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 being 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 employers 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 firms 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 why grocery clerks with checklists do. Giving these grocery clerks even greater and broader power will prove the 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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