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I think the problem is especially endemic in California. There is a large distinction between contractors and employees in part because only employees will receive stock options and large benefit packages. There are rules surrounding these being presented uniformly....and this can be problematic if you introduce low paying jobs.
I worked at one large F100 company in the area that had more contractors than employees. Contractors were managing other contractors. Contractors were working in roles for 5-6 years. So many people found themselves stuck as essentially a full time employee, but slated as a contractor. All those sticky rules surrounding termination and whatnot are then gone....I don't like you're tie....don't come back tomorrow.
For people that would prefer full time employment, this is problematic. Temps are much less likely to save for retirement as they have fewer options to do so. While regulation requires temp agencies to offer insurance, it's often atrocious and with no subsidy. No vacation. No stability. The wages are worthless when it comes to things like getting a loan. The income could stop the next day.
What California is missing out on is a vast amount of payroll taxes. Yes the eventual agency is paying a rate, but it is a rate that is lower than a direct hire would generate. Terminations are centered onto agencies and unemployment taxes remain artificially low at larger companies and capped at the agencies.
So California has a problem. Trying to artificially blend contractor and employee is hardly the solution. It doesn't make for a proper employee relationship for those that want one, and it endangers the most vital selling point for those of us that wish to remain free....our ability to remain variable.
Except the criteria is so ludicrously broad they'll rarely be met. A lot of doctors, particularly specialists, contract with hospitals and are not employees. They provide healthcare which is absolutely central. They very rarely work outside the control of the hospital as that's not how large, complex organizations work. Some of them don't even operate a business and exclusively work at one hospital, particularly if it's a larger one. Without question they would fail that three-prong test every time.
Likewise in my line of work you're either a gig worker or work for government. Been that way forever. I contract with two companies on a regular basis and a half dozen or so sporadically. There's little control over my work. But what I do is absolutely central to what those businesses do. The companies I work for primarily supply the clerical support and account management while the gig workers do the work. I've had my own clients and dealt with the clerical, account rep, billing, and all that stuff. It's a huge headache that I'm more than happy to not deal with.
It's not clear from the posts, and I haven't had time to read the actual wording of the law, but if you work for multiple companies, providing a specific service from time to time, I doubt you would be classified as an employee. If anything, the law will force lots of folks to form an LLC with themselves as the only employee. My brother had to do that to meet the requirements of one of his clients. My employer will not use a contractor that isn't an employee of another entity, even though it raises costs by the 15% the other entities tack on to the base costs.
...Uber, Lyft, Amazon, and other large companies will have the money and lawyers and connections in government(s) to litigate their status for a decade.
You say this as if it were a bad thing. It isn't.
Remember, there only will be litigation against "...Uber, Lyft, Amazon and other large companies..." if someone on the OTHER side (unscrupulous plaintiff attorneys) has the money and resources to keep suing them in search of a jackpot.
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Originally Posted by SocSciProf
... The small businesses will just close.
Maybe. But the plaintiff's bar won't sue many small businesses. Small businesses can't pay a litigation jackpot.
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Originally Posted by SocSciProf
... Is this what we want? The remedy is to exempt businesses based on gross income (or stock market capitalization, if its publicly traded), NOT on industry.
No, that is not the remedy. The remedy is to squash this type of regulation, legislation & litigation before it ever starts.
There is nothing wrong with hiring contractors. Just the opposite: each company needs to determine its strategic & competitive advantages and core competencies - and invest in them, while they outsource the things that don't provide strategic & competitive advantages.
In the case of Uber & Lyft, driving a car with a passenger from point A to point B is not a core competency. Hypothetically if it were a core competency, it still is neither a strategic advantage nor a competitive one.
That's why they do not own cars or employ drivers.
They aren’t outlawing contractors, just making sure they meet the 3 criteria. It’s one of the few bills that passed with bipartisan support. There are also multiple small business types who are exempted from the get-go such as insurance and real estate agencies, hair and beauty salons, and several others. Maybe they will add others after they evaluate the effects down the road.
Uhh yeah I’ll ignore this law completely then, and when it’s an issue I’ll just exit California. It literally makes no sense at all. We hire videographers nationwide to film projects for businesses, and they ship the footage to us in LA where it’s edited. Of course they’re central to our business, and many don’t bother to establish their own companies because they’re doing it solo, but they ARE contractors by every definition of the word. They bring their own equipment, we don’t have any supervision of them at all, and they’re basically told what the client is looking for in a general sense but not told how to do their jobs. That’s why they’re professionals. Everyone’s a contractor in the film world.
