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California Supreme Court Transforms the Test for Who Is an Employee

268 points by neonate 9y ago

taurath 9y ago
It’s interesting how even within companies a hard set social hierarchy has taken place between employees and contractors. The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects (companies tend to like to hire from full time to full time), worse benefits and generally don’t get most of the perks of being an employee. For coders, is this because they’re objectively somehow worse programmers? Given all the emphasis in hiring on avoiding “bad” hires at all costs, it seems like there’s a conflict between paying for people who are “worse” than a FTE but still accepting their contributions. I realize it’s a strategy that gives the companies more leeway to expand and retract their workforce, but then stigma that is attached throughout the industry around contract workers shouldn’t exist, right?
- netheril96 9y ago
  Do companies whose primary employees are programmers also employ contractual programmers? According to my observation, computer technology companies may have contractual workers, but only for other roles.
  - simcop2387 9y ago
    Most companies that I've worked for have had them, usually for specific purposes (billing system related) but they've also had them as more general cases, for less than full time work usually (the people also contracted out to multiple companies). I don't know how common this is though since it's only a few companies and the people involved are all semi-related (Perl programming community).
  - ereyes01 9y ago
    From personal experience (and admittedly stale by some 8 years), IBM had lots of contractors doing software development alongside full-timers. It was a pretty insecure position to be in because they would take the brunt of layoffs, and many I knew were gone by the time I left, with a couple of exceptions. Many were ex-employess who had been previously let go or were retired. Some were not, and all were basically indistinguishable from regular developers... they just happened to fill a req that merely funded a contractor instead of a full-time employee, depending on how the money was handed out to departments.
  - Zak 9y ago
    Yes, absolutely. I've had several clients like that. Usually, the work centers around something that isn't their core business or a technology that their full-time programmers aren't very experienced with. Sometimes it's just a matter of fluctuating workload where hiring another person full-time wouldn't make sense.
  - Bahamut 9y ago
    Even companies like Google employ contractor programmers.
  - meddlepal 9y ago
    Yes, all the time. Often in key positions or on strategic initiatives where expertise or specialist skills are needed. I've also seen short contracts used while a company ramps up hiring FTE as a velocity optimization to get the ball rolling on something new.
  - perl4ever 9y ago
    I couldn't tell you the reasoning, but I've worked at a couple of places where there were contract programmers alongside FTE programmers. In one case, that contract programmer became a FTE, but in either situation, most of the programmers were FTEs.
  - dragonwriter 9y ago
    > Do companies whose primary employees are programmers also employ contractual programmers? Yes, e.g., firms whose main line of business is contracting out employees who are programmers hire programmers as subcontractors in addition to regular employees to round out special skills needed in contracts.
- jMyles 9y ago
  I'm not sure this is a very good read, especially in the startup scene. I have been in a position (for which I'm super grateful) in which young startups didn't have the funds to pay me my full-time rate, and so instead chose to pay me a weekly rate to work one week out of the month. I like to believe that I provided substantial value in that configuration - usually landing to review code, mentor newer programmers, and help chart direction for the subsequent three weeks (during which I'd be absent). In this case, I was being paid quite a bit more than the full-timers, not less. In time, they grew to be able to afford a more complete full-time cadre, and they people I worked with weren't so junior anymore. I did this... I think half a dozen times. It was a great work config for everybody. If you can afford to travel to the work and you can really bring the fight for 5-8 straight days, I highly suggest it.
  - ddingus 9y ago
    Honestly, yours is a GREAT read. That's a very solid case for contractors and almost nobody will have a meaningful problem with it. I've done similar things in the CAD / data management space. A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. The full time peeps should be taking you out for a lunch or two to network and gain some easy, high value mentoring, contacts... I would in a second, and have had others invite me for this kind of thing. Some have remained in touch for years, and as they grew, have helped me as I did them. If we had more of that going on, it would benefit nearly everyone. But we don't. The majority case boils down to head count quotas, and cost of labor factors. Often, these are both under specified, leaving managers to find contractors to fill gaps. The larger companies do this and it's chronic.
    - ajross 9y ago
      > A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. Such a contractor would likely meet the new "ABC" standard in the linked article, though. Those aren't the positions that are in danger of being eliminated, it's the "grunt contractor" folks who are contractors only because the employer wants to keep a buffer of positions that are active but can be terminated easily.
- Trundle 9y ago
  I think this can vary a lot. Contractors often charge very high rates, but then they're called a consultant even if theyre there to do/create rather than consult.
  - noobermin 9y ago
    That would seem NOT to be to whom this ABC criteria applies, specifically on the "independently established role." This seems to most address those who have less power in the employer-contractor relationship.
- volkfish55 9y ago
  Contractor are paid more, since they have to factor in the health insurance, taxes, unpaid vacation, perks, their own laptops, no need for office space, no 401k match. There is no reason they would ever get paid less. Maybe those with H1B visas who can get taken advantage of or outsourced contractors in Ukraine? Those contractors definitely get paid a fraction of US salary.
  - CydeWeys 9y ago
    The vast majority of "contractors" in the US are paid than their full-time equivalents.
    - kbenson 9y ago
      > The vast majority of "contractors" in the US are paid than their full-time equivalents. You're missing the most important word there. I'm honestly not sure which one is intended.
      - CydeWeys 9y ago
        Meant to say "less" :/
  - taurath 9y ago
    Contractors are almost always paid less in my experience after taking into effect stock grants and bonuses. The contracting agency probably gets a nice portion of the takehome though (for having the political capital of being on a preferred vendors list), so to the company they probably pay more than salary.
    - fortythirteen 9y ago
      You also have to factor in the amount of responsibility for pay. A contractor with decent negotiation skils may net out slightly less than a FT senior dev at a company, but they often have less responsibility than even the FT junior and mid-level devs. Not to mention that they never get dragged into internal company politics or loyalty games. Factor in overtime, or the lack thereof, and you can make more or have far more work/life balance than FTs. That weekend app release? There's an extra $500-$1k that the FTs aren't getting. Company doesn't allow contractors to work over 40 hours for budgeting purposes? Leave at 5 everyday without anyone complaining.
- BurningFrog 9y ago
  There are two distinct classes of contractors. - Those who aren't good enough to get a full time job. - Those who are too good to settle for a full time job. The two groups are treated quite differently.
  - kelukelugames 9y ago
    Hahaha, I saw someone in the hallway wearing a contractor badge and a MIT hoodies. I am an alum so I asked about their time there. They said they graduated in 2003 but started in 91. I said, "Woah that's one helluva of a PHD." Turns out, they took a 10 year gap to play blackjack. Now they just work for fun every couple of years because they otherwise get bored. https://en.wikipedia.org/wiki/MIT_Blackjack_Team https://en.wikipedia.org/wiki/MIT_Blackjack_Team
  - taneq 9y ago
    Sounds like "casuals" vs. "contractors". Casual staff are often on very similar terms to contractors, apart from the rates of pay, but are seen as interchangeable rent-a-crowd rather than outside expertise.
    - dghughes 9y ago
      There were casual workers at the last place I worked some had been there 20 year or more. One day (literally on one day) they were all told they were not needed, no severance, no thanks just let go. Disposable human workers.
  - octorian 9y ago
    I've run into both types. The former are typically a group of second-class employees companies use as a way to "trial" someone before hiring them for real, or simply to skirt the requirements of employing someone full-time. They also tend to work for some shell company you've never heard of, at least on paper. The latter tend to be older folks, and often experts in various fields. They also have little trouble finding another "gig" almost immediately after their current one dries up. These people are usually self-employed.
- WalterBright 9y ago
  Back when I worked at Boeing, contractors got paid about double what the full time employees did. But, they received no employee benefits (worth about 40% of the employees' salary, if I recall correctly) and could be let go at a moment's notice. So in the end it worked out about the same. If the law requires contractors to get the same benefits, etc., the result will be the contractors will get paid less. The ones I knew wanted the higher pay / no benefits circumstance, and they'd lose that option.
- deleted 9y ago
  [deleted]
- forapurpose 9y ago
  > The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects ... There was a very interesting NY Times article last fall about that issue. They contrasted janitors at Apple, who work for a contractor and have no prospects for advancement in Apple, and Xerox's janitors in the 1980s who were employees, and one of whom is now Xerox's CTO: https://www.nytimes.com/2017/09/03/upshot/to-understand-rising-inequality-consider-the-janitors-at-two-top-companies-then-and-now.html https://www.nytimes.com/2017/09/03/upshot/to-understand-risi... To veer off on a tangent, I suspect it's connected with a new elitism in the U.S. What used to be the celebrated 'Land of Opportunity' where anyone could live the "American Dream' through hard work, regardless of where they started (even if very poor immigrants), is now a place where the children of the wealthy go to college, those of the working class are encouraged to go to trade school, and immigrants are more commonly discouraged.
