Three things to start with

We talked about how some enterprising political party could put together an economic agenda that could include something more than the Earned Income Tax Credit and that agenda might include a discussion about why so many people who should be entitled to overtime pay don’t get any.

I started thinking about overtime pay because my middle son, who barely talks at all, went into a long, detailed explanation a couple of weeks ago on why he was working additional shifts and hours and EXACTLY what that means in terms of what he will make the next pay period. Overtime he understands. This is also true in my law practice. I can have someone in front of me who answers questions with “yes” or “no” but if we’re looking at their pay record they become very engaged and can tell me at length when and why they picked up the hours with the higher wage. They’re the expert. They are happy to explain it to me.

So overtime would be a good thing to talk about and another good thing to talk about might be why so many people who should be employees are being told that they are independent contractors.

Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.
Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers.
One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees.

This is Richard Cordray in 2010. Cordray was the Ohio AG when this was written but is now the head of the CFPB. Cordray chose to portray this as a fairness issue with one group of employers playing by the rules and another group gaining an unfair advantage by flouting the rules. That’s one way to do it. I’m an employer and I don’t think it’s fair if I follow the rules and other employers don’t. I bet I’m not the only one who would see it that way.

“It’s a very significant problem,” said the attorney general, Richard Cordray. “Misclassification is bad for business, government and labor. Law-abiding businesses are in many ways the biggest fans of increased enforcement. Misclassifying can mean a 20 or 30 percent cost difference per worker.”

From the employee perspective, one might focus on this:

This is an even more striking comparison in 2014. The Social Security wage base is expected to increase from $113,700 for 2013 to $117,000 for 2014. That’s not the only thing to keep in mind, of course, but it does suggest that it can be shortsighted to turn down employee status. Apart from tax law, employee status carries a host of nondiscrimination laws, pension and benefits laws and wage and hour protections that apply to employees but not to independent contractors.

So minimum wage, overtime and real employees rather than misclassified “independent contractors”. Nearly everyone has a stake in that discussion and has some personal experience with it.

34 replies
  1. 1
    Keith G says:

    I work for a small business that regularly and aggressively screws employees on over time compensation. It is one thing to have the correct regulations in place. It is another thing to have in place a process to enforce these regulations that makes sense for the low level employees who feel very much at risk if they raise their voice.

    I have done fairly well by them because of my in-depth knowledge of state and federal labor laws as well as my ability to be obstinate prick.

  2. 2
    Roger Moore says:

    Repeal Taft-Hartley!

    Seriously, though, things have been downhill for labor for a long time, and Taft-Hartley was the start of a lot of it.

  3. 3
    Omnes Omnibus says:

    another good thing to talk about might be why so many people who should be employees are being told that they are independent contractors.

    This is something really bothers me. If companies want to have control over their workers, they need to accept responsibility for them. If they don’t want the responsibility, they have to give up control. As usual, the companies are trying to have both ways.

    ETA: If one is working for a company that is trying to run the independent contractor scam, dropping a dime to the IRS and state department of revenue is not a bad way to go. Let them know that the company is not properly withholding taxes for its employees.

  4. 4
    Kay says:

    @Keith G:

    It’s a great point and I agree. It’s part of the limits to the state side pro-working agenda: you need enough regulators and they can’t be captured or corrupted. It’s one of the reasons I think you need a non-state actor – traditionally labor unions. One of the things unions did and do is educate working people and give them a larger group which means leverage.

    But, for politicians, they have to have something they can do NOW and this is one thing they can do. It would be worthwhile even to raise it constantly. It will mean something to people. For the state side actors, it has to be something the state can actually do.

  5. 5
    Frankensteinbeck says:

    Again as a former poor working class joe, we didn’t know diddly about who pushed Earned Income. We knew Dems wanted worker protections and to strengthen stuff like Medicaid and increased minimum wage. We knew Republicans wanted to destroy all this stuff. I wasn’t politically tuned in at the time, either.

    We didn’t understand complex details, but the working man knows who is offering what. They choose what’s important to them. For a lot of folks that’s fucking over someone else.

  6. 6
    Kay says:

    @Omnes Omnibus:

    I think there’s a real risk for government, too. It falls under “what if everyone did that?” 90% of following rules is voluntary. If a perception takes hold that the rules are optional, and “smart” companies and people violate them with impunity that’s corrosive to what is really mostly voluntary compliance. They can’t have that perception take hold because the truth is they would have to hire an army if a whole bunch of people started ignoring their responsibilities. They don’t have enough regulators. They better hope that perception doesn’t become commonplace. They should stop fining and start going to court.

  7. 7
    Villago Delenda Est says:

    This is because the contemporary American capitalist is basically a thief and a parasite.

    Time to start chopping off the hands of these thieves.

  8. 8
    Mnemosyne says:

    @Kay:

    I admit, we’re quite spoiled here in California, because we have an activist Department of Industrial Relations that goes after large companies that try to bend the rules. It was particularly problematic in the 1990s when Silicon Valley companies were classifying everyone as a “contractor” even though they had desks, offices, and business cards, and they got slapped down.

