[conspire] Ballot Analysis and the 7/8 Clause

[Rick Moen]

Quoting Paul Zander (paulz at ieee.org):

>  On his /election-2020-11-03 page Rick wrote:
> Also as always, this page includes separate "RM partisan analysis"
> sections for each issue/candidate, just in case you're curious what I
> personally think. No, I'm not lobbying to persuade, in part because
> that doesn't work.
 
> One thing I like about CABAL is that we can disagree without being
> disagreeable.   Here is why I am inclined to vote in favor of #22
> regarding Uber drivers.

Hey, thanks.

I keep trying to tell people that the page is in no way intended to
arm-wrestle anyone.  It's literally an explicit effort to leverage the 
existence of the Web to give people access to a _lot_ of informed
opinion on the votable issues, so they can make up their own minds.

In fact, several people over the years asked me to include or link a 
one-page PDF of just the 'To vote like Rick, vote this way' bits for
quick-reference, and I was non-plussed.  Like, why?  Because I'm some
kind of oracle?  That sheet would be contrary to my fundamental aims.

Anyway...

[snip most of your text for brevity your recounting of some of the
gig-economy classification history]


Skip forward to the subheader The Linneus Bottomus, if you want to get
to the short version.


I have to mention an awkward bit, here.  When I write that the analysis
page is completed prior to an impending election, that's wild optimism, 
and often one of the bits I end up reconsidering first after it's
'completed' is my positions on state propositions.  Why?  Because the
work of assembling all of the information on the analysis pages is so
time-consuming that the 'completed' page often starts out with what is
barely better than my gut reaction, plus my faith in Pete Stahl's 
excellent analyses at his site peterates.com .

As it happens, I was woken up by one of our cats about 3am, picked up
the laptop computer for a while, and started reading some (more) of my
page's links about Prop. 22, particularly the newspapers that endorsed
'yes' (contrary to my announced 'Screw them sideways. They're shameless
scofflaws, and need to obey the law.' reaction -- like SF Chronicle's, 
and The Press Democrat's (Santa Rosa).

I can only say:  It's not clear-cut.

I have experience as both a genuine independent (WAN/LAN) contractor and
as a faux contrator.  Also, as a former tax accountant, I have known for
decades the court's and IRS's criteria for what is an employer-like
relationship and what is a contractor-like relationship.

When I was a WAN/LAN contractor, it was very, very clear that my
contractor status was completely kosher:  I supplied and maintained all
my own tools, I had an independent business with its own separate
reputation, I negotiated terms and fees on an equal basis (e.g.,
$85/hr., 2 hour minimum, and sure, go ahead and get a PFY to do a crummy
job for less if you are good with that), and more factors like that.  

On a different occasion, after a crummy boss at VA Linux Systems / VA
Software Corporation who had it in for me got me tossed out the door
into the Dot-bomb recession (trying to hide that I'd got glowing written
commendations from each of the SourceForge Enterprise Edition customers
whose installations I'd helped repair), I got picked up for a survival
job at small Fremont firm California Digital Corporation (CDC), the company
that bought out VA Linux Systems's remaining hardware inventory and
proved that CEO Larry Augustin was wrong when he decided VA could no
longer compete in hardware and converted the firm into a proprietary
software company.

I got my revenge against the crappy boss.  I mentioned in notes to Larry
Augustin, who'd been dismayed and distressed at my dismissal but hadn't
intervened, that every one of my three preceding bosses at VA had
reviewed me highly, just this one idiot disagreed, and that I strongly
suggested he check my file at Steve Barranti's HR department and would
find something surprising.

