THAT IS WHAT GLOBAL WALL STREET HAS AS A GOAL WITH INDEPENDENT CONTRACTOR STATUS---FREE LABOR WHILE MAKING THE 99% THINK THEY ARE PART OF THIS GLOBAL 1% ECONOMY. IT'S FAKE FOLKS.
So, I am on the bus to work and as usual our homeless citizens are promoting all these global Wall Street policies because the 5% to the 1% control all homeless and community training for our low-income selling GLOBAL WALL STREET POLICY AS GOOD FOR THE POOR. This homeless man was promoting the end of high school to be replaced by college and forget being an employee but be that ENTREPRENEUR. We have watched these employment policies for these few decades in Baltimore and have labor groups protesting the exploitation of these policies yet our low-income citizens are still being pumped with bad economic policy stances. This is what outsourcing our public agencies does----each corporate non-profit comes at our low-income from a selective policy stance rather than being a neutral public agent of human services.
My homeless citizen on the bus touting the global Wall Street policies of ending high school set the stage for all this to happen to our children exploding what has already been an illegal manipulation of our workforce these few decades costing our local, state, and Federal government tremendous loses in tax revenue from corporations.
'Misclassification also results in lost income tax revenue to local governments.
Municipal governments supported by payroll taxes are also hit hard by misclassification. This includes some of the nation’s largest and most important economic centers'.
This is a long article--please glance through and Goggle to see charts that did not copy.
OR MISCLASSIFICATION IMPOSES HUGE COSTS
Independent Contractor Misclassification
Imposes Huge Costs on Workers and
Federal and State Treasuries
Misclassification of employees as independent contractors exacts an enormous toll on workers,
law-abiding employers, and our economy. Accurate
information on the prevalence of the
problem, and on patterns of violations, can help
government officials to direct their efforts at
the worst violators and most problematic industries.
Introduction & Background
Employers in an increasing number of industries
misclassify their employees as independent contractors, denying them the protection of workplace laws, robbing unemployment insurance and workers’ compensation funds of billions of much-needed dollars, and reducing federal, state and local tax withholding and revenues, while saving as much as 30% of payroll and related taxes otherwise paid for
Misclassification also hurts law-abiding employers who play by the rules but are under-bid and out-competed. Misclassification can take one of several forms.
Employers call employees
“independent contractors,” even when the workers are not running their
own businesses; they require employees to form a limited liability corporation or
franchise company-of-one as a condition of getting a job;
and they pay workers off the books, without any payroll treatment at all. These workers are sometimes
required to sign boilerplate contracts attesting to independent contractor status even where the functional relationships do not reflect true independence. These practices are increasingly being called “payroll fraud” because they are intentional
and aimed at evading the law. Legitimate business-to-
business transactions are not payroll fraud, because true independent contractors have a specialized skill and have invested in a business that enables them to earn a profit.
Employee misclassification is a persistent problem in many of our economy’s growth industries, including home care, janitorial, trucking and drayage, construction hospitality and restaurants and, more recently, in the rapidly growing application-based on-demand economy. State-level task forces, commissions, and research teams are using agency audits along with unemployment insurance and
workers’ compensation data to document the scope of independent contractor misclassification. Confirming the findings of earlier national studies, these state
reports show that 10 to 30% of employers, or even more, misclassify their employees as “independent contractors,” meaning that several million workers
nationally may be misclassified. State and federal governments lose billions in revenues annually.
National studies and reports
Several government studies document the extent to which misclassification drains federal revenues. The data is limited, however, and should be updated to give a more accurate assessment of the current economic impact. A recently-issued U.S. Government Accountability Office (GAO) report on the contingent workforce, analyzing data from the 2005 Contingent Work Supplements to the Current Population Survey, reported that 7.4% of the labor force is classified
as independent contractors and 4.4% is classified as self-employed.
The report noted that contingent workers (a category that also includes temporary workers, staffing a
gency workers, on-call workers and day laborers) have lower weekly and annual earnings than standard workers, are less likely to have work-provided
benefits, and are more likely to receive public assistance. The GAO acknowledged that the data is outdated and may not capture the same level of detail as other, more focused studies.
