Ask Slashdot: Opinions on the State Breaking Its Own Law Against Employee Misclassification?

An anonymous reader writes: I've had the privilege of developing software as an independent contractor for various agencies of a particular state for many years. These past few, however, have seen changes: now I, and almost every other contractor I know, are being managed very differently. This state is now making a widespread practice of using the businesses it awards contracts to as staffing agencies, knowing full well that the people coming in are 1099s and receive none of the benefits or protections of regular employees. These contractors are expected to be on site full-time, are not allowed to use their own hardware or software, and are managed alongside, and perform substantially the same work as other, regular employees. This is apparently done to cut costs.

The State has no legal risk here — that rests solely on the businesses it awards contracts to. But given that this particular state takes a hard line against misclassifying employees, this strikes me as profoundly hypocritical. I am not here to ask for legal advice. Indeed, I have already retained counsel in this matter. Considering additional detail that I won't get into here, Federal law is likely being broken. Since this is also one of the states that have the strict 'three prong' test for classifying employees, the State's own law is definitely being broken.

I thought, maybe somebody should say something. But my lawyer's reaction surprised me. He said — this isn't a big deal, you could just go find another client. And you know what? He's right. I could totally do that. Maybe since we in the IT industry tend to be well paid, nobody should care, and there's no reason complain. I'm not asking for legal advice or a recommendation as to what I should do personally; I'm still forming an opinion on the larger issue here, and I'd like you to share yours.

Comments

So...

[coldsalmon]

...what's the question?

Re:So...

[cascadingstylesheet]

...what's the question?

He doesn't have one. He's ten steps ahead of you and doesn't want your advice. He precludes you contributing positively in any way you could conceive of.

So ... yeah. Not sure WTF.

Re:So...

[tlhIngan]

Often, employees can get the WORST of both worlds...if they are hired as a W2 employee of the contracting house (usually the prime) of a federal gig. Yes you get some benefits, but you don't get the pay and freedom of a full blown contractor.

OTOH, the employer has to pay payroll taxes of the employee, there's paid time off, etc. And well, the person doesn't have to seek out work when the contract's running out (because of the way things work, an independent contractor has the obligation to seek additional work to provide "independence" - you cannot have your contract renewed over and over again otherwise you can get classified as an employee.

All that is why contractors are paid more money - because instead of benefits and perks, all that is cashed out. You take time off - you don't get paid, so you're paid more to compensate for that. The contracting company doesn't pay payroll taxes on you - that's now your responsibility, etc.

Of course, the downside is you're cashing out your perks. If you're taxed at 25%, that means your paid time off is now taxed. So instead of taking 8 hours off, you got cashed out 8 hours, and effectively were paid for 6 hours.

Re:Right vs wrong

[Anonymous Coward]

Obviously, legal != moral, but it's important to consider the reasons behind these employment laws.
I've seen a lot of construction workers being taken advantage of by shady contractors who misclassify them. The workers are overworked, underpaid, and left without a lot of the protections that employees take for granted even in at-will, right to work red states. Competitors who follow the rules are regularly underbid by the cheaters. And how do you think a contractor who does this to his employees treats his clients? Keeping mum about these illegal practices is bad for us all.

Re:Right vs wrong

[Grishnakh]

The problem is that it isn't going to fix anything, and will just cause problems for him. This problem of treating employees as "contractors" isn't just with this state, it's everywhere. I've seen it with a bunch of small businesses with friends/relatives. Supposedly, the IRS takes a dim view of this practice, and allows employees to file SS-8 forms to report such employers, and force them to pay their proper share of FICA taxes and such. However, in practice, the IRS simply ignores these submissions and lets employers do whatever they want.

But where would we be as a society if people were afraid to take such risks in order to fix wrongs?

When society is so screwed-up that taking risks never actually improves things, and only results in trouble for the whistleblower, why bother? Face it, our current society hates whistleblowers. They're even called "rats". They're not well-perceived by anyone except a minority of people who are already malcontents.

This guy is a software developer; the market for that profession is actually really good currently (though much more so in certain areas than others). He just needs to go find a new job. He'll probably get paid a lot more too. State governments aren't exactly known for being high-paying employers.

I'm being taken advantage of

[rsilvergun]

What are my options to stop it? That's all he's asking. It's especially scary because the same govt that should be looking out for these abuses is actively participating in them. This is what happens when workers lose solidarity. They'll come for you and your wages next.

Re:I'm being taken advantage of

[Anonymous Coward]

It's telling that this post is universally met by cynical acceptance. The system is so broken, and has been broken for so long, that nobody even pretends to care about making it better.

And we ask why there is so much despair regarding the state of our government.

Is this a big deal

[Etherwalk]

...what's the question?

The big question is whether state misreporting of employees and IC's is a big deal. Anonymous poster sees gross hypocrisy by his government and is told by legal counsel that it's not a big deal, wants others to weigh in so that he can better conceptualize how he should feel about this--he's looking to third parties for feedback on something that strikes him as morally suspect and affects his life. That's actually an incredibly healthy, rational, and unusual attitude.

Is it a big deal? Yes and no. It's common to have people misrepresent employees as ICs in order to avoid the legal responsibilities of employment--that's *why* the IRS and various states crack down on it. So it's certainly not an *unusual* deal. And if you're making bank, it may not affect you much personally.

But it may affect a lower-income worker who gets treated the same way by the state and is denied overtime benefits, or the woman who's discriminated against by the state's hiring process and finds it much harder to sue, or the corrections officer who doesn't get a pension, for example. So there's some reason to call the state out on it for the public good.

There's *also* a strong argument that they should be called out on it because *they should have to put up with* the employment rules everyone else follows. They're the ones who change the rules, so they should experience having to live with them.

So there are reasons to responsibly disclose, but not much personal benefit to you. You risk a whistleblower sign over your head for the rest of your career unless you do it intelligently. You could sort of go a middle-ground, where you don't go to the press, for example, but do include a note on your taxes that the state has deliberately misclassified you as an independent contractor as part of a systemic process that affects many thousands of employees. I have no idea if the IRS would do anything with it (I'm guessing not), but you would be reporting it. Ah, here we go, the IRS has a way to report fraud:

http://www.irs.gov/Individuals...

Re:Is this a big deal

[tylikcat]

Yes, this. The part I found the most disturbing was:

"Maybe since we in the IT industry tend to be well paid, nobody should care, and there's no reason complain."

There's a pretty significant portion of the tech industry that isn't necessarily well paid, nor do they have much in the way of job security. When times are good, they do just fine. When times aren't, they bounce between really marginal contracts and unemployment. (I replaced IT with tech because I've spent most of my time in software development, so most of my knowledge of IT as a field is somewhat second hand.)

Tech culture tends to be all about individual achievement - and on the flip side, if you're not bringing in the buck, then you must be an underachiever, right? Which just means that if you are one of the workers who is more vulnerable, and if you are being exploited, there's more social pressure not to speak up about it, because you don't want to be labelled a whiner, when everyone knows that it's really that you couldn't hack it.

(Just in case there's any doubt, while I'm a big fan of people doing cool stuff, and rather like to do cool stuff myself, I think the above is a rather stupid and short sighted approach to structuring a either a business or a society.)

it's the State, stupid

[bill_mcgonigle]

the whole point of having a State is that there is one set of rules for State actors and another set of rules for everybody else. Qualified immunity, massive pollution, wasting resources, welching on promises, breaking every damn law on the books when it furthers wealth and power; how about you go work for a business that's not so wildly corrupt? - heck, even on Wall Street you'd do better.