Knowing that my boss was setting me up for dismissal, I had e-mailed my
boss and her boss _each_ time a letter arrived from a SourceForge
Enterprise Edition customer commending the job I'd done, asking if they
would please add it to my HR file in Steve Barranti's office.  Each
time, they e-mailed back that they would.  Each time, I waited a week, 
then visited Steve Barranti's office, said 'Hi, did Amy Abascal Turner
or DeWayne Kuhn bring a copy of this [holding out a printout of the
commendation letter] to my employee file?'  'Um, no.'  'Huh, that's
interesting.  Here is copy from my file, plus printouts of Amy and
DeWayne's e-mails notes saying they'd add it to my file, plus a
contemporaneous note today from me saying this didn't happen and your
acknowledging that they didn't.  The second, third, and fourth times
this happened, Steve looked quite pained, but obviously was not able to
intervene.

Anyway, after my heads-up to Larry Augustin, I heard to my pleasure that
boss-from-hell Amy had just been catapulted out the door, and I hope 
she heard that it was on account of the paper trail I'd left.

But meantime, I was hungry, so I took the job at CDC.  I learned a lot,
got my name into the credits for another open-source software project
(OpenIPMI), and helped design and build the #2 HPC computing cluster 
in the entire world, 'Thunder', built with 4096 Itanium2 CPUs for LLNL.

What I did not get was health benefits.  Or Social Security.  Or
unemployment insurance coverage.  Or Medicare disability insurance.  
Or wage/hours/etc. regulatory protection.  Or vacation/sick leave.  
Or a pension plan.  Or collective bargaining.  Or protection from
discrimination and retaliation.  Why?  Because corporate co-owners BJ
Arun and his wife were cheap bastiches and disobeyed the law.  I was
doing what was absolutely by all legal criteria a real employment job,
but had no benefits because that was the 'take it or leave it' offer --
and I took it.  I probably would again under similar circumstances, but
the point is, this was a terrible solution, and CDC was cheating me, the
state of California, and the Federal Government.

I could have informed on them during my years there, and the Aruns would
have been assessed for back taxes, penalties, and fines -- and I
probably would have lost my so-called job.  I could have informed on
them on the way out the door to take a better and more-real job at
Cadence Design Systems, but I didn't -- partly because I had willingly
accepted the cruddy terms, and so felt it would be a bit nasty to kick
them on the way out.

At the time, and possibly still, the 'no benefits' scam was common in
Silicon Valley.  On the one hand, you can say these were jobs that
otherwise might not exist.  On the other, it's nonetheless exploitative,
and unhealthy for everyone.


Let's roll forward to the gig-economy companies and Prop. 22.  

The Press Democrat and SF Chronicle pieces claim the 3-prong test for
independent contractor is too-rigid/inflexible and not like 'by any
reasonable definition not laid out by the court or politicians'.  Well,
gosh, guys, I don't know.  Here's the three criteria (all of which must
be met for the 'independent contractor' claim to be valid) from the CA
Supreme Court Dynamex courier and delivery service case (April 2018)
that the Legislature then hammered into state law via AB50:

   1.  The worker is free from the "control and direction" of the 
       hiring entity.
   2.  The worker performs duties that are "outside the usual course"
       of the hiring entity's business.
   3.  The worker is engaged in an "independently established" trade,
       occupation, or business.

You know, I'm just an ignorant former staff accountant and tax preparer
who used to work on this sort of issue for a living, and someone who's
been, in subsequent IT work, both lawfully and illegally an 'independent
contractor', but that sounds very, very like established US Supreme
Court and IRS criteria.  Let's double-check my memory.
https://en.wikipedia.org/wiki/Independent_contracting_in_the_United_States

  The United States Supreme Court has offered the following guidelines
  to distinguish employees from independent contractors:

  1.  The extent to which services are integral to the employer's business.
      Greater integration favors an employee-employer relationship.
  2.  The permanence of the relationship. More established relationships favor
      employee status.
  3.  The amount of investment in equipment. When a worker makes a significant
      investment in the equipment they use in working for someone else, this
      suggests an independent contractor relationship.
  4.  The degree of control by the principal. More control favors
      employee-employer status.
  5.  The amount of financial risk. More opportunity for profit or loss favors
      an independent contractor relationship.
  6.  The amount of initiative, judgment or foresight in open-market
      competition with others required for the success of the claimed
      independent enterprise. Entrepreneurial and distinctive work favors an
      independent contractor relationship

  The IRS, for federal income tax, applies a "right to control test"
  which considers the nature of the working relationship. They
  highlight three general aspects of the employment arrangement:

  1. financial control
  2. behavioral control
  3. relationship between the parties

  In general, their criteria parallel those of the Supreme Court in
  sentiment. [...]

