6 ms·

Obviously this is bad for workers in the short-term. The judge notes however that under California law, you’re either an employee or contractor, there is no in

Obviously this is bad for workers in the short-term. The judge notes however that under California law, you’re either an employee or contractor, there is no in-between, and she presumably wants to see that fixed. This is an old issue that goes way back to Microsoft hiring contractors and treating them really well like employees, until the IRS discovered they were also doing it to not pay payroll taxes :( Afterwards, Microsoft had to significantly dock contractor benefits to show there was a real distinction and it was not an accounting gimmick. Like a lot of labor and tax law, these were all put in place 60+ years ago and have pretty much been stretched to the maximum. Ironically, this makes me see people going to Law School as in a really cool spot for the future. I thought I’d never say this, but I can imagine us needing more lawyers in the future to hammer all these things out for whatever the next de facto American System is.

legohead 9y ago
I worked for the USPS at their national training facility, and most of the people there were contractors. The "real" USPS employees, the ones being trained, were employees. Apparently the reason was due to USPS employees getting really good benefits as they get to participate in the federal retirement program which includes a pension. They don't want to have to pony up for all the support staff, even though we worked at a facility, 8-5, 40 hours or more a week, with basically an infinite contract length. They paid for our healthcare plan as well - like an employee might get? :) There wasn't really anything to complain about, as the pay and benefits for even the contractors were really nice (we had "unlimited PTO" before it became a thing in the startup world), but the debate about employee vs contractor is interesting in this particular case.
- rconti 9y ago
  Were you a 1099 contractor, or an employee of a contracting firm? Big difference.
  - godzillabrennus 9y ago
    If they paid for healthcare I would expect an employee of a firm that the work was outsourced to. PEO's (Professional Employment Organizations) will have a future as more and more laws are enacted about how we classify an employee.
- walshemj 9y ago
  Infinite contract length might be a bit tricky and did the USPS pay the benefits? Sounds like an employee to be - which is where MS messed up.
WalterBright 9y ago
Benefits and protections available to employees but not to contractors all cost money. This is why contractors get paid more. If the benefits and protections are provided to contractors, then it will (sooner or later) come out of their paychecks.
ars 9y ago
> Obviously this is bad for workers in the short-term. That's not obvious at all. Why is this bad? It means people can have lots of flexibility on when to work, and for who. For some people this is very valuable. It also means a lot more flexibility to those offering work (i.e. they can scale up or down based on short term demand), which means there are now more companies willing to offer work, and again that's a win for the worker. To me, it's a net win because it results in more work being available, and more work being done (i.e. people getting paid).
- yourapostasy 9y ago
  While I take advantage of that flexibility you cite, after many years of seeing the inside of many clients, I have reluctantly concluded that state of employment is not a viable policy prescription for the American general population in the near future. To be really secure as a freelancer over the long-term (multiple decades), you ideally should have three years’ living expenses set aside. That lets you ride out big dips like the 2000 tech recession or 2008 Great Recession and still have enough left over to strategically pick your projects and rebuild your reserves at the same time. From where we sit today, it is a very long road to getting most of the population saving even 6-12 months living expenses. To get there, we need to take many intermediate baby steps. Perhaps special tax treatment for savings accounts belonging to taxpayers below a certain income level, and the account balance meets some kind of latency metrics, or outright grants for hitting metrics in lieu of EITC.
woolvalley 9y ago
Didn't those contractors have to pay payroll taxes through self employment tax then? The govt gets the same amount of tax in the end AFAIK. So those contractors basically have ~%8 less pay because they pay the employer part of the tax, unless MSFT paid them more to compensate. So what is the incentive for MSFT to do that in the first place? Is it just to fool the people who don't realize they might be paid less in a complicated way?
- walshemj 9y ago
  That struck me as odd as IT contactors in the UK are paid a lot more than FTE's and have much better (still) tax advantages.
- bzbarsky 9y ago
  Contractors have to pay the "employer" half of FICA (social security and medicare) themselves, true. But there are things other than FICA that employers have to pay for employees but not contractors. The most obvious one is unemployment insurance, both state and federal. There are likely others, in various location-dependent ways. Obviously contractors effectively self-insure for unemployment; this is a major reason why contractors are typically paid more on a nominal basis than employees are. In addition to that, there are compliance costs with employees (having to do tax withholding, pay reporting requirements to states and the IRS, etc) that are somewhat lower with contractors.