A 2010 study by the Congressional Research Service estimated that a proposed modification to the IRS’s “Safe Harbor” rules, which currently allow employers
significant leeway to treat workers as independent contractors for employment tax purposes, would yield $8.71 billion for FYs 2012-21. The proposal would permit the IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification has been prohibited under current law.
A 2009 report by the Government Accountability Office (GAO) estimated independent contractor misclassification cost federal revenues $2.72 billion in
The GAO’s estimate was derived from data reported by
the IRS in 1984, finding that 15% of employers misclassified 3.4 million workers at a cost of $1.6
billion (in 1984 dollars). From 2000 to 2007, the number of misclassified workers identified by state audits increased from approximately 106,000 workers to over
150,000 workers. These counts likely undercount the overall number of misclassified employees because states generally audit less than 2% of employers each year.
The Questionable Employment Tax Practice initiative, a partnership between some states and the IRS, assessed approximately $50 million in taxes between June 2009 and June 2012.
A 2000 study commissioned by the U.S. Department of Labor (DOL)–the “Planmatics” study–found that between 10% and 30% of audited employers misclassified workers.
Misclassification of this magnitude exacts an enormous toll:
researchers found that misclassifying just one percent of workers as independent
contractors annually results in a $198 million hit to unemployment insurance (UI) trust funds. This report also shows that workers would benefit tremendously from increased scrutiny; up to 95% of workers who claimed they were misclassified as independent contractors were reclassified as employees following review.
A 1994 study by Coopers and Lybrand estimated the federal government would lose $3.3 billion in revenues in 1996 due to independent contractor misclassification, and $34.7 billion in the period from 1996 to 2004.
New data on the scope of misclassification may be on its way soon: the Department of Labor has engaged in a nation-wide field survey of workers and employers that is slated to conclude in September 2015.
Findings from State Studies and Reports
A growing number of states have been calling attention to independent contractor
abuses by creating inter-agency task forces and committees to study the magnitude of the problem and passing new legislation to combat misclassification. Along with academic studies and other policy research, the reports document the prevalence of the problem and the attendant losses of millions of dollars to state workers’ compensation, unemployment insurance, and income tax revenues.
The following chart summarizes the findings from over 20 state-level studies.
The studies rely on a range of data and methods. Most studies rely on data from unemployment insurance and workers’ compensation audits, targeted or random; some draw on the records of multi-level government agencies; and a few used interviews with workers. Some studies examine the workforce as a whole, while others focus on industries where misclassification is rampant, such as construction.
Trends in the Findings From State Studies
The findings from these state studies demonstrate the staggering scope of misclassification, the difficulties in reaching precise counts of workers affected and funds lost, and the potential for enforcement initiatives to return much-needed funds to state coffers.
A large number of workers are misclassified.
Audits generally uncover numerous cases of misclassification at an individual workplace or employer, resulting in large numbers of workers who are reclassified as employees following review. For example, targeted audits conducted by the Ohio 1099
Task Force resulted in the reclassification of almost 47% of the workers interviewed.
At just one company it audited, the Maryland Division of Labor & Industry’s Division of UI Fraud found 537 misclassified workers and a total of $2,257,596 in taxable unreported wages.
In 2013, California’s Employment Development Department identified 102,479 workers who had not previously been reported by their employers.
According to its latest Taskforce report, the
Connecticut DOL identified close to 6,500 misclassified workers.
The New York Task Force reported that it identified 26,000 misclassified workers in 2014, with a total of 140,000 since the task force’s start in August 2007.
Studies that extrapolate from audit data put the actual numbers of misclassified workers at much higher levels: an estimated 368,685 workers in Illinois;
between 125,725 and 248,206 in Massachusetts;
704,785 in New
between 54,000 and 459,000 in Ohio;
580,000 in Pennsylvania;
214,000 in Virginia.
Studies most likely underestimate the true scope of misclassification. Many of the studies are based on unemployment insurance tax audits of employers registered with the state’s UI program. The audits seek to identify employers who misclassify workers, workers who are misclassified, and the resulting shortfall to the UI program. Researchers extrapolate from UI audit data to estimate the incidence of misclassification in the workforce and its impact on other social insurance programs and taxes.