(Note that those three correspond very closely to the Dynamex decision's
three.)


So, I'm not sure I buy the editorial writers' view that the three
criteria (dubbed the 'ABC test') are too-rigid and/or unrealistic.
They look like a minor variant on decades-old established Federal
regulatory law.

During my time as a staff accountant at CPA firms, we talked about the
IRS 'twenty factor test'.  I see Wikipedia mentions it at 
https://en.wikipedia.org/wiki/Misclassification_of_employees_as_independent_contractors
and links to
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
and 
https://www.irs.gov/pub/irs-pdf/p15a.pdf

They're listed outright here, at the Web site of a California tax lawyer:
https://www.robertschriebman.net/articles/the-famous-irs-20-factors-used-to-determine-whether-a-worker-is-an-independent-contractor-revenue-rule-87-41/

  The Famous IRS "20 Factors" Used to Determine Whether a Worker is an
  Independent Contractor - Revenue Rule 87-41

  The 20 common law factors listed below are not always present in every
  case. The IRS and state authorities know that some factors do not apply
  to certain occupations. The weight to be given each factor is not always
  constant. In other words, each factor is not automatically worth 5%. The
  degree of importance of each one may vary depending on the occupation
  and the reason for existence. Therefore, in each case, an IRS agent or
  state employment tax examiner must usually take into consideration two
  primary questions: (1) Does the factor exist? and (2) What is the reason
  for or importance of its existence or nonexistence?

  Does the EDD use these same 20 factors in deciding California Employment
  Tax issues? Well, yes and no. You see, the EDD also has a list of
  factors; many more than 20. However, the EDD will often decide a case
  using the IRS standards if it is in their best interest to do so.
  Technically, the EDD is suppose to use its own factors, but this is a
  mere technicality.

  Here are the 20 key factors found in Rev. Rul. 87-41 (1987-1 CB 296):

  1. Instructions: A person who is required to comply with specific
  instructions about the time, place and manner of work is usually
  considered an employee. If the employer has a right to require
  compliance with instructions, an employment relationship will usually be
  found to exist.

  2. Training: If the employer provides a training program or the
  individual is under some type of apprenticeship, an employee
  relationship will be found to exist. An independent contractor
  ordinarily uses his or her own methods and receives no training from the
  purchaser of the services. In fact, it is usually the independent
  contractor’s methods which bring him or her to the attention of the
  purchaser.

  3. Integration: How well do the person’s services fit into the overall
  business operation? The more they fit in (i.e., the more they are
  “integrated”), the greater chance that an employer-employee relationship
  exists.

  4. Services Rendered Personally: If the services must be rendered
  personally, there is a presumption that the employer is very interested
  in the methods as well as the results.

  5. Hiring, Supervising, and Paying Assistants: This generally shows
  control over the personnel on the job. Control seems to be synonymous
  with the employer-employee relationship (see also Rev. Rul. 70-440,
  1970-2 CB 209).

  6. Continuing Relationship: The longer the continuing relation, the
  greater the presumption that it is one of employer-employee.

  7. Set Hours of Work: This, again, is a control factor. The more control
  the employer has, the greater is the chance that an employer-employee
  relationship exists.

  8. Full Time Required: If the worker must devote full time to the
  business of the employer, the employer has control over the amount of
  time the worker spends working and impliedly restricts the worker from
  doing other gainful work for third persons in the normal course of
  business.

