5 ms·

California's new gig economy law could put freelancers out of business

27 points by jonbaer 7y ago

Hokusai 7y ago
The gig economy is not about freelancers but about misclassifying employees to negate their rights. > Naturally, Uber and Lyft have already announced they have no intention of changing how they classify their drivers. My point. > big business will always have the resources to shield itself from harms the little guy will suffer This is a dangerous argument to justify that big corporations are about the law. Luckily for now they still have to submit to the rule of law, even that sometimes is not easy.
x0x0 7y ago
This article is straight bullshit, and no good analysis comes from bullshit. The main claim: > To put that in context, here at The Week I write four columns per week. Were I subject to a 35-article cap, I'd hit my limit here in less than nine weeks. So I'd either have to stop writing for The Week by the end of February or dramatically slow my pace of work to less than one column weekly, cutting my yearly output from about 200 columns to the mandated 35. Taking the example, what AB25 actually says is that a journalist on a 1099 has a limit of 35 articles per year per pub. To exceed that limit, the journalist does not have to be fulltime. They merely have to be paid on a W2. afaik AB5 is unfortunately unclear -- though the courts will soon resolve this -- on whether the journalist would have to be paid W2 on articles [36, inf) or whether it would be articles [1, inf), in the case that the journalist write more than 35 articles in a year. Nonetheless -- and whether you support the law or not -- let's please not discuss it on a foundation of lies.
- jameslk 7y ago
  > Taking the example, what AB25 actually says is that a journalist on a 1099 has a limit of 35 articles per year per pub. To exceed that limit, the journalist does not have to be fulltime. They merely have to be paid on a W2. That's the point here. They cease to become freelancers, which means the company has to pay for many types insurances, benefits and the other half of social security tax. This usually adds about 20-30% of additional overhead on each worker. That might sound like no big deal and even favorable to the freelancer but that's not what the outcome will be. Businesses don't just reach into their pockets and start paying for these things. They either pass down the 20-30% in losses to the freelancers or just hire full time employees to replace the freelancers. See for example the effects this type of heavy-handed regulation has had on other "freelancer"-dependent industries: https://www.sfexaminer.com/news/new-rules-for-contractors-have-unexpected-consequences-for-the-citys-strip-clubs/ https://www.sfexaminer.com/news/new-rules-for-contractors-ha... In other words what the author has said is true: it becomes difficult or near impossible to make a freelance income from CA businesses.
  - x0x0 7y ago
    Nope, the claim is this: > So I'd either have to stop writing for The Week by the end of February or dramatically slow my pace of work to less than one column weekly If the company chooses to only use 1099, that's their choice. But they have a W2 option out there. > * the company has to pay for many types insurances, benefits and the other half of social security tax. This usually adds about 20-30% of additional overhead on each worker.* That's pure nonsense. If you're not providing health insurance -- which is not required under a threshold of hours per week, and which a freelancer like this is in no danger of hitting -- social security plus medicare are about 8% for the employer. On minimum wages of $12/hour in california, you're paying nothing like 30%. The employer also wouldn't be paying for office space, computers, internet, IT, or treating the employee decently (food, drinks, etc), all of which is rolled up in the typical 25% that employers use as a rule of thumb for overhead. The actual required overhead is minimal. Now if the employer doesn't want to pay a fully loaded W2 cost of probably under $13.50/hour for CA, that's their choice. But they don't need nonsensical numbers made up to support them.
- ars 7y ago
  From the article: "instead, they'd hire a few new full-time workers and cut their freelance budget altogether. If I didn't get one of those new jobs — and living outside of major media hubs like New York City and Washington, D.C., makes that likely"
verdverm 7y ago
It's seems plausible to create a "company" around the freelancer to keep things as they essentially are. Make it a company to company contract, freelancer has minimally more overhead
- ars 7y ago
  Sounds like a business opportunity. Create a company who's only purpose is to bypass these rules.
  - gbtw 7y ago
    So you mean an temping agency? Those usually work with 0 hour contracts while people are on call and rented out.
  - cnst 7y ago
    Great! Let's get a whole structure setup, so that these people who can hardly make ends meet as-is now have to worry about a whole extra structure to establish, and pay money for!
  - jjeaff 7y ago
    Most likely, it would be a legal zoom like company that allows you to easily form your own LLC, elect for c corp tax filing status and then generate invoices and send to the companies that hired you.
- HeyLaughingBoy 7y ago
  If it's as simple as the freelancer creating an LLC or a DBA to get around the law I'd be OK with it, but something tells me it's not. The article is correct: the law's well intentioned but misguided. If, as a freelancer, I decide to focus on one huge contract with the same company for two years, that should be my decision.
  - jjeaff 7y ago
    It probably would be that simple. When you issue a 1099 to an LLC, it's not like you report the number of employees or even have to know how many employees that LLC has. Additionally, if that one man company is a C Corp, you don't even have to issue a 1099. So the state would have no record at all of you paying that company. And before anyone says that a c corp is a lot harder to form, it's not really. A little bit extra on legal zoom and that's about it. Additionally, as an LLC, you can elect to file taxes as a C Corp. Which again, absolves the "employer" from needing to file a 1099 at all.
vadym909 7y ago
That is the point of the law. If you want to work exclusively for one company, you are not a freelancer- you are an employee and the company owes employer taxes for you. They don't get off and you don't get to ask for relief for them using the "they will terminate my contract". If that is allowed, every industry will find a way to start using freelancers instead of employees. Which is fine if you so desire, but then you have to re-jig how taxes like social security, unemployment insurance and workers comp are collected and worker protections like min wages and overtime are enforced. Else you are just allowing for a few tax dodgers from benefiting at the expense of everyone else.
- ars 7y ago
  You are misinformed. Freelancers pay the exact same social security, Medicare and other taxes as employees. The bookkeeping is slightly different, but the amount collected is identical.
  - jjeaff 7y ago
    They pay the same, yes. But they pay all of it. With an employer, the employer pays half and the employee pays half.
    - ars 7y ago
      Which is a distinction without a difference since all that happens is the base pay number is different. The take home pay, and the tax paid is identical.
yalok 7y ago
What does that law mean for software engineering contractors? Currently, I need to work at least 30 hours a week to qualify for full time benefits, and the law actually prevents me from heaving a group health insurance benefit until I am considered full time. Does that change with the new law?
beefalo 7y ago
Writing 4 articles per week for a single publication, possibly writing exclusively for them, sounds like a pretty good case for considering someone an employee rather than a contractor.
- cnst 7y ago
  In a recent Newsweek thread here on HN, I think it was revealed that employees were expected to write 4 articles per day, not per week. https://news.ycombinator.com/item?id=21339990 https://news.ycombinator.com/item?id=21339990 ("they’d have to write a minimum of four stories per day") Doing 4 short articles per week wouldn't really fly for a full-time employee the way all these papers and magazines are doing nowadays, where a whole bunch of them already have had to shutdown. The way this law is written, where the freelancer cut-off is at 35 articles a year, even someone like Boris Johnson wouldn't be able to "knock off an article as a way of relaxation" on a part-time basis. https://www.theguardian.com/politics/2009/jul/13/boris-johnson-second-salary-chickenfeed https://www.theguardian.com/politics/2009/jul/13/boris-johns...
valley-green 7y ago
California is destroying itself. 100,000 homeless is not the gold standard other states are looking towards. No other state will implement California legislation because it is harmful. This is uniquely a CA problem. We have corrupt politicians.