    Right now, their big push is against worker misclassification, and they have state law to back them up:

    On Sept. 8, 2011, the California legislature passed Senate Bill 459 prohibiting the willful misclassification of individuals as independent contractors. The new legislation, enacted on Oct. 9, 2011, creates civil penalties of between $5,000 and $25,000 per violation. The new law will also prohibit charging fees to or making deductions from the compensation paid to those misclassified workers.

    But, to your point, it doesn’t hurt that we also still have some very powerful unions in California, especially in the entertainment industry, and they have the ability to lobby for these kinds of laws and get them put in place.

  9. 9
    Gene108 says:

    There is enough gray area between independent contractor and employee that I think the current rules, which more or less establish a wall that divides them on the basis of receiving compensation on a 1099 or a W2 needs to be revisited.

    In an economy where permanent employee is a relative concept, where you may not have a job if the business does not get the next project for you, method of payment and classification as contractor and employee need to be revisited.

    A lot of these rules were constructed in the post-WW2 era and business has changed a lot in 60+ years.

  10. 10
    BR says:

    In case it didn’t make national news, there was a police riot in Berkeley last night, with tear gas, rubber bullets, smoke grenades and many helicopters circling for hours and hours, well into the middle of the night (probably 2 or 3 am). Students were protesting police violence nationally and then the police, who were looking for a fight, started employing violence against them. (Of course they quickly had their PR person say that some windows were broken and some rocks thrown at the police, thereby justifying their violence, but it’s pretty clear that the police started it.)

    This should be a wake up call — Berkeley isn’t just any city — it’s a place where protest is supposedly part of the norm. If in Berkeley people can’t peacefully assemble — to protest police violence — without the police *being violent*, things are far more broken than I’d like to think.

  11. 11
    Kay says:

    @Mnemosyne:

    California has a really strong law that defines “contractor v employee” much better than the federal system. My own sense reading the quotes from the Chamber of Commerce is that employers who want to push the rule right to the limits LIKE that the federal rule is less defined than California’s. Then they can hide in that space and say “we make honest mistakes! this regulation is such a burden to comply with!”

  12. 12
    Villago Delenda Est says:

    @Gene108: I would submit to you that “business has changed” because the parasite overclass has worked ceaselessly to erode worker protection since the end of WWII.

  13. 13
    Villago Delenda Est says:

    @Kay: The Ferengi Chamber of Commerce can eat bags of salted dicks.

  14. 14
    Kay says:

    @Gene108:

    A lot of these rules were constructed in the post-WW2 era and business has changed a lot in 60+ years.

    Right, but I would ask you to think about why these rules haven’t been revisited. Why is the salary line for overtime so low? Why have they let employers really define and put in practices that get around old rules that don’t fit? They’re all aware of this. If you go to the Dept of Labor site you’ll find scholarly studies on “the 1099 economy”. They didn’t modernize the rules because large employers didn’t want them to.

  15. 15
    Mnemosyne says:

    @BR:

    Do you think there were extra tensions because of the upcoming tuition increases? There have been protests at UCLA and other local campuses down here because of them, but I know the asshole Board of Regents are sticking with the decision.

  16. 16
    Gene108 says:

    @Kay:

    I disagree that 90% of following rules is voluntary.

    A lot of businesses follow rules because the downside for non-compliance is a lit worse than the cost of compliance.

  17. 17
    Gene108 says:

    @Villago Delenda Est:

    So I can play more grab-ass with the pretty ladies in the office than I could in 1954, without the fear of repercussions?

    Job security is not what it used to be, but we have a lot more safety and harassment protections now than we did then.

    People tend to confuse job security with work place safety and work place discrimination.

  18. 18
    Gene108 says:

    @Kay:

    Don’t have answers. Just the whole assumption that control can be defined solely if taxes are withheld at source or not is not sufficient anymore.

    This does not mean a one way street to lower wages. You could just extend employer liability and responsibility to 1099’s, since you could change the meaning of contactor to mean control always exists either explicitly or implicitly.

  19. 19
    BR says:

    @Mnemosyne:

    Maybe that was part of it, but my understanding is that the fraction of students that were part of the protest *increased* over time as the police were indiscriminately firing tear gas, effectively hitting lots of students who weren’t even part of the original protest.

  20. 20
    rikyrah says:

    this is straight up thievery.

    THIEVERY!!!

    I’m glad you bring such issues forth, Kay. I really appreciate it.

  21. 21
    Tehanu says:

    @Kay:
    California, ha. Unfortunately, no matter how well-written the law is, our fking corporate masters can always figure out a way to stick to the letter of the law and completely give the finger to the spirit. I work as an employee (now) at a CA company where i “temped” for 18 years. Every 2 years, when if I had worked one more day they would have had to change me to employee status, they laid me off for 2 months and then took me back. I didn’t complain because I needed the job. They finally decided to make the job a real employee position, then made me jump through all the same “Human Capital Management” hoops as the 200 or so outside applicants in the name of “fairness in hiring practice.” I still need the job so I still don’t complain, but watch out if I ever win the lottery.

  22. 22
    Corner Stone says:

    @Tehanu: What’s the category of work this job falls under?