  9. Doing Work on the Employer’s Premises: This is not necessarily a sign
  of control. Many independent contractors must perform their services on
  the premises. However, the use of a desk space, telephone or
  stenographic service or the use of heavy equipment, such as in the
  machine tool business, usually indicates and employer-employee
  relationship.

  10. Order or Sequence Set: If the worker must perform the work in a
  sequence set by the business, then he or she is more likely an employee.

  11. Oral or Written Reports: If the worker has to continuously submit
  oral or written reports to the employer or to the supervisors or
  foremen, this usually indicates a subservient relationship and one of
  employer-employee.

  12. Payment by Hour, Week, or Month: Regular periodic paychecks indicate
  an employer-employee relationship. Usually, independent contractors get
  paid in a lump sum, or a lump sum is agreed to be paid in installments.

  13. Payment of Business and/or Travel Expenses: If the employer pays the
  person for business and/or traveling expenses, the person is ordinarily
  an employee. On the other hand, a person who is paid by the job and who
  has to take care of his or her own incidental expenses is generally an
  independent contractor.

  14. Furnishing of Tools, Machinery and Materials: The fact that an
  employer furnishes tools, machinery, equipment, and materials tends to
  show the existence of an employer- employee relation; however, this is
  not always the case. I remember that one of the very first cases that I
  had as a young lawyer involved individuals working in a machine shop. I
  was able to prove that it was impractical for these people to bring any
  heavy equipment into and out of the shop.

  15. Significant Investment: Investment by the person in facilities used
  in performing services for another is a factor that tends to establish
  an independent contractor.

  16. Working for More Than One Firm: A person who works for a number of
  persons or firms at the same time is generally an independent
  contractor.

  17. Realization of Profits or Losses: One who puts assets at risk and
  who can realize a profit or suffer a loss as a result of his or her
  services is generally an independent contractor. An opportunity for
  profit and loss may be established by one or more of a variety of
  circumstances:

  a. The individual hires, directs, and pays assistants;

  b. The individual has an office, equipment, materials and work
  facilities;

  c. The individual has a business reputation at stake;

  d. The individual has exposure to liabilities in the ordinary course of
  business; and

  e. The individual may bid on specific jobs and therefore run the risk of
  overbidding or underbidding.

  18. Making Services Available to the General Public: This factor usually
  indicates an independent contractor status. However, some independent
  contractors, such as certain aerospace defense specialists in electronic
  technology, are hired on a fairly long-term basis that occupies all of
  their time.

  19. Right to Hire and Fire: The right to hire and fire is a very
  important factor in determining whether an individual is an employee or
  an independent contractor.

  20. Right to Terminate: Generally, an employee has the right to
  terminate a relationship with an employer at any time without incurring
  a liability. This is particularly true if the employee is not under a
  written contract. On the other hand, independent contractors usually
  work under a written contract and do not have the right to terminate at
  will.


My recollection is that employers worrying that they might be a marginal
case can apply to IRS for an evaluation, which IIRC typically takes
about six months.

Paul wrote:

> Within months, AB5 was passed and codified the Dynamex decision into
> state law.  So, yes Uber and Lyft are violating AB5.  My issue is that
> AB5 covers, not only drivers, but names many other professions that
> had been getting on just fine.

Had they, though?  That's intended as a real question, not a rhetorical
one.  I've not been a staff accountant in ages, and merely been on the
receiving end of employment-tax gamesmanship without taking detailed
looks at the law.  I just took it as given that CDC and many others were
scofflaws and that 'contractors' like me had been in a passive
conspiracy with them to violate the law for (arguable?) mutual benefit.

According to an almost classically half-assed Wikipedia article
( https://en.wikipedia.org/wiki/California_Assembly_Bill_5_(2019) )
the CA Supremes' 2019 'ABC test from Dynamex Operations West, Inc. v.
Superior Court replaced an earlier court-decreed 11-point test, the
'Borello test' from the 1989 case S.G. Borello & Sons, Inc. v.
Department of Industrial Relations.

https://www.lexisnexis.com/legalnewsroom/workers-compensation/b/recent-cases-news-trends-developments/posts/california-will-dynamex-dynamite-the-borello-factors
covers the change.