These UI audits miss a large portion of the misclassified workforce, however, because they rarely identify employers who fail to report any worker payments to state authorities or workers paid completely off-the-books–the “underground economy”–where misclassification is generally understood to be even more prevalent.
Billions of dollars of payroll are never reported to state governments. As explained above, many employers underreport their payroll, or pay workers off-the-books and do not report any wages. In California and New York alone, employers fail to report billions of dollars to state agencies each year.
Reliance on random audits as the sole investigatory strategy may result in an undercount of violations and unpaid taxes.
Misclassification also results in lost income tax revenue to local governments. Municipal governments supported by payroll taxes are also hit hard by misclassification. This includes some of the nation’s largest and most important economic centers.
Misclassification rates are disproportionately high in certain industries, such as construction, real estate, home care, trucking, janitorial, hi-tech and the rapidly growing on-line application based, on-demand economy. Many misclassification studies focus on
construction because the industry has been so plagued by independent contractor abuses. The Maine, Massachusetts, Minnesota and New York studies found rates of misclassification up to several points higher in construction as compared with the workforce as a whole.
Delivery drivers and truckers have also experienced widespread abuse.
FedEx has faced repeated legal challenges over its practice of misclassifying drivers as independent contractors: the delivery company recently settled a California lawsuit for $228 million;
drivers in about 40 states have
now sued FedEx; and sixteen states have negotiated with the company to end its practice of misclassifying drivers as independent contractors.
An estimated two thirds of port truck drivers are misclassified.
App-based, on-demand companies Lyft, Uber,
Homejoy and many others treat their workers as
independent contractors and are facing lawsuits by workers challenging this practice.
The on-demand economy is growing rapidly, with Uber alone claiming over 160,000 drivers in the U.S.
Reports indicate that employers in several other key sectors routinely misclassify workers.
Misclassified workers make significantly less than workers paid as employees. One government expert calculated that a construction worker earning $31,200 a year before taxes would be left with an annual net
compensation of $10,660.80 if paid as an independent contractor, compared to $21,885.20 if paid properly as an employee.
A study on port truck
drivers found that annual median net earnings before taxes were $28,783 for drivers paid as contractors as compared with $35,000 for employees.
Targeted audits are cost-effective and have the potential of returning hundreds of millions of dollars to state coffers. Audits conducted by California’s Employment Development Department between 2011 and 2013, for example, recovered roughly $105 million in payroll tax assessments. In 2014, the New York Joint Enforcement Task Force assessed nearly $8.8
million in unemployment insurance contributions. The Washington State Labor & Industry Fraud Prevention and Compliance Program (focused on workers’ compensation) reported that it brought in over $7 for every dollar invested in enforcement efforts.
These numbers do not take into account
fraud that is deterred before a violation even takes place, when employers take note of aggressive enforcement activities and voluntarily come into
Misclassification of employees as independent contractors exacts an enormous toll
on workers, law-abiding employers, and our economy. Accurate information on the prevalence of the problem, and on patterns of violations, can help state officials to direct their efforts at the worst violators and most problematic industries. The growing body of research summarized here has been vital to recent efforts in the states to combat misclassification; new research will further facilitate enforcement.
If public schools are not getting the tax revenue they need---this is ONE GREAT BIG REASON.
With US cities deemed Foreign Economic Zones as Baltimore MOVING FORWARD building global corporate campuses for the global 1% ----there is no intention of allowing small business economies to exist. Foreign Economic Zone designation does not allow for manufacturing with a goal of retail locally----the policies are for manufacturing products for EXPORT. Now, how is my homeless citizens being told to be an entrepreneur going to open markets overseas? The answer is he is not. He will be free labor until he throws in the towel or the few millions global Wall Street pols throws to keep the 99% busy stops.
While our public K-12 has strong broad democratic education preparing US students to go in any direction of employment they want----this high school as college apprenticeship and entrepreneurship will lead to a life of family instability and joblessness.
THE LEFT SOCIAL PROGRESSIVE DEMOCRAT STOPS MOVING FORWARD GLOBAL CORPORATE CAMPUSES TO ALLOW FOR REAL FREE MARKET DEVELOPMENT OF OUR SMALL AND REGIONAL BUSINESSES OWNED BY BALTIMORE CITIZENS INCLUDING OUR HOMELESS.