  - Camillo 9y ago
    You are so wrong I don't know where to start. The percentage of Americans with college degrees has never been higher. For decades, the message from authorities has consistently been to encourage youths to go to college as much as possible, and the number of students has kept increasing beyond all reason. We are well past the point of diminishing returns, and into pure and simple harm, where millions of Americans go into debt to get pointless degree just so they'll be considered for jobs that shouldn't need a degree in the first place. It's a disaster.
    - forapurpose 9y ago
      Those claims are trendy, but the parent provides no basis for them and I've never seen one. There's plenty of reason to believe otherwise: The 'youths' want to go to college, and in a free country and a free market, it's believed that they know and decide their own best interests. Businesses in fact highly value college education; they pay people with college degrees much more than people without them. The incomes of people without degrees has been stagnant for decades, and there's concern among economists that their job prospects will become more difficult due to automation. If it had reached a point of diminishing returns (really, small marginal benefit), then the wage differential would be small. As I pointed out above, it's really economic discrimination: Education depends, more than anything, on family wealth. So the outcome of what the parent advocates is that the wealthy classes go to college and the lower classes don't get that opportunity. Usually it's wealthy people with college degrees that say college isn't needed; but tell them that their kids shouldn't go to college and you'll get a much different response. > The percentage of Americans with college degrees has never been higher. That's great. We want people to be better educated, more productive, and live better lives. That's the 'American Dream'. We don't want the economy stuck in the 1980s, but to move forward. It also makes the economy more productive. For example, Silicon Valley can't get enough talented developers, yet the United States (and world) is filled with kids with no access to education, many of whom probably could fill that talent gap. We need more education. High skill, high-paying jobs will go where there are more highly educated workers; if the U.S. cuts college education, it will go elsewhere. New businesses and industries that we haven't yet imagined will arise when they have that resource of educated people. Education also makes people healthier, better citizens, better parents, etc. HN celebrates knowledge; it's hard to suddenly discount it in this case. > It's a disaster. By what measure? The only disaster is that education is too expensive and not available to people without money.
- lazzlazzlazz 9y ago
  In my experience, contractors are almost without exception worse than full-time employees in terms of the quality of their work. The contractors who stand out get selected for full-time work relatively quickly and consistently.
  - jMyles 9y ago
    > The contractors who stand out get selected for full-time work relatively quickly and consistently. ...but many of us pass on full-time offers nearly constantly. It's not like contractors are just waiting for the day when they are "selected."
  - richardknop 9y ago
    Most contractors I know get full time offers constantly and they keep turning them down :)
- dingo_bat 9y ago
  In my limited experience contractors are paid much more.
- afpx 9y ago
  Given all the emphasis in hiring on avoiding “bad” hires at all costs ... I suspect that a small portion of companies use grueling interviews as more of a hazing ritual, and many of the rest follow because, well, that’s just what everyone else seems to do.
- e40 9y ago
  worse benefits Make that no benefits. In my 35 years in the tech industry I've never seen a contractor that got benefits, since it's the primary reason contractors exist.
- walshemj 9y ago
  er not in my experience are you confusing w2 contractors hired from a job shop with real self employed ones.
derekp7 9y ago
Does this affect "contract to hire" positions, where companies "try before you buy"? Further, can companies still get contractors through a contractor agency, assuming the workers are employees of that agency?
- simcop2387 9y ago
  I doubt it'll affect agencies, since generally there's not a contract with the person but with the agency. No idea about the first case, this is definitely going to result in a lot of billable time for lawyers.
  - Shivetya 9y ago
    I am going to assume agencies will be the biggest benefactor here. Would be interesting to see if companies like uber/lyft don't spin off agency type setups to isolate the company from the service providers.
- r00fus 9y ago
  This is how my wife joined her current (mega corp) employer with whom she's been with for years. In her case she was on an educational visa (with employment rights ) at the time of the contract to hire. She had sought employment for months after completing her degree so was really not in the best position to negotiate.
  - derekp7 9y ago
    Similar store with me, except I was 4 months into a layoff when I took a 6 month contract-to-hire position. They made me permanent after about 3 weeks (it is amazing how easy it is to impress an employer when you've had a 4 month forced vacation), and been there 8 years. Never would have applied if I had been working full time somewhere else though.
- greglindahl 9y ago
  This does sound like it would affect "try before you buy", unless the contractor has significant other work. Does anyone actually do "try before you buy" in California? It doesn't work in a hot job market, and the job market is currently hot.
LAMike 9y ago
What affect will this potentially have on Uber/Lyft?
- V-eHGsd_ 9y ago
  this is the 69 billion dollar question.
- bm1362 9y ago
  If this is common in other states I'd assume they've already passed the test for driver partners?
nebulous1 9y ago
This seems like a good thing overall
jMyles 9y ago
Ouch. Some of my favorite gigs I've ever performed aren't possible under this standard. I question whether this will actually benefit contractors, but I have no doubt that it will benefit bigger, established players who already have full-time cadres.
- forapurpose 9y ago
  > Some of my favorite gigs I've ever performed aren't possible under this standard. Let's not assume that because the cost to the employer goes up, they will drop all the former 'contractor' positions. Employee rates are based on what the market will bear, subject to law and regulation; they are not based on 'cost-minus' - cost to the employer, minus a profit. Using a very simple case of the cost and benefit: If the employer can hire you for $10/hr, they will, regardless of whether they make $20/hr or $200/hr from your labor; if the law increases your rate to $15, they still will employ you. Of course, if they only make $9/hr from your labor, they won't hire you at $10/hr in this simple theoretical case. Reality is more complex: They may be happy to absorb the loss for other reasons, such as completing a major project, pleasing an important client, acquiring or maintaining market share, developing talent, your compromising photos of the boss, etc. It's similar to the mistake people make about pricing: They assume goods are priced at 'cost plus' - the seller's cost plus a profit - and that therefore if the seller's cost increases then the price must also (businesses encourage this misconception - 'if regulations increase our costs, then everyone will have to pay more!'). Really goods are priced based on what the market will bear. That is, goods are priced as high as possible (i.e., at the level which maximizes profit). If they can charge you $10,000 for an item costing them $100, they will. If they have to charge $50 for it, they will do that too; $50 is better than nothing. If their costs change, it doesn't change what the market will bear.
  - kbart 9y ago
    For some (non-IT) companies programmers are always a sunk cost, so this math doesn't work there.
    - forapurpose 9y ago
cft 9y ago
How will this affect the tax? The main difference between a 1099 contractor and a W2 employee is in the payroll and social security/medicare tax requirements. But these tax requirements are federal and this is a CA only decision.
- greglindahl 9y ago
  Last I worked on a 1099, the total tax amount was roughly the same, the difference was who paid it.
  - SilasX 9y ago
    It doesn’t make a difference if everyone (including the government) agrees on the classification in advance. It makes a huge difference if you can retroactively change the terms of the original agreement (“because I wasn’t classified right”) and get the other party to have to pay you back for (half of) those taxes.
- gnicholas 9y ago
  Bingo. The IRS uses a different test, so workers could end up as "employees" for the purpose of state law and "contractors" for the purpose of federal tax withholding. Source: I used to be a tax lawyer.
danans 9y ago
There are many types of work outside of Tech and Gig-worker (the two that most comments here focus on) in which workers are inappropriately classified as contractors in order to reduce carried risk and cost to the employer, but where the employer also exerts significant control over the time, place and manner in which the work is done. My own familiarity with this (through family who have experienced it) is in the healthcare field, where new graduates who are hungry for experience have little leverage vs established employers, and don't push the issue of how they are incorrectly classified as contractors. Their only alternative would be to report the misclassification to state employment authorities, but again, they are often not in a position to make that worthwhile.
- e40 9y ago
  I was talking with someone recently, and they told me that all new Kaiser doctors are contractors. I was shocked. I don't know if it is true. If it is, I hope this decision reverses that trend. Can you imagine coming out of medical school, passing the boards, doing your time as a slave as some hospital, to get an offer as a contractor? And all that, with an amazing amount of debt, that you assumed you could pay off easily, but now you're not so sure? Wow.
  - danans 9y ago