  23. 23
    Mnemosyne says:

    @Tehanu:

    Seriously? I temped at UCLA for about three years while I was in grad school, and they let me go in part because the labor board was starting to scrutinize them about their temp usage (and also to reduce headcount, there were some major financial fuckups at the time). The Giant Evil (entertainment) Corporation where I work now has a strict policy that you can only use a specific temp for 18 months at a stretch — after that, you can’t use them again for one calendar year. We were finally allowed to hire three specific people as limited employees who can only work part-time so at least we have trained people we can call on when we need them.

    But, again, since it’s a large entertainment company, I suspect the craft unions are able to get some momentum to get those kinds of companies extra scrutiny.

    ETA: I started temping at UCLA around 2002, if that helps you figure out timelines.

  24. 24
    Kay says:

    @Tehanu:

    I’m familiar with the temp gaming. I talk to people who do not know that they don’t work for the company they think they work for. I think it’s outrageous. I mean, come on. Can we be slightly less greedy and law-flouting? Is that possible? It’s not enough that they’re making 9 dollars an hour, have no job security or benefits and get treated like garbage? I thought we were encouraging industrious people. Is it any wonder people just give up? It’s rigged. They can’t win.

  25. 25
    wmd says:

    I’ve been in the job market until quite recently. My skillset resulted in contacts by headhunting shops quite a bit, and most of the positions would be contract work. My first question to them was would this be 1099 or W-2 contract work – that is am I an independent or am I employed by a consulting company as a regular employee. If the latter please tell me about benefits beyond employer’s portion of FICA. Most headhunters said W-2 and limited benefits.

    Some technology companies use contract to hire – the perception is it’s easier to cut a contractor loose, so the company can have a better idea of performance before hiring.

  26. 26
    Roger Moore says:

    @Gene108:
    I don’t think that’s exactly what Kay is talking about. The point is that there aren’t enough regulators to force compliance in the face of massive refusal. If companies are actually afraid of enforcement, it’s a misplaced fear; the actual chances of enforcement, and the penalties for non-compliance, are small enough that it’s profitable to break the rules.

  27. 27
    Kay says:

    @Roger Moore:

    If 30% of employers are doing this and getting away with it I’d start to worry about reaching a tipping point. These systems run on a perception that there’s enforcement. They can’t possibly police every employer. They better hope that perception holds. Their credibility as regulators matters a lot. If they lose that, they’re screwed.

  28. 28
    Corner Stone says:

    @Kay:

    They better hope that perception holds. Their credibility as regulators matters a lot.

    To who? Most employers look at the NLRB and other enforcement mechanisms and know they can do just about anything they want. They then turn to look at SCOTUS and there ruling that employers can mandate unpaid activity by workers, and have it classified as not essential to work.
    It’s all rigged, and everyone knows it, in both directions.

  29. 29
    grondo says:

    Of course, if you try to make the argument that it’s unfair to employers who abide by the rules to have to compete with those who flout the rules (which is very true), then the right wingers will simply argue that the rules should be changed, because jobs. Then you’re in the position of having to champion arcane regulations about who is a statutory employee and why that’s a good thing.

  30. 30
    catclub says:

    @Roger Moore: Do you think Taft -Hartley could have been repealed in 2009 when Obama had 60 votes in the Senate? I don’t.

  31. 31
    burnspbesq says:

    @Omnes Omnibus:

    dropping a dime to the IRS and state department of revenue is not a bad way to go.

    Except that those agencies have been the object of Draconian budget cuts by Republicans in Congress and Republican-controlled state legislatures, to the point that they can’t fill open positions and have to prioritize the use of their scarce resources. It’s also far too easy for employers to get “Section 530 relief.”

  32. 32
    mai naem mobile says:

    Wanted to post in this thread earlier but didn’t have time. Anyhoo, i know a woman who works as a medical assistant for a husband and wife specialist doctor team. She works as an independent contractor. Shes the neighbor of a coworker.and we both told her it was bullshit. Shes scared she’s going to lose her shitty $10/hr job. You are working under direct supervision of the docs. She uses their equipment. How can she be considered an independent contractor? And, oh yeah, she doesn’t get paid for breaks and any personal phone calls she makes are monitored and taken off her pay. Meanwhile, I’m guessing the two docs are making $500-600k a year if not more. I also have an nurse friend who was desperate for work and called a temp agency and they told him he would be an independent contractor working at facilities. I’m just wondering what happens with these independent healthcare contractors if they catch a disease like AIDS,ebola!,and hepatitis. They don’t have workmens comp I’m assuming. As far as calling the IRS etc. those places want your name and that makes it that much harder for the employee to report this crap.

  33. 33
    prtex says:

    In March of this year the President directed the Secretary of Labor to make a new rule with regard to overtime. The new rule is expected to substanially raise the level of wages below which workers would receive overtime. The draft rule wad

  34. 34
    prtex says:

    was expected to be finished last month. I don’t know if it was. When it is finished, the public comment period is next. Let’s all make comments that we want the higher ceiling to be indexed to inflation.
    We’ll see what happens; but the Executive Branch appears to be working the problem.

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