It is that designation as FOREIGN ECONOMIC ZONE that has US employees being treated anyway global corporate campuses want including INDEPENDENT CONTRACTOR status. The FTZ (free trade zone) status also inhibits ANY small and regional manufacturing because it is an import-export zone only. So, citizens in Baltimore simply wanting to start a business cannot----the only winners these few decades have been those pesky 5% TO THE 1% global Wall Street players being thrown a few million to pretend they have businesses and they are as bad at exploiting our citizens as employees as global corporations. It is the global Wall Street CLINTON/BUSH/OBAMA pols who create this pay-to-play network keeping our citizens from any employment stability. This hits our immigrant citizens as well as our US citizens ---do you hear those activists yelling at TRUMP shouting these few decades against widespread employee fraud?
'Employment in US FTZs reached a record 390,000 workers in 2013. While that’s not many compared to the overall US workforce of about 156 million, it’s worth noting that most of this employment is in the manufacturing sector, which has suffered significantly from layoffs over the past few decades'.
The more we allow all corporate and manufacturing growth happening only inside these FOREIGN ECONOMIC ZONES the more we are ending our US standards of employment, protections from our US justice system, and a growing instability and impoverishment of all US citizens and our immigrant labor as well. That is MOVING FORWARD and this is what our low-income citizens in Baltimore are being taught to support by the 5% to the 1% CLINTON/BUSH/OBAMA global Wall Street players.
What you need to know about the global business of free trade zones
Economics 02 Feb 2015
Reports on the success of free trade zones (FTZs) across the world are mixed but in some developing nations FTZs have kicked off industrialisation.
By Daniel Allen
Not all free trade zones are created equally.
Increasing global trade, the development of infrastructure and advancing technology are driving the proliferation of free trade zones (FTZs) like never before. With more than 3500 FTZs in various guises now dotted across the world, these enclaves of preferential commercial treatment are responsible for about 68 million jobs and the generation of US$500 billion in annual trade.
FTZs are designated areas that typically eliminate traditional trade barriers and minimise bureaucratic regulations.
Importers and exporters based in such zones may benefit from the deferral or elimination of customs duties, exemption from certain taxes, as well as inverted tariff relief. Many FTZs also offer operational benefits such as indefinite storage opportunities, increased security and insurance on goods, and state-of-the-art operating facilities.
Free trade zones come in all shapes and sizes: free, foreign, economic and export processing zones all fall under the FTZ umbrella. The distinction between each term may depend on the zone’s location, whether it generates mostly imports or exports, and what kind of trade-manufacturing mix is present.
China’s Shanghai Pilot Free Trade Zone (SH PFTZ), which opened its gates in September 2013, has been in focus recently. With special economic zones having played a major role in China’s economic development over the last 25 years, Beijing is clearly a big advocate of controlled, zonal commerce.
The Shanghai area is the first of a series of new trade zones on the Chinese mainland, where Beijing is experimenting with financial reform. And as China is pushing hard to internationalise the renminbi (RMB), it’s no surprise half the companies in the zone are now connected to financial services.
Many Chinese companies use this zone for overseas launches because it is easier to borrow money at lower interest rates within the FTZ. Many overseas companies, however, have been critical of the zone’s progress, especially as they’re expecting a relaxation of China’s current restrictions on financial activity to come soon.
In a recent interview with The Wall Street Journal, Fredrik Hähnel, general manager of merchant banking at the Shanghai branch of Nordic lender Skandinaviska Enskilda Banken AB, expressed his disappointment.
“I still don’t find the SH PFTZ as a physical entity very exciting,” he said, “because one year on, I would expect more to have happened.”
But others take a more philosophical view.
Free trade zones come in all shapes and sizes: free, foreign, economic and export processing zones all fall under the FTZ umbrella.
“You can’t expect the zone to be a second Shenzhen after a year,” says Richard Cant, a Shanghai-based regional director for law firm Dezan Shira & Associates.
“Everything is relative. To create a subsidiary company in mainland China can take three to four months and cost upward of US$10,000. You can drown in paperwork. In the SH PFTZ those figures are cut in half. So things are better, but we’re not talking streamlined just yet.”
