[dangxiaopin]

Contractors send 1099 they receive from a company to FTB. They don't need to complain.

This means that a bootstrapped start-up cannot temporarily hire a graphics designer or a coder in California anymore, without the budget to make him an employee. But non-VC entrepreneurship has been hardly possible here for other reasons: building and rent control regulations driving the housing and office space costs. Since the 2006's "web2.0", progressive California regulators are at it for real, pitching entrepreneurship as an enemy of labor: it's no longer a place for small business and non-VC startups. Those have been fleeing.

[gamblor956]

This means that a bootstrapped start-up cannot temporarily hire a graphics designer or a coder in California anymore, without the budget to make him an employee.

This is so completely wrong.

You know what the difference between a temporary, part-time employee and an independent contractor is, from the business' financial point of view? They have to pay payroll taxes (and in some states unemployment insurance levies) for the part-time worker instead of forcing the worker to handle those costs themselves. And that's it. They aren't required to provide benefits or anything else until they exceed a threshold size in terms of employees (generally 50) or annual income (usually >$10 million/year).

In your specific example, the startup could hire both the designer and the coder as employees or as contractors, so long as both were allowed to work on other gigs while they were temporarily contracting with you and your startup wasn't in the business of graphics design or software. (If your business is a software business, the analysis is more granular: is the coder working on the revenue-generating part of your software, or on a supporting part of the software like the networking code?)

Since the 2006's "web2.0", progressive California regulators are at it for real, pitching entrepreneurship as an enemy of labor: it's no longer a place for small business and non-VC startups. Those have been fleeing.

California went from being the world's 8th largest economy to the world's 5th largest economy over this time. Has lead the nation in small business growth for the past decade. California's regulations basically just filter out all of the fake businesses that don't have enough backing to at least attempt existence.

[dangxiaopin]

They have to pay payroll tax and administer payroll. I ran a bootstrapped business, that initially had several contractors, till a day I could afford to replace (in several cases, promote) them to employees, so I know this intimately. Additionally, there are payroll costs and the accounting costs, and the payroll administration burden. For a tiny growing business with no outside capital it matters more than you know.

The 5th largest economy figures come from semi monopolies like Google and Facebook. In the beginning, they get a VC investment, a comfortable office, a payroll admin and Wilson and Sonsini from day one. In the meantime, San Francisco restaurants cannot afford cooks.

[zaroth]

I think the delta between "contractor" and "part-time or temporary employee" is a bit steeper than you are claiming.

The tax issues are not minor, to begin with. If I have no property and no employees in a given State, I likely do not pay all sorts of taxes to that state which I otherwise might have to. I likely do not even file an income tax return with that State. As soon as I have an employee living in a State, then I definitely have to file taxes there. I also have to register with their labor department, there are probably state-specific labor laws which I could run afoul of, maybe state-specific postings and notices, etc. It's not simply a matter of the payroll company making the correct deductions.

I have to follow a different hiring practice to hire an employee than a contractor. There are likely to be more requirements on how I must make the job posting, and how I can conduct the interview process. There are additional government forms that must be filled out during the hiring process, and after the candidate is hired. The legal rights of a temporary employee are different from the legal rights of a contractor in important ways that I might not fully understand.

Once an employee is hired, I either have to pay them hourly, or a guaranteed monthly salary. I cannot offer to pay the employee a fixed amount for a certain deliverable. I have to pay the employee on a set time schedule, and not based on deliverables. I cannot withhold payment based on deliverables not being met.

I will have to update my worker's compensation policy. Depending on the size of my company and the state, I may have to enroll this person (and their family) to provide health benefits, life insurance, disability, etc. Also, certain states impose family and medical leave requirements on employees which would not apply to contractors. Federal discrimination regulations only apply to employees. I'm sure the list goes on and on...

And here I was, just wanting to get some help mocking up this new UI screen, or porting some code from one language to another, or making a new logo for my site, or updating the CSS to work with latest device X, or...

Over the last decade I've spent mid-6-figures on sites from Rent-a-Coder to Upwork and it's been a game changer for being able to quickly tackle big problems which arise due to a new R&D effort, or closing a new customer contract which our current feature set doesn't quite support, or just getting logos and wireframes because I'm not a designer and don't have nearly enough work to justify hiring one.