legohead 9y ago

I worked for the USPS at their national training facility, and most of the people there were contractors. The "real" USPS employees, the ones being trained, were employees. Apparently the reason was due to USPS employees getting really good benefits as they get to participate in the federal retirement program which includes a pension. They don't want to have to pony up for all the support staff, even though we worked at a facility, 8-5, 40 hours or more a week, with basically an infinite contract length. They paid for our healthcare plan as well - like an employee might get? :) There wasn't really anything to complain about, as the pay and benefits for even the contractors were really nice (we had "unlimited PTO" before it became a thing in the startup world), but the debate about employee vs contractor is interesting in this particular case.

rconti 9y ago
Were you a 1099 contractor, or an employee of a contracting firm? Big difference.
- godzillabrennus 9y ago
  If they paid for healthcare I would expect an employee of a firm that the work was outsourced to. PEO's (Professional Employment Organizations) will have a future as more and more laws are enacted about how we classify an employee.
walshemj 9y ago
Infinite contract length might be a bit tricky and did the USPS pay the benefits? Sounds like an employee to be - which is where MS messed up.

WalterBright 9y ago

Benefits and protections available to employees but not to contractors all cost money. This is why contractors get paid more. If the benefits and protections are provided to contractors, then it will (sooner or later) come out of their paychecks.

ars 9y ago

> Obviously this is bad for workers in the short-term. That's not obvious at all. Why is this bad? It means people can have lots of flexibility on when to work, and for who. For some people this is very valuable. It also means a lot more flexibility to those offering work (i.e. they can scale up or down based on short term demand), which means there are now more companies willing to offer work, and again that's a win for the worker. To me, it's a net win because it results in more work being available, and more work being done (i.e. people getting paid).

yourapostasy 9y ago
While I take advantage of that flexibility you cite, after many years of seeing the inside of many clients, I have reluctantly concluded that state of employment is not a viable policy prescription for the American general population in the near future. To be really secure as a freelancer over the long-term (multiple decades), you ideally should have three years’ living expenses set aside. That lets you ride out big dips like the 2000 tech recession or 2008 Great Recession and still have enough left over to strategically pick your projects and rebuild your reserves at the same time. From where we sit today, it is a very long road to getting most of the population saving even 6-12 months living expenses. To get there, we need to take many intermediate baby steps. Perhaps special tax treatment for savings accounts belonging to taxpayers below a certain income level, and the account balance meets some kind of latency metrics, or outright grants for hitting metrics in lieu of EITC.

woolvalley 9y ago

Didn't those contractors have to pay payroll taxes through self employment tax then? The govt gets the same amount of tax in the end AFAIK. So those contractors basically have ~%8 less pay because they pay the employer part of the tax, unless MSFT paid them more to compensate. So what is the incentive for MSFT to do that in the first place? Is it just to fool the people who don't realize they might be paid less in a complicated way?

walshemj 9y ago
That struck me as odd as IT contactors in the UK are paid a lot more than FTE's and have much better (still) tax advantages.
bzbarsky 9y ago
Contractors have to pay the "employer" half of FICA (social security and medicare) themselves, true. But there are things other than FICA that employers have to pay for employees but not contractors. The most obvious one is unemployment insurance, both state and federal. There are likely others, in various location-dependent ways. Obviously contractors effectively self-insure for unemployment; this is a major reason why contractors are typically paid more on a nominal basis than employees are. In addition to that, there are compliance costs with employees (having to do tax withholding, pay reporting requirements to states and the IRS, etc) that are somewhat lower with contractors.