As usual, New York is following California’s lead, this time by seeking to turn independent contractors into employees, or else.
A bill before the New York state Senate seeks to reclassify many independent contractors as employees, advancing a standard similar to that of California’s ruinous Assembly Bill 5, or A.B. 5. The proposed S2052 would implement the “ABC Test,” which classifies workers as employees unless the (a) worker is free from the control of the hiring entity, (b) the work performed is outside the hiring entity’s bailiwick, and (c) the worker is “customarily engaged” in the type of work he is hired to do.
Lest anybody take the “ABC Test” too seriously, consider how this will work out in the real world, where an employer audited for compllance finds itself in the position of having to defend the nitty-gritty details of independent contractors’ duties, at significant expense and risk. The IC might be willing to fight for his independence, but the business with whom he contracts really doesn’t need the problems and aggravation, not to mention cost, and says “screw it, we’re not taking any chances just because these people want to be independent contractors.”
And who can blame them? The freedom of contractors to sell their services when they feel like it, to whom they feel like, isn’t for the sake of the business, but for their sake. Independent contractors are business owners. They work when they want and for whom they want. They do the work they choose to do and reject the work they do not. Some will be high demand professionals, while others will be fungible gig workers. If they don’t have a corporate entity, they would be presumptively employees and entitled to the accouterments of employment, overtime, vacation, sick leave and a regular paycheck.
The counterargument is that some workers feel exploited by working as employees, being told when to work and what to do, while being denied the benefits of employment. It’s a good argument, and there are employers who deliberately exploit people and deny them the benefits to which the law says they’re entitled.
The question is whether the fix is to destroy the market for independent contractors or enforce employee protection laws so that employees can’t be exploited. But this too presents a practical dilemma, as employers find themselves caught in the middle either way. Whether it’s falsely claiming employees are independent contractors, and thus unlawfully denying them benefits due employees, or whether they are compelled to treat everyone as an employee, even if they are (and choose to be) independent, such that individuals who run their own businesses are frozen out of the market because they don’t want to be anyone’s employee.
The government can’t turn every contractor into an employee, so making it impossible for employers to hire many independent contractors will simply make many independent contractors unemployed in their chosen careers. Anti-freelance politicians, backed by unions, tout the benefits of “employee” status, but such benefits accrue to a few at the expense of many others. Following the passage of A.B. 5 in California, for instance, sports network SB Nation opted to terminate roughly 200 freelancers, reportedly to be replaced by just 20 full- and part-time staffers. Those 20 people may have received more in pay and benefits, but 180 other people lost income.
It’s not that there aren’t legitimate issues on both sides of this conundrum, but that a choice has to be made whether to enact a law that would require businesses to treat every IC as an employee rather than let the employee who feels he’s being exploited to walk away and find another job where he’s treated the way he prefers to be treated. Or to reduce this to the most basic question, should there be a presumption that we’re all independent and capable of making our own choices or are we all exploited and in need of government to protect our employee mentality?
Not too long ago, the “business person” at a law firm with which I consult sent me an email informing me that since I was not a corporate entity, and since they sent me checks for my services, they were going to have to withhold taxes as if I was an employee. I responded that I am most assuredly not their employee, and I take care of my own taxes, thank you very much.
In reply, she explained patiently that while she was well aware, the firm’s accountants advised that sending regular checks to a non-corporate entity would be a red flag to a number of bureaucrats who were disinterested in any deep investigation or consideration of our actual relationship, and might knee-jerk sanction the firm because that’s what grocery clerks with checklists do. Giving these grocery clerks even greater and broader power will prove a significant obstacle to independence. Of course, for those people who dream of being employees, they can take comfort in knowing the grocery clerks are there for them.
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There is already a federal law in place – for decades – that defines employee vs contractor very well that everyone understands and presumably has been satisfied with. This one seems like a mess, particularly the first prong. Is your plumber under your control? Can he choose to work on the sink when you hire him to fix the toilet.
And what is it about progressives that they can’t see something fail in practice and understand that if implemented somewhere else it will fail again? As you point out they’re doing it with this in light of the spectacular mess that California’s law created. And Germany tried the Biden/California energy plan around 2014 and it failed spectacularly. This winter they’ve gone all the way back to coal generation to keep people from freezing. Yet not only are we doing it, we’re pushing to accelerate it because reasons.
Are they incapable of learning from mistakes of others? Is the virtue signal more important than the outcome? Do they just not care?
Government intrusion into the relationship between employer and employee has been festering for decades. As laws were enacted to require employers to provide additional benefits, such as maternity leave for full time employees, employers sought to alleviate the burdens by reducing the number of hours employees worked so they wouldn’t have to provide expensive benefits.
Then came the gig economy, which was intended to fundamentally alter the nature of the relationship by making everyone independent while businesses could profit as if they were employees. Much as the definition of IC worked in the past, employers have found ways to circumvent the relationship and use it to their advantage. As the problem became increasingly pervasive, so too did the complaints of exploitation. But every time govt sticks its nose in to tweak the law, it creates new problems and disrupts the relationship with unintended consequences.
Independent contractors have traditionally been skilled workers called in for discrete projects: Plumber, illustrator, lawyer, and so forth.
Companies are using ‘independent contractors’ for ongoing unskilled workers maintaining ongoing operations. This leads to abusive situations, because unskilled workers do not have the leverage of skilled workers.
This is a case of “For every complex problem there is an answer that is clear, simple, and wrong.” It is not a case of there not being a problem.
Of course, having third party businesses withhold as though the contractor is an “employee” doesn’t relieve the contractor of his or her own income and FICA withholding obligations.
The effort to erode “independent contractor” status and destroy it over time has been ongoing for decades. The “worker protection” gloss is only the latest attempt to obscure the true purpose. The actual point of broadly imposing “employee” status was originally to further tax collection by making employers the agents of the government. Simply put, it is easier for the government to lean on one employer than fifty independent contractors.
The “employee” mechanism has become even more important since employers have been conscripted to perform other duties, such as immigration enforcement and mandatory pronoun training. Mandatory healthcare administration is likely on the way as well. State and federal governments need more and more employer-employee relationships, to further the implementation of programs designed to be imposed through that relationship.
The model for this is the taxi cab industry. Occasionally throughout the years here in the Midwest some would grumble about not getting the benefit of being an employee; usually those in conflict with the cab co.
Along comes Uber et,al and effectively kills the cab industry… but now as Uber saturates the field with more and more drivers shrinking the pie being an employee looks good.