In short, contractors are super fucking important, and the "ABC" test seems to fundamentally mischaracterize a lot of tried and true contract work. Someone that I am hiring to perform a specific task, who is working remotely, who I will not be on-boarding, who will not be working closely with many employees, and who is paid upon completion of that task and then goes away, should be a contractor, even if they are doing work that is central to my business, and even if I closely monitor or specify how the work is to be completed.

[gamblor956]

Someone that I am hiring to perform a specific task, who is working remotely, who I will not be on-boarding, who will not be working closely with many employees, and who is paid upon completion of that task and then goes away, should be a contractor, even if they are doing work that is central to my business, and even if I closely monitor or specify how the work is to be completed.

Right, they would probably be treated as a contractor under the ABC test and the new law.

You're hung up on the "central to business" part of the test without paying attention to the nuance. Laws aren't black and white, they're many shades of grey.

If you're in the business of doing X, say programming widgets, then if you hire someone to do X (i.e, program widgets) for you, then that person will be an employee for all purposes of this law. Because they should be. They're literally doing your business activity for you, and there are plenty of legal reasons that you should be liable for their work--you're passing off their work as your own to the end customer.

OTOH, if you hire a contractor to program your back end, that guy wouldn't become an employee under the test, because you're not in the business of programming back ends. That back end may still be central to your business, but it's not your primary business activity (i.e., it's not your revenue-generating activity).

even if I closely monitor or specify how the work is to be completed.

This is the most misunderstood part of the ABC test. The ABC test doesn't require that the contractors have free reign to do whatever. It simply provides that a contractor should have free reign to accomplish the work unless the manner in which the project is completed is a relevant part of the contractual requirements. For example, specifying that a contractor program your backend in Node, with spaces instead of tabs, use git, and make use of specific AWS APIs, to match your standard coding practices in the rest of the project would be fine. Another example: telling a designer they must use Illustrator and specific design tools within Illustrator to match the processes or products of other designer work is also fine.

Monitoring work for purposes of quality assurance or quality control is also acceptable under the ABC test and is indeed even expected by the courts--not conducting QA/QC has been used as a factor indicating that the worker is an employee.

[zaroth]

> OTOH, if you hire a contractor to program your back end, that guy wouldn't become an employee under the test, because you're not in the business of programming back ends.

I have zero faith in the courts’ ability to distinguish this. In the case of Uber, their business is providing the back-end, and their revenue is a commission for doing all the back-end work. They are not in the business of driving cars — no Uber employee drives a car — and yet this bill would make the car drivers employees.

Similarly, I would have to expect someone working on any instrumental part of the product which generates revenue will fail the ABC Test.

If my product is a web API and I hire contractors to port my library to 17 different languages, pretty sure that is failing the ABC test.

If my product is food ordering, and I hire contractors to key in local restaurants’ menus into my database...

[xemdetia]

"I have zero faith in the courts’ ability to distinguish this. In the case of Uber, their business is providing the back-end, and their revenue is a commission for doing all the back-end work. They are not in the business of driving cars — no Uber employee drives a car — and yet this bill would make the car drivers employees."

I find this an interesting interpretation of how Uber defines their business. If Uber only provided the back-end for their work, the common consumer wouldn't know about Uber, you would know the driver directly and reach a deal with the driver directly. I would relate this most closely to things like in China where you can pay via WeChat or elsewhere with Square where they just facilitate the transfer of funds. They would be a distant party to the work actually being done.

Instead the average consumer knows Uber, goes to Uber with the goal of fulfilling their need of getting personal transport door-to-door, and the act is delivered by their contracted driver. They expect Uber to handle the complaint escalations, money handling, route planning, and basically everything related to that goal. If Uber provided only backend you could create your own frontend/theme to Uber for your local town (like you would a wordpress for a SMB) and create a business around just that. While there may be some back and forth on interpretation I think the real test is that based on all those steps that have to happen if the ride itself was omitted from all the services they created would Uber still be able to function and the answer is no which would make it part of the "usual course of the hiring entity's business." If Uber (not counting their other lines of business) didn't actually arrange rides for people, they aren't a company providing a marketable service anymore.

[zaroth]

If the CSS was omitted from my website it wouldn’t function very well either.... But I still think I should be able to hire a web designer on a contract basis to setup my CSS.

This is exactly why I think the ABC test is so disingenuous. It papers over the whole reason contracts are great — providing a single well defined service for a fixed price, and then moving on with life without worrying about a million regulations and forms and paperwork and insurance and hiring practices and workplace blahbity blah.