    AFAIK (have a friends who are Kaiser docs), they are employees, and eventually partners, of the Kaiser Medical Group (a distinct business entity from Kaiser Permanente the nonprofit health system, that contracts exclusively with it), which comes with excellent benefits - including large home loans that are forgiven after several years of service and a generous pension. Perhaps they contract out some hyperspecialist roles. But neither of those scenarios is really comparable to the ones low wage contract workers find themselves in.
    - e40 9y ago
      I'm glad to hear that.
- lightedman 9y ago
hardwaresofton 9y ago
Here is the new test (the ABC test if you're into unnecessary pet names for things): > If A, B, or C isn’t present, the worker is considered an employee. > A. Freedom from control over how to perform the service > B. Service is outside the business' normal variety or workplace > C. Worker is engaged in independently established role So if any one of those conditions isn't the case, you are an employee under the law. I see people in this thread wondering how it'll affect companies like Uber/Lyft/whatever -- and I think it will actually be good for them, because now they'll use some of that warchest to hire the the best lawyers to figure out exactly how to best navigate the law (in california at least), and write their contracts in whatever way that best makes sure all 3 are present and they still get a healthy supply of drivers. Other smaller gig economy companies will then follow that lead so they can stay afloat and not purchase the legal work done by Uber/Lyft. If I was invested in Uber/Lyft, I would welcome this, because it removes an avenue of risk, stabilizing the lawsuit risk. [EDIT] - In the article there's a link to the decision from which the test comes from: https://www.bloomberglaw.com/public/desktop/document/Hargrove_v_Sleepys_LLC_220_NJ_289_106_A3d_449_2015_Court_Opinion?1525151421 https://www.bloomberglaw.com/public/desktop/document/Hargrov...
- siruncledrew 9y ago
  Could someone please provide examples for A and C? I understand B, but I don't fully understand A and C. For A, does that only mean working hours (i.e. can't make someone work 11am-7pm EST)? Does that affect scheduling milestones or tasks to be completed? For C, what does 'independently established role' mean? Like job title? Thanks in advance.
  - rexgallorum2 9y ago
    A: You hire an external contractor to do work (roofing, pouring concrete, creating a website, etc.), the contractor should have full autonomy (and liability) regarding how, when, and by whom the work is done--the contractor is responsible for the end result. A good (bad) example might be a language school--just the type of business that often operates in this grey area. A language school might 'hire' a teacher, technically an independent contractor, to do teaching work, yet nonetheless treat the teacher as an employee, specifying exact teaching times, methods, books, locations, etc., closely monitoring performance (as with an employee), and even integrating the person into an internal hierarchy (so the boss becomes a boss rather than a client). True autonomy (freedom from control) in this case would be the freedom to decide upon the times, locations, methods, materials, etc. and a dependence upon own's own independent expertise while performing the contracted duty. C: The contractor (ideally) works for many companies (i.e. has many clients) and not just for you. Is the contractor (individual or company) independently established? When determining C, the authorities might look specifically at things like whether the contractor has an established business location, whether the contractor has employees, how much work the contractor does for any individual client, etc.
paulsutter 9y ago
The change seems immaterial to me except that it’s much clearer. The article author injects a social justice angle without describing any specific impact. Who is really affected by this? Any concrete examples?
- Animats 9y ago
  The material part is that it's clearer. That means most such decisions don't require litigation. The result will be that blatant violations of the law get resolved fast.
  - paulsutter 9y ago
    Such as? Uber seems in the clear (I direct the driver not Uber), I cant think of any material cases where this matters By the way, that’s really good for Uber drivers. If they had to be employees they would get paid less and couldn’t deduct many expenses
    - siegel 9y ago
      Not exactly. The prior test used in California already looked at who had the right to control or direct the work of the putative contractor. The new test requires the company to prove that it does not fundamentally control or direct the performance of work, as well as prove that the other 2 factors of the ABC test also do not apply.
- mabbo 9y ago
  FedEx, UPS, Amazon Logistics, basically every delivery company. Everyone in delivery these days is an "independent contractor" with no control over their route or hours, working for a business that does nothing but deliveries.
  - PhantomGremlin 9y ago
    FedEx, UPS, Amazon Logistics, basically every delivery company. I don't know about the rest of them, but your information is totally wrong about UPS. The "delivery" people are most definitely employees. Union employees, Teamsters in fact. Which means that UPS doesn't get to push them around all that easily. But which also means that the relationship is occasionally more confrontational than it should be. https://teamster.org/divisions/package https://teamster.org/divisions/package
SilasX 9y ago
Sorry, rant coming. (I assure the mods this is impromptu and not copy-pasted; verify yourself.) I don't see a lot of productive progress being made on this question. Judges constantly try to apply conflicting standards of whether someone is "really" an employee, but you can't make progress on that question until you can measurably answer why you're asking that question to begin with. For another context, take "is alcoholism really a disease?" If we don't want to be stuck in unproductive talking-past-each-other, we have to transform that into a more concrete query, like, "are alcoholics responsive to social pressure?" or "does the urge to drink stem from a chemical imbalance?" Those questions, you can actually -- in principle -- make progress on. Maybe you find some chemical under which alcoholics stop drinking because it doesn't appeal to them anymore. Or maybe you find that shunning changes their behavior, and the appeal to "alcoholism being a disease" maps to a specific game-theoretic strategy. Or maybe shunning just turns out to make alcoholics miserable and resort to more expensive, covert techniques to get their fix. Or maybe the evidence is perpetually ambiguous. But at least you can make progress on those questions. What are the corresponding criteria for the question "is this Uber driver really an employee?" How would you know you got it wrong? What are you really optimizing for when you legislate a distinction between contractor and employee? For example, let's say you proposed a new test A, under which every purchase of labor makes someone an employer and employee. You buy a haircut? Great, you need to send this amount to this fund to pay for their unemployment insurance. And you need to give them this notice about their rights as a worker. And you need to pay into this worker's comp fund. Or let's say you proposed a test B under which the buyer is the sole decider of how to classify, and every employer/buyer in the world elects to classify the provider/worker as an employee, and screams in glee as they offload all the liability and expenses onto the worker. By what standard, concretely, do you know you erred? It doesn't work to say "that's absurd". What's important is to say the specific desiderata that make that situation absurd. I have yet to see someone propose a (satisfying) standard/desideratum to ground the employee/contractor distinction in law. The closest I've seen is "we want to make sure workers don't get oppressed" (or some equivalent expression), but that doesn't suffice -- there has to be some reason you don't go with the A test above. What is that?
- mark212 9y ago
  Transaction costs for one. It sounds like an incredible mess to actually implement. And why shift that burden to the customer? In a haircut scenario, the person getting the cut is unquestionably a customer and not an employer. So why make him/her shoulder the administrative and legal burden? Think beyond wage and hour. Customer #2 gets cut by scissors, suffering serious bodily injury. Who does she sue? The barber, sure. But these actions were performed during the course and scope of employment. So now (per 400+ years of common law) the employer — aka previous customer - is now on the hook for those damages. I’d certainly never get my hair cut there. It might cost me $100,000. Ok so change that law, but now you’re ditching a few centuries of agency law and getting exactly what in return? A system no more efficient than what it’s replacing.
eyeareque 9y ago
Would this affect companies like Google and others who have contractors/vendors, but use them as if they were employees?
Izmaki 9y ago
As a foreigner I hate when English headlines are semi-cryptic lines of text that make absolutely no sense to me without a few extra words. They transform... What?
- dang 9y ago
  I think you need a "the" in there. We'll add one.
tomohawk 9y ago
ABC has long stood for Anywhere But California How they expect to stem the flow of businesses moving out of the state while not honoring simple contracts is beyond me.
- rconti 9y ago
  Can you explain why that's the case, when this is apparently a standard that already existed in other states, before California (according to the article)? Can you explain why California is thriving when people incessantly predict the imminent collapse due to every employer moving out of state?
- forgottenpass 9y ago
  > not honoring simple contracts Please, tell me more about these jurisdictions that enforce void (not voidable, void) contracts.
bigcostooge 9y ago
The rest of the country needs this.
PythonicAlpha 9y ago
For me it would be interesting to see, if this also sparks remote work for software development contractors, since of test criteria B. Else, when a software developer freelancer is working directly in a company with software developer employees, the criterion will be difficult to fulfill. In Germany we have a similar situation, because we also have this discussion, who is an employee (for social security matters). One big criterion is remote work, but still many employers are holding back, since they fear to loose control over the contractor, when he can not look over his shoulder.
lstroud 9y ago
Why does a court get to establish a rule like this? Shouldn’t this be a legislative responsibility?