27 points by jonbaer 7y ago

The gig economy is not about freelancers but about misclassifying employees to negate their rights. > Naturally, Uber and Lyft have already announced they have no intention of changing how they classify their drivers. My point. > big business will always have the resources to shield itself from harms the little guy will suffer This is a dangerous argument to justify that big corporations are about the law. Luckily for now they still have to submit to the rule of law, even that sometimes is not easy.

x0x0 7y ago

This article is straight bullshit, and no good analysis comes from bullshit. The main claim: > To put that in context, here at The Week I write four columns per week. Were I subject to a 35-article cap, I'd hit my limit here in less than nine weeks. So I'd either have to stop writing for The Week by the end of February or dramatically slow my pace of work to less than one column weekly, cutting my yearly output from about 200 columns to the mandated 35. Taking the example, what AB25 actually says is that a journalist on a 1099 has a limit of 35 articles per year per pub. To exceed that limit, the journalist does not have to be fulltime. They merely have to be paid on a W2. afaik AB5 is unfortunately unclear -- though the courts will soon resolve this -- on whether the journalist would have to be paid W2 on articles [36, inf) or whether it would be articles [1, inf), in the case that the journalist write more than 35 articles in a year. Nonetheless -- and whether you support the law or not -- let's please not discuss it on a foundation of lies.

jameslk 7y ago
> Taking the example, what AB25 actually says is that a journalist on a 1099 has a limit of 35 articles per year per pub. To exceed that limit, the journalist does not have to be fulltime. They merely have to be paid on a W2. That's the point here. They cease to become freelancers, which means the company has to pay for many types insurances, benefits and the other half of social security tax. This usually adds about 20-30% of additional overhead on each worker. That might sound like no big deal and even favorable to the freelancer but that's not what the outcome will be. Businesses don't just reach into their pockets and start paying for these things. They either pass down the 20-30% in losses to the freelancers or just hire full time employees to replace the freelancers. See for example the effects this type of heavy-handed regulation has had on other "freelancer"-dependent industries: https://www.sfexaminer.com/news/new-rules-for-contractors-have-unexpected-consequences-for-the-citys-strip-clubs/ https://www.sfexaminer.com/news/new-rules-for-contractors-ha... In other words what the author has said is true: it becomes difficult or near impossible to make a freelance income from CA businesses.
- x0x0 7y ago
  Nope, the claim is this: > So I'd either have to stop writing for The Week by the end of February or dramatically slow my pace of work to less than one column weekly If the company chooses to only use 1099, that's their choice. But they have a W2 option out there. > * the company has to pay for many types insurances, benefits and the other half of social security tax. This usually adds about 20-30% of additional overhead on each worker.* That's pure nonsense. If you're not providing health insurance -- which is not required under a threshold of hours per week, and which a freelancer like this is in no danger of hitting -- social security plus medicare are about 8% for the employer. On minimum wages of $12/hour in california, you're paying nothing like 30%. The employer also wouldn't be paying for office space, computers, internet, IT, or treating the employee decently (food, drinks, etc), all of which is rolled up in the typical 25% that employers use as a rule of thumb for overhead. The actual required overhead is minimal. Now if the employer doesn't want to pay a fully loaded W2 cost of probably under $13.50/hour for CA, that's their choice. But they don't need nonsensical numbers made up to support them.
ars 7y ago
From the article: "instead, they'd hire a few new full-time workers and cut their freelance budget altogether. If I didn't get one of those new jobs — and living outside of major media hubs like New York City and Washington, D.C., makes that likely"

