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Independent Contractors Treated as Employees in Tech (How to Prevent)?
I've noticed an increasing trend that companies and agencies will hire you as an independent consultant with the resulting lack of job security and benefits, but without the advantages of being an independent consultant.
Those advantages are around flexibility of hours, autonomy and of course higher pay.
Other than higher pay, I'm finding companies are loosey goosey in their hiring and treatment of contractors. In one recent SOW I came across via an agency (as a subcontractor to a contracting agency), upon arriving on the first day there suddenly was a 9 to 5 requirement such that the contractor gets reprimanded if they arrive at 9:05; moreover they have a 'manager' with tight control over the contractor's time, work and whereabouts during the work day.
To me this signifies an employee-employer relationship. And this is tech, not Uber drivers and the ambiguity around that.
If you are a tech consultant, what can you do, if anything, to avoid these situations? Sometimes you do not know until you begin the actual engagement.
- itamarst 9y agoPresuming this is long-term contract (3-6 months), you basically are going through same process as employee - need to interview the company first, need to read the contract, and not sign it if it's not acceptable. If they're asking you for stuff that's not in the contract, say no. If they persist, walk away.
- chrisbennet 9y agoIf you are a direct contractor, it sounds like the IRS would consider you an employee. If you are actually an employee of a company that contracts you out to a 3rd party, then this doesn’t apply. ”The IRS developed the 20-Factor Test shown below to help employers evaluate whether a worker is an employee or an independent contractor. No one factor on the test is more indicative of employee status than another. If there is a high number of “yes” marks, then it will most likely indicate the presence of an employment relationship, a high number of “no” marks may or may not indicate a contractor relationship.” https://www.regent.edu/admin/busoff/pdf/20-questions1099test.pdf https://www.regent.edu/admin/busoff/pdf/20-questions1099test...
- mancerayder 9y agoFully agreed. Question is, what's the best course of action? Is this common?
- chrisbennet 9y agoYou’re treated as an employee because you are an employee (of the contracting agency). You aren’t an Independant contractor. And yes, it sucks depending on the agency. You need to go contract Direct if you want to be treated as an “independant” consultant. The Agency usually makes you sign something that makes it near impossible to contract Direct for a company they place you at. You need to use your network to find your own contracts. This is easier said than done.
- mancerayder 9y agoWait a second. What if you're contracting via an LLC and they (the consulting agency) made you sign a contract that it's not an employee relationship?
- chrisbennet 9y agoI’m not sure exactly what your situation is but if you are paid “W2”, you’re an employee, end of story. If you’re working “1099” and leaving is an option for you, talk with the parties to your contract and renegotiate or clarify expectations if you can. I can tell you’re pissed (I don’t blame you) but you can’t bring that to the discussion/negotiations. At the end of the day, you usually can’t make a bad client “behave”. You either pick good clients or leave.
- mancerayder 9y agoIt's 1099. It's indeed a situation of being treated like an employee. I was curious how people have experienced these circumstances. I'm thinking the same thing with regards to getting people to behave.
- tytytytytytytyt 9y agoLearn how to say no. It's not complicated or difficult to avoid what you're describing.
- jmheinkle 9y agoYour observations are perfectly correct, the short answer is these are low quality (and sometimes exploitative) job shops. You should avoid. What I think is going on is that consulting stratifies into two groups: high quality consulting exactly as you envision with high pay and freedom, and these consultancies which effectively are low quality labor. Obviously avoid the later if you have no other choice. In addition to the shitty pay, you will suffer serious penalties to respect and the projects you’ll work on will be the least attractive (and sometimes shitty and dangerous in other ways).
- closeparen 9y agoAny software engineer should be able to find work as a W2 employee with benefits good enough that i.e. healthcare costs are not something that ever crosses your mind. I suggest researching compensation norms, as I suspect you are wildly underestimating your market value. If this isn't true in your location, you might need to move to a larger city. Our skills are in high enough demand that none of us should have to rely on legal protections to be treated well. There are no job-security advantages to being a regular employee, by the way. Employment in essentially all of the US is at-will.
- kahnpro 9y agoThis is a very US-centric answer. In other countries there are absolutely job security benefits to being an employee.
- closeparen 9y agoThis is the website of an American venture capital firm focused on a community that occupies a small stretch of coastal California. The poster did not specify a foreign country. Of course it's a US-centric answer.
- tytytytytytytyt 9y agoI don't think that's strictly true. If any problems arise where they need to cut people, they might cut the contractors first.
- BjoernKW 9y agoThere are usually some red flags: - the language used during the sales process points to an employee-employer type relationship - conditions like full-time and having to work at the client's office all the time - the sales process itself is treated more like an interview process (you have to provide documents like a CV first etc.) If you encounter these or other aspects that feel off: Walk away. If the contract stipulates you be at their office from 9 to 5: Walk away If the contract doesn't say anything about this but the client still tries to enforce such rules: Point to the contract and if the client still insists, again walk away. If this sounds overly harsh or opinionated please keep in mind as a contractor / consultant you're running a business and an essential part of running a business is establishing long-term, trustworthy relationships. You can only do this by agreeing upon and adhering to clear conditions of how you do business.
- rajacombinator 9y agoNothing about your situation says independent contractor. You work for an outsourcing sweatshop that sells labor as contractors to further reduce their rates.
- ccajas 9y agoI have been a victim of a 1099 misclassification scheme. At the time I had graduated just three months ago and taken a job at a small web development agency that was run on a very tight budget- mangement was "top heavy" meaning there was about 1-2 managers per in-house developer and designer, and the rest of the team worked in India. They expected me to show up to the office every day 9-5, while I was working as an independent contractor, along with other treatment as employee (was given my own computer and desk, etc). As a few people have pointed out, yes this is common in exploitative job shops. Unfortunately it was beyond the statute of limitations when I found out I could take action by verifying status with the IRS. But I still have the physical printed out contract with me. It says $15/hr on 1099 as contract-to-hire with conversion to $20 on a W2 after 3-6 months. I was never put on a W2 and I have worked there for at least 18 months. Now to answer the actual question- how to prevent it? It's hard to say. The US has laws in place to prevent this but without acknowledgement of the problem, the bite is weak. A lot of these things occur due to simple ignorance of the victim's part. Perhaps a general "professional development" course to be taken in a junior of senior year of college could help smooth things out? Then less college graduates will be left behind, and there's less risk for them to go through the school of hard knocks after graduation. Such a course doesn't have to be limited to employee-employer or contractor relations. It can cover issues related to how to deal with workplace politics, understand what perception does to others at work, etc. There are many gotchas that people do not see entering the white-collar workforce.