- PythonicAlpha 9y ago
  Yes, I guess so. Thing is, that legislation is often slow, so courts have to decide matters. In Germany also the legislation oftentimes is not competent. Many laws are made, that are without value, after they where on trial. So, at least in Germany, courts are oftentimes a second law maker, because they have to check, how all these rules fit together (in the best of all worlds, the legislation should do that beforehand).
  - jerf 9y ago
    It's worth pointing out there are different legal foundations. The United States is on something called Common Law [1], in which courts are generally supposed to follow precedent and not make up new stuff or function as de facto legislatures. Obviously, this is one of those plans that doesn't necessarily survive contact with the enemy, but under common law it is reasonable to criticize the court here as potentially overreaching. A mitigating factor in that criticism is precisely that many other peer jurisdictions have adopted the same standard on presumably similar bases of legislation, so there is some precedent in favor of using this same standard. Germany is built on a foundation called Civil Law [2]. In this system, judges are encouraged to uphold principles and rule on the specifics of a case, regardless of previous cases that may have found in some way or another. Just as with common law, I'm sure judges may consult precedents as they find useful, but they aren't bound to them, and are, I presume, much less likely to mention them in judgments as they are not anywhere near as relevant. This also applies in a fairly obvious fashion to Hermel's post that is a sibling to what I'm replying to. In Civil Law, which Switzerland also operates under [3], instructing judges to imagine reasonable laws is a reasonable thing to do. In Common Law, judges just imagining laws to be the way they believe they should be strikes at the foundation of the system. (Perhaps ironically, it's probably easier for Common Law courts to function as de facto legislatures precisely because of the respect for precedential law, despite the fact they are nominally not supposed to. A certain court can make a decision and apply some test like this, and it tends to spread around the country unless some legislatures take explicit action to prevent it. It can even spread between countries, because common law courts can look at other country's common law courts and consider their precedents as well, though more weakly than their own. By contrast, while a civil law judge at first seems to be taking a legislative role when they make some decision based on laws that essentially only exist in their head, they are binding the future far less and the decision carries less global weight, making it much harder to truly "legislate from the bench" in the way we complain about in the US. Second order effects can be pretty twisted!) [1]: https://en.wikipedia.org/wiki/Common_law https://en.wikipedia.org/wiki/Common_law [2]: https://en.wikipedia.org/wiki/Civil_law https://en.wikipedia.org/wiki/Civil_law [3]: https://en.wikipedia.org/wiki/Civil_law_(legal_system)#/media/File:Map_of_the_Legal_systems_of_the_world_(en).png https://en.wikipedia.org/wiki/Civil_law_(legal_system)#/medi...
fiatjaf 9y ago
You know what would be a better test? Check if there is a job contract between company and person.
- forgottenpass 9y ago
  Check where? Not all contracts are memorialized.
jdavis703 9y ago
How does the "B" in ABC affect me as someone who does software engineering contracting on the side sometimes for tech firms? I've got a decent network out here in SV, and sometimes a startup facing an urgent deadline will hire me to do some code writing for a couple of weeks. This is work I do outside of my normal 9-5. But now it seems I can't do this without being classified as an employee. That really sucks.
- ericabiz 9y ago
  For you, and others in this type of role, it likely makes the most sense to form a LLC or other corporation, and do a corp-to-corp contract. If this ruling holds, companies may even start to require that. Unfortunately for those in California, CA requires an $800/year minimum fee for a corporation. It’d be nice if these changes forced a change in that law. (By the way, just to head off a common misconception: You cannot just “incorporate somewhere else” to avoid the $800 fee. If you are a California resident doing work in California, even if you have a “foreign corporation”—California’s term for corporations from other states—you must register it in California and be subject to the $800 fee.)
- emaginniss 9y ago
  I think it's about the service that the contracting company does. The idea being that the company should only contract for things that are different than what it normally does. IOW, if you have a 100 SW developers in SV that are employees, you can't also have a bunch of contract SW developers in SV.
hmahncke 9y ago
This test has been the standard in other states for a while - New Jersey for example. But I don't think it has been an issue for Uber/Lyft classifying drivers in NJ as contractors. I wonder why not?
- coryfklein 9y ago
  California has 4x the population of Jersey and is home to the very businesses that are leading the charge against employee/contractor norms.
  - hmahncke 9y ago
    Yes, for sure. I'm just curious why Uber/Lyft haven't been sued already for their New Jersey operations.
rayvd 9y ago
Should the "employee" also have a say in this?
- e40 9y ago
  That's a good question. I think it is widely assumed that contractors would prefer to be employees, given the number of court cases where contractors have sued employers. (I don't remember a court case where an employee sued to be a contractor.) I still remember the huge Microsoft settlement[1]. Well, huge for the time. Employers want to commoditize the jobs they offer. It's in their best interest to be able to hire/fire with as little risk as possible. The dream for many companies would be "all employees are contractors" and no one gets benefits. Except, of course, management. They'll get huge salaries and great benefits. (I'm an officer of a 35 yr old corp.) [1] https://www.nytimes.com/2000/12/13/business/technology-temp-workers-at-microsoft-win-lawsuit.html https://www.nytimes.com/2000/12/13/business/technology-temp-...
eli_gottlieb 9y ago
What a May Day gift!
walshemj 9y ago
MM I just though isn't this going to kill Hollywood as the entertainment biz is run off "contractors" I think A & B would catch most film tv and theater professionals the gaffer gets told what lighting effect to go for also everyone on a show gets told when and where to show up on the call sheet.
- justherefortart 9y ago
  IT contractors or contract-to-hire is likely dead as well. And good fucking riddance. I contract out work from my company. You know what I don't require? Them to come and work at my office from "core hours". I don't have a dress code. I only have specs on what they're creating and the tools, which they provide. They bill per job and do it at their leisure as well. Just like when I built homes, my contractors provided everything they needed and I provided materials. I scheduled them but they showed up whenever it fit in their schedule based off their other contract jobs. They're also required to carry their own GL and Worker's Comp if I hire them or go through their own LLC/Corp.
  - walshemj 9y ago
    But if your expecting me to provide kit to your required spec that increases my day rate :-) though that does help with fending off the tax man. You confusing say a brickie, sparks or a chippie who can use the same tools from job to job - with an it job where you might have to buy new software / hardware.
- s73v3r_ 9y ago
  I don't think so. The gaffer is told what lighting effect is desired, but they are the one that has control over how it's achieved. Same for the propmaster; the director says, "We need something that does this", and it's up to the propmaster how to achieve that. That industry does also have some pretty strong unions, so I think they'd be ok regarding labor standards. Just like if you hired someone to paint your fence, you do have control over how you want it (what color, for example), but not necessarily over how it gets done (if they end up tricking a bunch of other painters to do it because they say how fun it is).
laveur 9y ago
Am I the only person that feels that places like Uber/Lyft/Etc are fighting the wrong battle? I think their money would be better spent instead fighting for a new classification of labor. One that defines exactly what a Gig (Hate that term) worker is and how the industry operates. Its clear to me that tons of people want a job like Uber offers. I think its time we make a law that represents that. Instead they waste their time fighting in courts to keep them as a contract employee, which according to the law is not what they are. But I feel they are also not a regular employee. I think adding a new classification for them is win win for both sides. It gives both sides rights under the law.
- hartator 9y ago
  Yes, making new laws is always yhe solution. The fight is more about is Uber drivers should get minimum wages when they are have a low day than status.
- knuththetruth 9y ago
  I don’t think companies who have profited from the declining power and wealth of American workers should be able to buy themselves a new labor classification that serves their interests. That’s not how a healthy democracy works.
  - dsfyu404ed 9y ago
    In a healthy democracy the people get what they want, even if it's dumb. Prohibition is the first example that comes to mind that won't offend many people here. If the companies can convince the people to want a new labor classification badly enough then they can get it. Of course things will swing back if it turns out to be crap that is bad for enough people and good for too few. The arc of progress is long.
    - knuththetruth 9y ago
      Companies don't "convince" people of this kind of stuff. They use their wealth and power to force it on workers with bought-and-sold politicians. People sleeping in their cars in between working at an Amazon distribution center or driving deliveries don't want a new labor classification. They don't want to die in poverty and are just trying to survive this ceaseless assault.
joshuaheard 9y ago
Maybe it's time for the legislature to create a new classification of employee: an independent employee, to conform to the nature of the new gig economy.
- s73v3r_ 9y ago
  What benefits would the employees have under that system? How would they be better off with that than they are now?
  - joshuaheard 9y ago
    I don't know. The purpose of the law is not to confer benefits on one class or another. It is to accurately describe the rights and duties of relationships.