verdverm 7y ago

It's seems plausible to create a "company" around the freelancer to keep things as they essentially are. Make it a company to company contract, freelancer has minimally more overhead

ars 7y ago
Sounds like a business opportunity. Create a company who's only purpose is to bypass these rules.
- gbtw 7y ago
  So you mean an temping agency? Those usually work with 0 hour contracts while people are on call and rented out.
- cnst 7y ago
  Great! Let's get a whole structure setup, so that these people who can hardly make ends meet as-is now have to worry about a whole extra structure to establish, and pay money for!
- jjeaff 7y ago
  Most likely, it would be a legal zoom like company that allows you to easily form your own LLC, elect for c corp tax filing status and then generate invoices and send to the companies that hired you.
HeyLaughingBoy 7y ago
If it's as simple as the freelancer creating an LLC or a DBA to get around the law I'd be OK with it, but something tells me it's not. The article is correct: the law's well intentioned but misguided. If, as a freelancer, I decide to focus on one huge contract with the same company for two years, that should be my decision.
- jjeaff 7y ago
  It probably would be that simple. When you issue a 1099 to an LLC, it's not like you report the number of employees or even have to know how many employees that LLC has. Additionally, if that one man company is a C Corp, you don't even have to issue a 1099. So the state would have no record at all of you paying that company. And before anyone says that a c corp is a lot harder to form, it's not really. A little bit extra on legal zoom and that's about it. Additionally, as an LLC, you can elect to file taxes as a C Corp. Which again, absolves the "employer" from needing to file a 1099 at all.

vadym909 7y ago

That is the point of the law. If you want to work exclusively for one company, you are not a freelancer- you are an employee and the company owes employer taxes for you. They don't get off and you don't get to ask for relief for them using the "they will terminate my contract". If that is allowed, every industry will find a way to start using freelancers instead of employees. Which is fine if you so desire, but then you have to re-jig how taxes like social security, unemployment insurance and workers comp are collected and worker protections like min wages and overtime are enforced. Else you are just allowing for a few tax dodgers from benefiting at the expense of everyone else.

ars 7y ago
You are misinformed. Freelancers pay the exact same social security, Medicare and other taxes as employees. The bookkeeping is slightly different, but the amount collected is identical.
- jjeaff 7y ago
  They pay the same, yes. But they pay all of it. With an employer, the employer pays half and the employee pays half.
  - ars 7y ago
    Which is a distinction without a difference since all that happens is the base pay number is different. The take home pay, and the tax paid is identical.

yalok 7y ago

What does that law mean for software engineering contractors? Currently, I need to work at least 30 hours a week to qualify for full time benefits, and the law actually prevents me from heaving a group health insurance benefit until I am considered full time. Does that change with the new law?

beefalo 7y ago

Writing 4 articles per week for a single publication, possibly writing exclusively for them, sounds like a pretty good case for considering someone an employee rather than a contractor.

cnst 7y ago
In a recent Newsweek thread here on HN, I think it was revealed that employees were expected to write 4 articles per day, not per week. https://news.ycombinator.com/item?id=21339990 https://news.ycombinator.com/item?id=21339990 ("they’d have to write a minimum of four stories per day") Doing 4 short articles per week wouldn't really fly for a full-time employee the way all these papers and magazines are doing nowadays, where a whole bunch of them already have had to shutdown. The way this law is written, where the freelancer cut-off is at 35 articles a year, even someone like Boris Johnson wouldn't be able to "knock off an article as a way of relaxation" on a part-time basis. https://www.theguardian.com/politics/2009/jul/13/boris-johnson-second-salary-chickenfeed https://www.theguardian.com/politics/2009/jul/13/boris-johns...

valley-green 7y ago

California is destroying itself. 100,000 homeless is not the gold standard other states are looking towards. No other state will implement California legislation because it is harmful. This is uniquely a CA problem. We have corrupt politicians.