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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.
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.
...what's the question?
It is not true the state is free from legal risk. I was in a somewhat similar situation and I was arguing that the contracting company was a sham and I was actually an employee of the original company.
I received a big check to shut me up.
Unfortunately, I often find myself in the minority on points like this. But here's where I typically come out:
Everyone has a responsibility to report wrong-doing, when they see it. Even if this is not a legal responsibility, it is a moral one. Certainly, one can take this too far, and become a nitpicker. It's not one's responsibility to be a nitpicker. But it is one's responsibility to set a reasonable line in the sand, and when one sees that line crossed, then act accordingly.
I get the sense you wouldn't be asking the question if you thought this fell into the category of nitpicking. The fact you feel the need to ask the question in the first place probably provides the answer right there. I believe you have a moral responsibility to not just look the other way. And this might involve risk to you. But where would we be as a society if people were afraid to take such risks in order to fix wrongs?
IANAL, but ...
Many years ago, I worked in the USA for a Canadian Corp. The Corp. routinely bounced payroll checks, delayed sending payroll checks, or wrote payroll checks for less than the amount owed. Every time theses things happened, the Corp. claimed it was difficulties with exchange rates and transfers to the USA bank from which pay checks were drawn for USA employees.
I happened to work right across the street from a US Federal Building, so one day, several co-workers and myself walked over to inquire about any remedies that might be possible. We provided documentation to the helpful FBI agent who said bouncing payroll checks could fall under FBI jurisdiction. I also happened to mention the situation to my congressman who I knew socially as a long time family friend. A few weeks later, a Treasury Department person called and told us that nothing could be done to induce better behavior by a Canadian Corp. with respect to USA "employees", and furthermore, we weren't employees. We were considered independent contractors from the point of view of the Canadian Corp. Apparently, a shell USA Corp. employed us as regular employees with benefits and then contracted with the parent Corp. for our time. We received W-2 instead of 1099, but we were effectively 1099 contractors. The Treasury representative seemed to be telling us that we were not protected by USA labor laws or banking laws.
Treasury representative's statements didn't seem right, and we asked many questions to clarify our understanding. Several of us asked a local lawyer about the situation, and the answer we got was that any court action would have to start in Canada, and any settlement would be consumed by attorney fees. In other words, it wasn't worth it.
After a while of continued mistreatment, all of the USA employees except a few salesmen who worked on commission moved on to greener pastures. Such is life.
Yes..and SHHHHHHH!!!
Don't start complaining about this. Those of us in the 1099 contracting game LIKE it this way!!
There's nothing magical or that difficult about paying your own benefits!! Medical is easy, just get a high deductible policy (and many of them since obama care came out are this way) of about $1200 deductible, you can also set up a HSA (Health Savings Account) and sock away about $3K annually pre-tax....for your routine meds and co-pays, etc.
You set up a solo-401K or IRA..whatever you like...and you know how to negotiate your bill rate to cover medical/retirement/timeoff and you're good to go. This way, you generally have MUCH more freedom with work (no more fucking waiting to *EARN* vacation hours...take them off when you want), and you can write off many things, driving to/from job site is a good one, equipment, and as I've mentioned before, if you set yourself up as a S-corp of one person, and pay yourself a reasonable salary W2 from your own company, you only have to pay employment taxes (SS and medicare) on that portion of your money, the rest falls through to personal income taxes at EOY..where only state and federal are taxes..and thats AFTER you take your deductions out.
All you have to do, is be able to wear your big boy pants and keep up with a bit of paperwork yourself, be responsible with money (save enough to pay EOY taxes, make sure to pay quarterly taxes)...and also good idea to hire a CPA (deductible).
You get more freedom to work like you wish, and you have a fighting chance to keep more of your hard earned money from the fscking IRS. And it is perfectly legal...
There is NOTHING wrong with being a 1099 contractor, frankly, I think it is much better than being a regular W2 wage slave...and these days, face it, you don't get any more job security as a regular employee than you do as a contractor...so, you might as well contract and get the BILL rate that goes with it.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
...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...