268 points by neonate 9y ago

It’s interesting how even within companies a hard set social hierarchy has taken place between employees and contractors. The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects (companies tend to like to hire from full time to full time), worse benefits and generally don’t get most of the perks of being an employee. For coders, is this because they’re objectively somehow worse programmers? Given all the emphasis in hiring on avoiding “bad” hires at all costs, it seems like there’s a conflict between paying for people who are “worse” than a FTE but still accepting their contributions. I realize it’s a strategy that gives the companies more leeway to expand and retract their workforce, but then stigma that is attached throughout the industry around contract workers shouldn’t exist, right?

netheril96 9y ago
Do companies whose primary employees are programmers also employ contractual programmers? According to my observation, computer technology companies may have contractual workers, but only for other roles.
- simcop2387 9y ago
  Most companies that I've worked for have had them, usually for specific purposes (billing system related) but they've also had them as more general cases, for less than full time work usually (the people also contracted out to multiple companies). I don't know how common this is though since it's only a few companies and the people involved are all semi-related (Perl programming community).
- ereyes01 9y ago
  From personal experience (and admittedly stale by some 8 years), IBM had lots of contractors doing software development alongside full-timers. It was a pretty insecure position to be in because they would take the brunt of layoffs, and many I knew were gone by the time I left, with a couple of exceptions. Many were ex-employess who had been previously let go or were retired. Some were not, and all were basically indistinguishable from regular developers... they just happened to fill a req that merely funded a contractor instead of a full-time employee, depending on how the money was handed out to departments.
- Zak 9y ago
  Yes, absolutely. I've had several clients like that. Usually, the work centers around something that isn't their core business or a technology that their full-time programmers aren't very experienced with. Sometimes it's just a matter of fluctuating workload where hiring another person full-time wouldn't make sense.
- Bahamut 9y ago
  Even companies like Google employ contractor programmers.
- meddlepal 9y ago
  Yes, all the time. Often in key positions or on strategic initiatives where expertise or specialist skills are needed. I've also seen short contracts used while a company ramps up hiring FTE as a velocity optimization to get the ball rolling on something new.
- perl4ever 9y ago
  I couldn't tell you the reasoning, but I've worked at a couple of places where there were contract programmers alongside FTE programmers. In one case, that contract programmer became a FTE, but in either situation, most of the programmers were FTEs.
- dragonwriter 9y ago
  > Do companies whose primary employees are programmers also employ contractual programmers? Yes, e.g., firms whose main line of business is contracting out employees who are programmers hire programmers as subcontractors in addition to regular employees to round out special skills needed in contracts.
jMyles 9y ago
I'm not sure this is a very good read, especially in the startup scene. I have been in a position (for which I'm super grateful) in which young startups didn't have the funds to pay me my full-time rate, and so instead chose to pay me a weekly rate to work one week out of the month. I like to believe that I provided substantial value in that configuration - usually landing to review code, mentor newer programmers, and help chart direction for the subsequent three weeks (during which I'd be absent). In this case, I was being paid quite a bit more than the full-timers, not less. In time, they grew to be able to afford a more complete full-time cadre, and they people I worked with weren't so junior anymore. I did this... I think half a dozen times. It was a great work config for everybody. If you can afford to travel to the work and you can really bring the fight for 5-8 straight days, I highly suggest it.
- ddingus 9y ago
  Honestly, yours is a GREAT read. That's a very solid case for contractors and almost nobody will have a meaningful problem with it. I've done similar things in the CAD / data management space. A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. The full time peeps should be taking you out for a lunch or two to network and gain some easy, high value mentoring, contacts... I would in a second, and have had others invite me for this kind of thing. Some have remained in touch for years, and as they grew, have helped me as I did them. If we had more of that going on, it would benefit nearly everyone. But we don't. The majority case boils down to head count quotas, and cost of labor factors. Often, these are both under specified, leaving managers to find contractors to fill gaps. The larger companies do this and it's chronic.
  - ajross 9y ago
    > A person with outside perspective, rare skills, experience, and most importantly, is the outside voice able to bring real options to the table along with production proven, time tested ways and means, is worth every penny. Such a contractor would likely meet the new "ABC" standard in the linked article, though. Those aren't the positions that are in danger of being eliminated, it's the "grunt contractor" folks who are contractors only because the employer wants to keep a buffer of positions that are active but can be terminated easily.
Trundle 9y ago
I think this can vary a lot. Contractors often charge very high rates, but then they're called a consultant even if theyre there to do/create rather than consult.
- noobermin 9y ago
  That would seem NOT to be to whom this ABC criteria applies, specifically on the "independently established role." This seems to most address those who have less power in the employer-contractor relationship.
volkfish55 9y ago
Contractor are paid more, since they have to factor in the health insurance, taxes, unpaid vacation, perks, their own laptops, no need for office space, no 401k match. There is no reason they would ever get paid less. Maybe those with H1B visas who can get taken advantage of or outsourced contractors in Ukraine? Those contractors definitely get paid a fraction of US salary.
- CydeWeys 9y ago
  The vast majority of "contractors" in the US are paid than their full-time equivalents.
  - kbenson 9y ago
    > The vast majority of "contractors" in the US are paid than their full-time equivalents. You're missing the most important word there. I'm honestly not sure which one is intended.
    - CydeWeys 9y ago
      Meant to say "less" :/
- taurath 9y ago
  Contractors are almost always paid less in my experience after taking into effect stock grants and bonuses. The contracting agency probably gets a nice portion of the takehome though (for having the political capital of being on a preferred vendors list), so to the company they probably pay more than salary.
  - fortythirteen 9y ago
    You also have to factor in the amount of responsibility for pay. A contractor with decent negotiation skils may net out slightly less than a FT senior dev at a company, but they often have less responsibility than even the FT junior and mid-level devs. Not to mention that they never get dragged into internal company politics or loyalty games. Factor in overtime, or the lack thereof, and you can make more or have far more work/life balance than FTs. That weekend app release? There's an extra $500-$1k that the FTs aren't getting. Company doesn't allow contractors to work over 40 hours for budgeting purposes? Leave at 5 everyday without anyone complaining.
BurningFrog 9y ago
There are two distinct classes of contractors. - Those who aren't good enough to get a full time job. - Those who are too good to settle for a full time job. The two groups are treated quite differently.
- kelukelugames 9y ago
  Hahaha, I saw someone in the hallway wearing a contractor badge and a MIT hoodies. I am an alum so I asked about their time there. They said they graduated in 2003 but started in 91. I said, "Woah that's one helluva of a PHD." Turns out, they took a 10 year gap to play blackjack. Now they just work for fun every couple of years because they otherwise get bored. https://en.wikipedia.org/wiki/MIT_Blackjack_Team https://en.wikipedia.org/wiki/MIT_Blackjack_Team
- taneq 9y ago
  Sounds like "casuals" vs. "contractors". Casual staff are often on very similar terms to contractors, apart from the rates of pay, but are seen as interchangeable rent-a-crowd rather than outside expertise.
  - dghughes 9y ago
    There were casual workers at the last place I worked some had been there 20 year or more. One day (literally on one day) they were all told they were not needed, no severance, no thanks just let go. Disposable human workers.
- octorian 9y ago
  I've run into both types. The former are typically a group of second-class employees companies use as a way to "trial" someone before hiring them for real, or simply to skirt the requirements of employing someone full-time. They also tend to work for some shell company you've never heard of, at least on paper. The latter tend to be older folks, and often experts in various fields. They also have little trouble finding another "gig" almost immediately after their current one dries up. These people are usually self-employed.
WalterBright 9y ago
Back when I worked at Boeing, contractors got paid about double what the full time employees did. But, they received no employee benefits (worth about 40% of the employees' salary, if I recall correctly) and could be let go at a moment's notice. So in the end it worked out about the same. If the law requires contractors to get the same benefits, etc., the result will be the contractors will get paid less. The ones I knew wanted the higher pay / no benefits circumstance, and they'd lose that option.
deleted 9y ago
[deleted]
forapurpose 9y ago
> The contractors tend to perform the exact same duties as employees, but are usually paid less, have worse future prospects ... There was a very interesting NY Times article last fall about that issue. They contrasted janitors at Apple, who work for a contractor and have no prospects for advancement in Apple, and Xerox's janitors in the 1980s who were employees, and one of whom is now Xerox's CTO: https://www.nytimes.com/2017/09/03/upshot/to-understand-rising-inequality-consider-the-janitors-at-two-top-companies-then-and-now.html https://www.nytimes.com/2017/09/03/upshot/to-understand-risi... To veer off on a tangent, I suspect it's connected with a new elitism in the U.S. What used to be the celebrated 'Land of Opportunity' where anyone could live the "American Dream' through hard work, regardless of where they started (even if very poor immigrants), is now a place where the children of the wealthy go to college, those of the working class are encouraged to go to trade school, and immigrants are more commonly discouraged.
- Camillo 9y ago
  You are so wrong I don't know where to start. The percentage of Americans with college degrees has never been higher. For decades, the message from authorities has consistently been to encourage youths to go to college as much as possible, and the number of students has kept increasing beyond all reason. We are well past the point of diminishing returns, and into pure and simple harm, where millions of Americans go into debt to get pointless degree just so they'll be considered for jobs that shouldn't need a degree in the first place. It's a disaster.
  - forapurpose 9y ago
    Those claims are trendy, but the parent provides no basis for them and I've never seen one. There's plenty of reason to believe otherwise: The 'youths' want to go to college, and in a free country and a free market, it's believed that they know and decide their own best interests. Businesses in fact highly value college education; they pay people with college degrees much more than people without them. The incomes of people without degrees has been stagnant for decades, and there's concern among economists that their job prospects will become more difficult due to automation. If it had reached a point of diminishing returns (really, small marginal benefit), then the wage differential would be small. As I pointed out above, it's really economic discrimination: Education depends, more than anything, on family wealth. So the outcome of what the parent advocates is that the wealthy classes go to college and the lower classes don't get that opportunity. Usually it's wealthy people with college degrees that say college isn't needed; but tell them that their kids shouldn't go to college and you'll get a much different response. > The percentage of Americans with college degrees has never been higher. That's great. We want people to be better educated, more productive, and live better lives. That's the 'American Dream'. We don't want the economy stuck in the 1980s, but to move forward. It also makes the economy more productive. For example, Silicon Valley can't get enough talented developers, yet the United States (and world) is filled with kids with no access to education, many of whom probably could fill that talent gap. We need more education. High skill, high-paying jobs will go where there are more highly educated workers; if the U.S. cuts college education, it will go elsewhere. New businesses and industries that we haven't yet imagined will arise when they have that resource of educated people. Education also makes people healthier, better citizens, better parents, etc. HN celebrates knowledge; it's hard to suddenly discount it in this case. > It's a disaster. By what measure? The only disaster is that education is too expensive and not available to people without money.
lazzlazzlazz 9y ago
In my experience, contractors are almost without exception worse than full-time employees in terms of the quality of their work. The contractors who stand out get selected for full-time work relatively quickly and consistently.
- jMyles 9y ago
  > The contractors who stand out get selected for full-time work relatively quickly and consistently. ...but many of us pass on full-time offers nearly constantly. It's not like contractors are just waiting for the day when they are "selected."
- richardknop 9y ago
  Most contractors I know get full time offers constantly and they keep turning them down :)
dingo_bat 9y ago
In my limited experience contractors are paid much more.
afpx 9y ago
Given all the emphasis in hiring on avoiding “bad” hires at all costs ... I suspect that a small portion of companies use grueling interviews as more of a hazing ritual, and many of the rest follow because, well, that’s just what everyone else seems to do.
e40 9y ago
worse benefits Make that no benefits. In my 35 years in the tech industry I've never seen a contractor that got benefits, since it's the primary reason contractors exist.
walshemj 9y ago
er not in my experience are you confusing w2 contractors hired from a job shop with real self employed ones.