According to Eunice Kuo, a tax partner of Deloitte China, the slow progress is hardly surprising as many of the pilot policies within the zone will be rolled out across China.
Companies want improvements such as a shorter negative list – the list of Chinese industrial sectors from which foreign companies are banned from investing – and a bigger zone area, along with better coordination between government departments.
US success stories
On the other side of the Pacific, foreign trade zones in the US are much further along the evolutionary scale. Nearly 300 FTZs and “sub-zones” have been authorised since 1934, including at least one in every US state and major port of entry. A growing number are now acting as hubs for the re-shoring of manufacturing, and are a valuable platform for US exports.
While physically located on US territory, each FTZ is considered outside US territory for the purposes of import inspection and duty collection. For companies operating inside an FTZ, this means that duties are only collected when imported goods leave the zone to enter US commerce, not when goods are admitted to the zone from abroad. Products and parts can be stored in a zone indefinitely and are exempt from state and local inventory taxes.
The FTZ program’s usefulness was boosted with the 2009 introduction of the Alternative Site Framework (ASF). This allows a FTZ “grantee” – typically a local port authority – to confer FTZ status on companies operating nearby.
According to a recent United States Foreign-Trade Zones Board report, presented to US Congress, the 177 active zones in the US received US$835 billion in merchandise in 2013, with almost two-thirds of this domestically sourced. Exported merchandise reached a record value of US$79.5 billion over the same period.
Dubai Industrial City's low income tax arrangements offer a similar appeal as free trade zones.
“In recent years FTZ exports have grown far faster than overall US exports,” says Dan Griswold, president of the National Association of Foreign-Trade Zones (NAFTZ) in Washington, DC.
“This clearly demonstates the competitive benefits of locating inside one of these zones.”
More than 3000 companies now participate in the US FTZ program, including high-profile corporations General Electric (GE), Apple, Rolls-Royce, Airbus and BMW.
GE recently invested US$800 million in a huge manufacturing facility with FTZ status in Kentucky, while appliance manufacturer Whirlpool has just opened a facility inside a FTZ that it calls the largest washing machine plant in the world. The benefits that FTZ status confers mean that Whirlpool is now shifting production of washing machines back to the US from Mexico.
Some experts question how much the FTZ program in the US benefits the broader American economy, but recent figures suggest it has a positive impact.
Employment in US FTZs reached a record 390,000 workers in 2013. While that’s not many compared to the overall US workforce of about 156 million, it’s worth noting that most of this employment is in the manufacturing sector, which has suffered significantly from layoffs over the past few decades.
“The purpose of the US FTZ program is to encourage economic activity in the US that might otherwise be conducted elsewhere,” says Greg Jones, the co-founder and vice president of the Free Trade Zone Corporation based in Alabama.
“When calculated on a macro-economic basis, the customs duty savings realised by FTZ participants are dwarfed by the federal, state and local taxes that they contribute as a result of their location inside the US. This comes on top of job provision.”
FTZs come in various shapes and sizes. In 2010 Norwegian outdoor apparel retailer Helly Hansen established a so-called “usage-driven” FTZ. This remote zone in the city of Auburn, south of the port of Seattle, was created under the Alternative Site Framework for use by a single company. This single site now meets most of the company’s storage, logistics, accounting, customer service, marketing and sales operations needs for the American and Canadian markets.
In the four years since establishing the Auburn FTZ, the financial benefits have allowed Helly Hansen to double its on-site workforce and handling capacity.
“Before we set up the FTZ we had to pay duties immediately upon importation,” explains Scott Sutherland, Helly Hansen North America’s director of finance.
“Delayed payment of duty is very useful because duty rates are a significant part of our inventory costs and seasonal apparel can sit around in our warehouse for many months.”
Over the last 15 years, Middle Eastern countries have been as active as any region in setting up FTZs. Yet while these FTZs offer similar fiscal and financial incentives, their performance has differed widely. Many FTZs, including those in Jordan, Syria and Egypt, have failed to attract much foreign investment and are little more than storage and warehousing areas.
On the other hand, the growing number of FTZs in the United Arab Emirates (UAE) are attracting foreign investment, job provision, export levels and backward linkages with the UAE economy.
