractors who looks at the A.B.C. test and realizes they are in violation, might incentivize their contractors to convert by sharing in the fees associated with forming an Independent Contractor S corporation.
"While some contractors might be set up as LLCs, the majority of contractors start out as sole proprietorships. Simply converting LLCs taxed as proprietorships or partnerships to corporate taxation removes the barriers to employment for the contractor and removes the risk to the hiring company."
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.
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.
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.
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).
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.
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
The court invented that test to justify their ruling so of course it's highly broad. My question is do you think that's good for freelancers? Or drivers?
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.
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.