derekp7 9y ago

Does this affect "contract to hire" positions, where companies "try before you buy"? Further, can companies still get contractors through a contractor agency, assuming the workers are employees of that agency?

simcop2387 9y ago
I doubt it'll affect agencies, since generally there's not a contract with the person but with the agency. No idea about the first case, this is definitely going to result in a lot of billable time for lawyers.
- Shivetya 9y ago
  I am going to assume agencies will be the biggest benefactor here. Would be interesting to see if companies like uber/lyft don't spin off agency type setups to isolate the company from the service providers.
r00fus 9y ago
This is how my wife joined her current (mega corp) employer with whom she's been with for years. In her case she was on an educational visa (with employment rights ) at the time of the contract to hire. She had sought employment for months after completing her degree so was really not in the best position to negotiate.
- derekp7 9y ago
  Similar store with me, except I was 4 months into a layoff when I took a 6 month contract-to-hire position. They made me permanent after about 3 weeks (it is amazing how easy it is to impress an employer when you've had a 4 month forced vacation), and been there 8 years. Never would have applied if I had been working full time somewhere else though.
greglindahl 9y ago
This does sound like it would affect "try before you buy", unless the contractor has significant other work. Does anyone actually do "try before you buy" in California? It doesn't work in a hot job market, and the job market is currently hot.

LAMike 9y ago

What affect will this potentially have on Uber/Lyft?

V-eHGsd_ 9y ago
this is the 69 billion dollar question.
bm1362 9y ago
If this is common in other states I'd assume they've already passed the test for driver partners?

nebulous1 9y ago

This seems like a good thing overall

jMyles 9y ago

Ouch. Some of my favorite gigs I've ever performed aren't possible under this standard. I question whether this will actually benefit contractors, but I have no doubt that it will benefit bigger, established players who already have full-time cadres.

forapurpose 9y ago
> Some of my favorite gigs I've ever performed aren't possible under this standard. Let's not assume that because the cost to the employer goes up, they will drop all the former 'contractor' positions. Employee rates are based on what the market will bear, subject to law and regulation; they are not based on 'cost-minus' - cost to the employer, minus a profit. Using a very simple case of the cost and benefit: If the employer can hire you for $10/hr, they will, regardless of whether they make $20/hr or $200/hr from your labor; if the law increases your rate to $15, they still will employ you. Of course, if they only make $9/hr from your labor, they won't hire you at $10/hr in this simple theoretical case. Reality is more complex: They may be happy to absorb the loss for other reasons, such as completing a major project, pleasing an important client, acquiring or maintaining market share, developing talent, your compromising photos of the boss, etc. It's similar to the mistake people make about pricing: They assume goods are priced at 'cost plus' - the seller's cost plus a profit - and that therefore if the seller's cost increases then the price must also (businesses encourage this misconception - 'if regulations increase our costs, then everyone will have to pay more!'). Really goods are priced based on what the market will bear. That is, goods are priced as high as possible (i.e., at the level which maximizes profit). If they can charge you $10,000 for an item costing them $100, they will. If they have to charge $50 for it, they will do that too; $50 is better than nothing. If their costs change, it doesn't change what the market will bear.
- kbart 9y ago
  For some (non-IT) companies programmers are always a sunk cost, so this math doesn't work there.
  - forapurpose 9y ago

cft 9y ago

How will this affect the tax? The main difference between a 1099 contractor and a W2 employee is in the payroll and social security/medicare tax requirements. But these tax requirements are federal and this is a CA only decision.

greglindahl 9y ago
Last I worked on a 1099, the total tax amount was roughly the same, the difference was who paid it.
- SilasX 9y ago
  It doesn’t make a difference if everyone (including the government) agrees on the classification in advance. It makes a huge difference if you can retroactively change the terms of the original agreement (“because I wasn’t classified right”) and get the other party to have to pay you back for (half of) those taxes.
gnicholas 9y ago
Bingo. The IRS uses a different test, so workers could end up as "employees" for the purpose of state law and "contractors" for the purpose of federal tax withholding. Source: I used to be a tax lawyer.

danans 9y ago

There are many types of work outside of Tech and Gig-worker (the two that most comments here focus on) in which workers are inappropriately classified as contractors in order to reduce carried risk and cost to the employer, but where the employer also exerts significant control over the time, place and manner in which the work is done. My own familiarity with this (through family who have experienced it) is in the healthcare field, where new graduates who are hungry for experience have little leverage vs established employers, and don't push the issue of how they are incorrectly classified as contractors. Their only alternative would be to report the misclassification to state employment authorities, but again, they are often not in a position to make that worthwhile.