As recounted there, the Dynamex decision started out by summarising the
Borello test:

   "The trial court described the Borello test as involving the
   principal factor of 'whether the person to whom services is rendered has
   the right to control the manner and means of accomplishing the result
   desired' as well as the following nine additional factors:
 
  (1) right to discharge at will, without cause;

  (2) whether the one performing the services is engaged in a distinct
  occupation or business;

  (3) the kind of occupation, with reference to whether in the locality
  the work is usually done under the direction of the principal or by a
  specialist without supervision;

  (4) the skill required in the particular occupation;

  (5) whether the principal or the worker supplies the instrumentalities,
  tools, and the place of work for the person doing the work;

  (6) the length of time for which the services are to be performed;

  (7) method of payment, whether by the time or by the job;

  (8) whether or not the work is part of the regular business of the
  principal; and

  (9) whether or not the parties believe they are creating the
  relationship of employer-employee.”


Now, I must admit that I've been out of this field for too long, and am
trying to acquaint myself with old and new material in a tearing hurry,
but on a quick parse, the Dynamex 3-point ABC test and the Borello 11-point 
test seems like both kissing cousins to the IRS twenty-factor test and
the USSC criteria.  There are some minor differences in detail, but they 
all share the same underlying thrust.

I mean, tell me if I'm wrong in that.  This current post is being
written on the fly with almost no contemplation.  But my gut reaction 
is that the ABC criteria hammered into AB5 amounts to the same concepts 
and guiding principles I've known since dinosaur days from Federal tax
and USSC caselaw.

So, if I'm correct in that really-quick assessment, then I'd take a lot
of convincing that either the CA Supreme Court or the Legislature did
anything very novel.  _Maybe_ the need to meet all three prongs of the
ABC test is 'overly rigid'.  I'd have to think about that, and about how
the administrative and caselaw is or is not likely to shift.  My gut
sense is:  I doubt it would much, in part because judges aren't stupid
or inflexible and our legislators aren't stupid or inflexible even if
they sometimes err and need to about-face while claiming not to have
done so.

But, speaking of inflexible (and how's that for a segue?)....


The Linneus Bottomus

Prop. 22 includes a certain provision, and, wow.  It binds the
Legislature permanently against making _any change_ to legal provisions 
hammered into California statutues by Prop, 22 unless the Legislature
has a 7/8 supermajority.

Seven-eights.  A 87.5% supermajority vote.  Permanently.

Because, it's not like the Legislature are our elected representatives
who we trust to act for us diligently on pain of our replacing or
recalling them, or overturning their actions in court.  Oh, wait, that's
exactly who they are.

Even if I were utterly in support of every other part of Prop. 22, that
provision would be an automatic dealbreaker -- an absolute HELL NO.


> So if the TV spot is correct and 4 out of 5 app-based drivers prefer
> the IC status that is what they should have.

You know, back when I had that illicit 'independent contractor' job at
California Digital, if the local news station had put me on the air, and
said 'Mr. Moen, do you feel your job at Mr. Arun's company on an
independent contractor basis is the right thing and is compliance with
a just application of employment law?', I would have smiled and said  
'Absolutely.  I love the opportunity Mr. and Ms. Arun have given me, 
and appreciate it every day.'  I'd say that even though I knew it was
grossly illegal and somewhat exploitative, because it brought home food
and paid my rent.

Rare is the person who's relying on a somewhat exploitative subsistence
job who's willing to bite the hand that feeds -- at least not until
he/she has moved on to something better.  I know, because I've been that
guy.


Anyway, I'm taking a day to reconsider all (well, some) of my hasty
ballot decisions, and will probably rewrite some.  However, the 7/8
thing presently inclines me to change 'no' on Prop. 22 to 'HELL NO'.

However, as Dennis Miller used to say (back when he was funny), 
'But that's just my opinion.  I may be wrong.'