They’re also paid $75-100/hour so nobody cares or feels bad for them that they’re “not employees.” If they were employees they wouldn’t be making that kind of money. As with almost anything CA does, it’s insanely stupid. I hate that state and everyone who runs it, but mostly it’s the people who live there who are just painfully dumb.
I don't know about outside the US but there's plenty of cities and now the entire state of California that want to regulate and define how uber operates its ride sharing.
As well they should. But keep in mind, Uber exploits laws that have a positive purpose.
<sigh.>
Uber doesn't exploit anything whatsoever. Uber complies will all existing laws and regulations.
What is happening is unscrupulous elected politicians and public sector bureaucrats & mandarins are targeting Uber for a shakedown.
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Originally Posted by SocSciProf
Not everyone wants to be an employee. There's a legitimate reason to be a contractor. Uber exploits that...
Untrue. Uber exploits nothing.
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Originally Posted by SocSciProf
...and the legislation should not be so scattershot that it hits the legitimate, authentic businesses...
...so, Uber is not a legitimate, authentic business? Careful, P'fessor; you're starting to sound like a candidate for the Democratic Presidential Nomination.
Moreover, legislation should NEVER be targeted at a specific company such as Uber.
Our government should NOT be in the business of picking winners and losers - so legislation, to the extent it needs to exist, should create a level playing field rather than placing an undue burden on large companies.
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Originally Posted by SocSciProf
... that use contractors in the way the law intended.
Which, indeed, they do. Uber employs over 22,000 people in the areas where they have a core competency and a strategic and competitive advantage - being an intermediary between people who wish to share a ride and people who wish to share a car.
Moreover, Uber is far from making money. It reported an operating loss of $3 billion in 2018 after losing more than $4 billion the previous year.
Uber has lost more money, faster than any venture in history. Uber destroyed more shareholder value in its first two days of trading than any IPO in history – by a wide margin.
The LAST thing this nascent industry needs is yet more costly regulation designed to satisfy the ultra-progressive wing of the sole relevant political party in California.
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Originally Posted by SocSciProf
... Someone exploits it and thus causes untold damages on lots of people.
No one has "exploited" anything. There has been no "untold damages."
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Originally Posted by SocSciProf
... California decides to "fix" the problem..
There is no problem and hence no fix is needed... unless you define the problem as "campaign contributions and votes" whereby elected representatives are "selling" legislation to trial lawyers in exchange for campaign contributions and get-out-the-vote efforts on behalf of unscrupulous contractors who hope for a litigation jackpot.
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Originally Posted by SocSciProf
... writes an overly broad, poorly-reasoned law. Everybody they wanted to protect plus lots of others lose.
It isn't overly broad from the point of view of the winners - the California Trial Lawyers Association and its ultra-wealthy lawsuit factories.
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Originally Posted by SocSciProf
... Why is California unable to write reasonable legislation to deal with legitimate problems in a way that doesn't produce massive collateral damage?
Again, you seem to want to pick winners and losers. That's not the job of public sector bureaucrats and mandarins.
I don't completely disagree with you, but I think you are ignoring that it is routine and entirely appropriate to exempt businesses on the basis of size.
It is not appropriate. There needs to be a level playing field rather than legislators, bureaucrats and mandarins selecting who to punish and who to reward.
It's not clear from the posts, and I haven't had time to read the actual wording of the law, but if you work for multiple companies, providing a specific service from time to time, I doubt you would be classified as an employee.
Many drivers use both the Uber and the Lyft platform. The drivers will migrate to whichever platform provides them the best customers.
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Originally Posted by WRM20
If anything, the law will force lots of folks to form an LLC with themselves as the only employee.
The tax law already provides a huge incentive to do so. Far from "force," the country has lots of people who would "love" to meet the requirements to form an LLC because of the many advantages it provides in the real world.
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Originally Posted by WRM20
My brother had to do that to meet the requirements of one of his clients.
There are many benefits your brother can now enjoy. Here's a simple hypothetical benefit (I just pulled this out of the air; I may be wrong on this so I'll defer to any tax professional): As an employee of his newly formed LLC, the LLC can now provide him with health insurance at the LLC's expense, thereby reducing LLC profits. Yeah, he can buy it prior to being an employee of an LLC, but then the costs of health insurance are his (not the LLCs) and are subject to federal limitations associated with his AGI. Moving personal costs to the LLC solves that problem:
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The IRS allows you to deduct qualified medical expenses that exceed 7.5% of your adjusted gross income for 2017 and 2018. Beginning Jan. 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.
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