e40 9y ago
I was talking with someone recently, and they told me that all new Kaiser doctors are contractors. I was shocked. I don't know if it is true. If it is, I hope this decision reverses that trend. Can you imagine coming out of medical school, passing the boards, doing your time as a slave as some hospital, to get an offer as a contractor? And all that, with an amazing amount of debt, that you assumed you could pay off easily, but now you're not so sure? Wow.
- danans 9y ago
  AFAIK (have a friends who are Kaiser docs), they are employees, and eventually partners, of the Kaiser Medical Group (a distinct business entity from Kaiser Permanente the nonprofit health system, that contracts exclusively with it), which comes with excellent benefits - including large home loans that are forgiven after several years of service and a generous pension. Perhaps they contract out some hyperspecialist roles. But neither of those scenarios is really comparable to the ones low wage contract workers find themselves in.
  - e40 9y ago
    I'm glad to hear that.
lightedman 9y ago

hardwaresofton 9y ago

Here is the new test (the ABC test if you're into unnecessary pet names for things): > If A, B, or C isn’t present, the worker is considered an employee. > A. Freedom from control over how to perform the service > B. Service is outside the business' normal variety or workplace > C. Worker is engaged in independently established role So if any one of those conditions isn't the case, you are an employee under the law. I see people in this thread wondering how it'll affect companies like Uber/Lyft/whatever -- and I think it will actually be good for them, because now they'll use some of that warchest to hire the the best lawyers to figure out exactly how to best navigate the law (in california at least), and write their contracts in whatever way that best makes sure all 3 are present and they still get a healthy supply of drivers. Other smaller gig economy companies will then follow that lead so they can stay afloat and not purchase the legal work done by Uber/Lyft. If I was invested in Uber/Lyft, I would welcome this, because it removes an avenue of risk, stabilizing the lawsuit risk. [EDIT] - In the article there's a link to the decision from which the test comes from: https://www.bloomberglaw.com/public/desktop/document/Hargrove_v_Sleepys_LLC_220_NJ_289_106_A3d_449_2015_Court_Opinion?1525151421 https://www.bloomberglaw.com/public/desktop/document/Hargrov...

siruncledrew 9y ago
Could someone please provide examples for A and C? I understand B, but I don't fully understand A and C. For A, does that only mean working hours (i.e. can't make someone work 11am-7pm EST)? Does that affect scheduling milestones or tasks to be completed? For C, what does 'independently established role' mean? Like job title? Thanks in advance.
- rexgallorum2 9y ago
  A: You hire an external contractor to do work (roofing, pouring concrete, creating a website, etc.), the contractor should have full autonomy (and liability) regarding how, when, and by whom the work is done--the contractor is responsible for the end result. A good (bad) example might be a language school--just the type of business that often operates in this grey area. A language school might 'hire' a teacher, technically an independent contractor, to do teaching work, yet nonetheless treat the teacher as an employee, specifying exact teaching times, methods, books, locations, etc., closely monitoring performance (as with an employee), and even integrating the person into an internal hierarchy (so the boss becomes a boss rather than a client). True autonomy (freedom from control) in this case would be the freedom to decide upon the times, locations, methods, materials, etc. and a dependence upon own's own independent expertise while performing the contracted duty. C: The contractor (ideally) works for many companies (i.e. has many clients) and not just for you. Is the contractor (individual or company) independently established? When determining C, the authorities might look specifically at things like whether the contractor has an established business location, whether the contractor has employees, how much work the contractor does for any individual client, etc.

paulsutter 9y ago

The change seems immaterial to me except that it’s much clearer. The article author injects a social justice angle without describing any specific impact. Who is really affected by this? Any concrete examples?

Animats 9y ago
The material part is that it's clearer. That means most such decisions don't require litigation. The result will be that blatant violations of the law get resolved fast.
- paulsutter 9y ago
  Such as? Uber seems in the clear (I direct the driver not Uber), I cant think of any material cases where this matters By the way, that’s really good for Uber drivers. If they had to be employees they would get paid less and couldn’t deduct many expenses
  - siegel 9y ago
    Not exactly. The prior test used in California already looked at who had the right to control or direct the work of the putative contractor. The new test requires the company to prove that it does not fundamentally control or direct the performance of work, as well as prove that the other 2 factors of the ABC test also do not apply.
mabbo 9y ago
FedEx, UPS, Amazon Logistics, basically every delivery company. Everyone in delivery these days is an "independent contractor" with no control over their route or hours, working for a business that does nothing but deliveries.
- PhantomGremlin 9y ago
  FedEx, UPS, Amazon Logistics, basically every delivery company. I don't know about the rest of them, but your information is totally wrong about UPS. The "delivery" people are most definitely employees. Union employees, Teamsters in fact. Which means that UPS doesn't get to push them around all that easily. But which also means that the relationship is occasionally more confrontational than it should be. https://teamster.org/divisions/package https://teamster.org/divisions/package

SilasX 9y ago

Sorry, rant coming. (I assure the mods this is impromptu and not copy-pasted; verify yourself.) I don't see a lot of productive progress being made on this question. Judges constantly try to apply conflicting standards of whether someone is "really" an employee, but you can't make progress on that question until you can measurably answer why you're asking that question to begin with. For another context, take "is alcoholism really a disease?" If we don't want to be stuck in unproductive talking-past-each-other, we have to transform that into a more concrete query, like, "are alcoholics responsive to social pressure?" or "does the urge to drink stem from a chemical imbalance?" Those questions, you can actually -- in principle -- make progress on. Maybe you find some chemical under which alcoholics stop drinking because it doesn't appeal to them anymore. Or maybe you find that shunning changes their behavior, and the appeal to "alcoholism being a disease" maps to a specific game-theoretic strategy. Or maybe shunning just turns out to make alcoholics miserable and resort to more expensive, covert techniques to get their fix. Or maybe the evidence is perpetually ambiguous. But at least you can make progress on those questions. What are the corresponding criteria for the question "is this Uber driver really an employee?" How would you know you got it wrong? What are you really optimizing for when you legislate a distinction between contractor and employee? For example, let's say you proposed a new test A, under which every purchase of labor makes someone an employer and employee. You buy a haircut? Great, you need to send this amount to this fund to pay for their unemployment insurance. And you need to give them this notice about their rights as a worker. And you need to pay into this worker's comp fund. Or let's say you proposed a test B under which the buyer is the sole decider of how to classify, and every employer/buyer in the world elects to classify the provider/worker as an employee, and screams in glee as they offload all the liability and expenses onto the worker. By what standard, concretely, do you know you erred? It doesn't work to say "that's absurd". What's important is to say the specific desiderata that make that situation absurd. I have yet to see someone propose a (satisfying) standard/desideratum to ground the employee/contractor distinction in law. The closest I've seen is "we want to make sure workers don't get oppressed" (or some equivalent expression), but that doesn't suffice -- there has to be some reason you don't go with the A test above. What is that?

mark212 9y ago
Transaction costs for one. It sounds like an incredible mess to actually implement. And why shift that burden to the customer? In a haircut scenario, the person getting the cut is unquestionably a customer and not an employer. So why make him/her shoulder the administrative and legal burden? Think beyond wage and hour. Customer #2 gets cut by scissors, suffering serious bodily injury. Who does she sue? The barber, sure. But these actions were performed during the course and scope of employment. So now (per 400+ years of common law) the employer — aka previous customer - is now on the hook for those damages. I’d certainly never get my hair cut there. It might cost me $100,000. Ok so change that law, but now you’re ditching a few centuries of agency law and getting exactly what in return? A system no more efficient than what it’s replacing.

eyeareque 9y ago

Would this affect companies like Google and others who have contractors/vendors, but use them as if they were employees?

Izmaki 9y ago

As a foreigner I hate when English headlines are semi-cryptic lines of text that make absolutely no sense to me without a few extra words. They transform... What?

dang 9y ago
I think you need a "the" in there. We'll add one.

tomohawk 9y ago

ABC has long stood for Anywhere But California How they expect to stem the flow of businesses moving out of the state while not honoring simple contracts is beyond me.

rconti 9y ago
Can you explain why that's the case, when this is apparently a standard that already existed in other states, before California (according to the article)? Can you explain why California is thriving when people incessantly predict the imminent collapse due to every employer moving out of state?
forgottenpass 9y ago
> not honoring simple contracts Please, tell me more about these jurisdictions that enforce void (not voidable, void) contracts.

bigcostooge 9y ago

The rest of the country needs this.

PythonicAlpha 9y ago

For me it would be interesting to see, if this also sparks remote work for software development contractors, since of test criteria B. Else, when a software developer freelancer is working directly in a company with software developer employees, the criterion will be difficult to fulfill. In Germany we have a similar situation, because we also have this discussion, who is an employee (for social security matters). One big criterion is remote work, but still many employers are holding back, since they fear to loose control over the contractor, when he can not look over his shoulder.

lstroud 9y ago

Why does a court get to establish a rule like this? Shouldn’t this be a legislative responsibility?

PythonicAlpha 9y ago
Yes, I guess so. Thing is, that legislation is often slow, so courts have to decide matters. In Germany also the legislation oftentimes is not competent. Many laws are made, that are without value, after they where on trial. So, at least in Germany, courts are oftentimes a second law maker, because they have to check, how all these rules fit together (in the best of all worlds, the legislation should do that beforehand).
- jerf 9y ago
  It's worth pointing out there are different legal foundations. The United States is on something called Common Law [1], in which courts are generally supposed to follow precedent and not make up new stuff or function as de facto legislatures. Obviously, this is one of those plans that doesn't necessarily survive contact with the enemy, but under common law it is reasonable to criticize the court here as potentially overreaching. A mitigating factor in that criticism is precisely that many other peer jurisdictions have adopted the same standard on presumably similar bases of legislation, so there is some precedent in favor of using this same standard. Germany is built on a foundation called Civil Law [2]. In this system, judges are encouraged to uphold principles and rule on the specifics of a case, regardless of previous cases that may have found in some way or another. Just as with common law, I'm sure judges may consult precedents as they find useful, but they aren't bound to them, and are, I presume, much less likely to mention them in judgments as they are not anywhere near as relevant. This also applies in a fairly obvious fashion to Hermel's post that is a sibling to what I'm replying to. In Civil Law, which Switzerland also operates under [3], instructing judges to imagine reasonable laws is a reasonable thing to do. In Common Law, judges just imagining laws to be the way they believe they should be strikes at the foundation of the system. (Perhaps ironically, it's probably easier for Common Law courts to function as de facto legislatures precisely because of the respect for precedential law, despite the fact they are nominally not supposed to. A certain court can make a decision and apply some test like this, and it tends to spread around the country unless some legislatures take explicit action to prevent it. It can even spread between countries, because common law courts can look at other country's common law courts and consider their precedents as well, though more weakly than their own. By contrast, while a civil law judge at first seems to be taking a legislative role when they make some decision based on laws that essentially only exist in their head, they are binding the future far less and the decision carries less global weight, making it much harder to truly "legislate from the bench" in the way we complain about in the US. Second order effects can be pretty twisted!) [1]: https://en.wikipedia.org/wiki/Common_law https://en.wikipedia.org/wiki/Common_law [2]: https://en.wikipedia.org/wiki/Civil_law https://en.wikipedia.org/wiki/Civil_law [3]: https://en.wikipedia.org/wiki/Civil_law_(legal_system)#/media/File:Map_of_the_Legal_systems_of_the_world_(en).png https://en.wikipedia.org/wiki/Civil_law_(legal_system)#/medi...

fiatjaf 9y ago

You know what would be a better test? Check if there is a job contract between company and person.

forgottenpass 9y ago
Check where? Not all contracts are memorialized.

jdavis703 9y ago

How does the "B" in ABC affect me as someone who does software engineering contracting on the side sometimes for tech firms? I've got a decent network out here in SV, and sometimes a startup facing an urgent deadline will hire me to do some code writing for a couple of weeks. This is work I do outside of my normal 9-5. But now it seems I can't do this without being classified as an employee. That really sucks.

ericabiz 9y ago
For you, and others in this type of role, it likely makes the most sense to form a LLC or other corporation, and do a corp-to-corp contract. If this ruling holds, companies may even start to require that. Unfortunately for those in California, CA requires an $800/year minimum fee for a corporation. It’d be nice if these changes forced a change in that law. (By the way, just to head off a common misconception: You cannot just “incorporate somewhere else” to avoid the $800 fee. If you are a California resident doing work in California, even if you have a “foreign corporation”—California’s term for corporations from other states—you must register it in California and be subject to the $800 fee.)
emaginniss 9y ago
I think it's about the service that the contracting company does. The idea being that the company should only contract for things that are different than what it normally does. IOW, if you have a 100 SW developers in SV that are employees, you can't also have a bunch of contract SW developers in SV.

hmahncke 9y ago

This test has been the standard in other states for a while - New Jersey for example. But I don't think it has been an issue for Uber/Lyft classifying drivers in NJ as contractors. I wonder why not?

coryfklein 9y ago
California has 4x the population of Jersey and is home to the very businesses that are leading the charge against employee/contractor norms.
- hmahncke 9y ago
  Yes, for sure. I'm just curious why Uber/Lyft haven't been sued already for their New Jersey operations.

rayvd 9y ago

Should the "employee" also have a say in this?

e40 9y ago
That's a good question. I think it is widely assumed that contractors would prefer to be employees, given the number of court cases where contractors have sued employers. (I don't remember a court case where an employee sued to be a contractor.) I still remember the huge Microsoft settlement[1]. Well, huge for the time. Employers want to commoditize the jobs they offer. It's in their best interest to be able to hire/fire with as little risk as possible. The dream for many companies would be "all employees are contractors" and no one gets benefits. Except, of course, management. They'll get huge salaries and great benefits. (I'm an officer of a 35 yr old corp.) [1] https://www.nytimes.com/2000/12/13/business/technology-temp-workers-at-microsoft-win-lawsuit.html https://www.nytimes.com/2000/12/13/business/technology-temp-...

eli_gottlieb 9y ago

What a May Day gift!

walshemj 9y ago

MM I just though isn't this going to kill Hollywood as the entertainment biz is run off "contractors" I think A & B would catch most film tv and theater professionals the gaffer gets told what lighting effect to go for also everyone on a show gets told when and where to show up on the call sheet.

justherefortart 9y ago
IT contractors or contract-to-hire is likely dead as well. And good fucking riddance. I contract out work from my company. You know what I don't require? Them to come and work at my office from "core hours". I don't have a dress code. I only have specs on what they're creating and the tools, which they provide. They bill per job and do it at their leisure as well. Just like when I built homes, my contractors provided everything they needed and I provided materials. I scheduled them but they showed up whenever it fit in their schedule based off their other contract jobs. They're also required to carry their own GL and Worker's Comp if I hire them or go through their own LLC/Corp.
- walshemj 9y ago
  But if your expecting me to provide kit to your required spec that increases my day rate :-) though that does help with fending off the tax man. You confusing say a brickie, sparks or a chippie who can use the same tools from job to job - with an it job where you might have to buy new software / hardware.
s73v3r_ 9y ago
I don't think so. The gaffer is told what lighting effect is desired, but they are the one that has control over how it's achieved. Same for the propmaster; the director says, "We need something that does this", and it's up to the propmaster how to achieve that. That industry does also have some pretty strong unions, so I think they'd be ok regarding labor standards. Just like if you hired someone to paint your fence, you do have control over how you want it (what color, for example), but not necessarily over how it gets done (if they end up tricking a bunch of other painters to do it because they say how fun it is).

laveur 9y ago

Am I the only person that feels that places like Uber/Lyft/Etc are fighting the wrong battle? I think their money would be better spent instead fighting for a new classification of labor. One that defines exactly what a Gig (Hate that term) worker is and how the industry operates. Its clear to me that tons of people want a job like Uber offers. I think its time we make a law that represents that. Instead they waste their time fighting in courts to keep them as a contract employee, which according to the law is not what they are. But I feel they are also not a regular employee. I think adding a new classification for them is win win for both sides. It gives both sides rights under the law.

hartator 9y ago
Yes, making new laws is always yhe solution. The fight is more about is Uber drivers should get minimum wages when they are have a low day than status.
knuththetruth 9y ago
I don’t think companies who have profited from the declining power and wealth of American workers should be able to buy themselves a new labor classification that serves their interests. That’s not how a healthy democracy works.
- dsfyu404ed 9y ago
  In a healthy democracy the people get what they want, even if it's dumb. Prohibition is the first example that comes to mind that won't offend many people here. If the companies can convince the people to want a new labor classification badly enough then they can get it. Of course things will swing back if it turns out to be crap that is bad for enough people and good for too few. The arc of progress is long.
  - knuththetruth 9y ago
    Companies don't "convince" people of this kind of stuff. They use their wealth and power to force it on workers with bought-and-sold politicians. People sleeping in their cars in between working at an Amazon distribution center or driving deliveries don't want a new labor classification. They don't want to die in poverty and are just trying to survive this ceaseless assault.

joshuaheard 9y ago

Maybe it's time for the legislature to create a new classification of employee: an independent employee, to conform to the nature of the new gig economy.

s73v3r_ 9y ago
What benefits would the employees have under that system? How would they be better off with that than they are now?
- joshuaheard 9y ago
  I don't know. The purpose of the law is not to confer benefits on one class or another. It is to accurately describe the rights and duties of relationships.