The Jebel Ali FTZ in Dubai, the first in the UAE, now boasts some of the most comprehensive business incentives in the world. Full foreign ownership of companies is permitted and there are no restrictions on the repatriation of profits or foreign currency exchange. There are no import or export duties except for sales made into the UAE, and corporate and personal income taxes are waived for up to 50 years from start-up.
"Companies are attracted to free trade zones and multiple reasons for not just one. The successful zones will be the ones that innovate with the business environment that they provide." – Ray O'Driscoll, Shannon GroupHowever, FTZs are not the only option for investors in the UAE, as the country offers low tax arrangements more generally. For instance, Dubai Industrial City is not a free zone, but businesses here can export duty free to a number of countries as a result of free trade agreements (FTAs). The number of firms operating in the city almost doubled from 259 at the end of 2011 to 471 at the end of 2012.
With so many FTZs now operating in the Gulf, competition to attract business is on the increase. The Ajman Free Zone in the UAE, for example, lets investors pay their charges monthly or quarterly, with payment plans designed to attract small-to-medium enterprises (SMEs).
The good and the bad
Over the last two decades many FTZs have had disappointing outcomes. Poorly conceived and managed, they have been criticised for their macro and micro level constraints on business, bad labour practices and poor environmental records. They have fallen prey to money launderers and drug traffickers, failed to increase exports, and provided little in the way of benefit to the host country.
But some FTZs have been spectacularly successful, creating huge wealth, significant numbers of jobs and becoming starting points for industrialisation, especially in developing countries. It only takes one look at Shenzhen, which over the last 30 years has grown from a sleepy coastal hamlet into a Chinese city of 10 million inhabitants, to see what can be achieved.
In the face of an ever-increasing number of global trade pacts, some experts predict the demise of the FTZ. Others disagree, pointing toward a trend in zone specialisation and innovations such as the ASF system in the US.
“Global trade liberalisation will continue to diminish the benefits of some ‘classic’ free trade zones,” says Ray O’Driscoll, a director with the Shannon Group, which oversees Ireland’s Shannon Free Zone – the world’s first free trade zone, established in 1959.
“However, companies are attracted to free trade zones for multiple reasons not just one. The successful zones will be the ones that innovate with the business environment they provide.”
The small percentage of citizens that gain some success in these independent contractor policies are almost always those connected to that 5% and the businesses that appear successful are gone not too far down the road. Baltimore is 100% this economy only and the super-majority of our citizens are low-income and average/below average students who need strong factory jobs paying a developed nation wage----what global Wall Street Baltimore Development, global Johns Hopkins and their pols in Baltimore City Hall, Maryland Assembly, and Congress are working hard to do instead is push our citizens into a global factory network whether in the US or overseas paying third world wages. This is the only economic development happening and the bones thrown for local business development never create lasting community economies.
When our unemployed are directed to job training and life skills development programs led by the 5% to the 1% telling them to call for these very policies---this is where WE THE PEOPLE ARE CAPTURED AND FAILING. We must get rid of global Wall Street players MOVING FORWARD policies only designed for a global 1% and their 2% to profit while 99% of citizens are enslaved at $3-6 a day====or $20-30 a day.
While global corporations are the ones breaking laws on INDEPENDENT CONTRACTOR listings----we know our citizens trying to do a startup would go for this same business model ------it has corrupted our entire hiring and employment structure.
BE THOSE CITIZENS EDUCATING IN ALL COMMUNITIES TO GET THIS MESSAGE IN EMPLOYMENT RIGHT-----
Starting a Startup in Washington DC and Baltimore
A list of startup accelerators, incubators and co-working spaces for budding entrepreneurs.
by Ricky Ribeiro Google+ TwitterRicky publishes and manages the content on BizTech magazine's website. He's a writer, technology enthusiast, social media lover and all-around digital guy.
by Anuli AkanegbuAnuli is a writer and new-media enthusiast who dreams about becoming the sixth Spice Girl. Until then follow her on Google+ or Twitter: @akaanuli.
Just like a child, it takes a village to raise a startup. Through the hard work, sweat, investment and tears of venture capitalists, entrepreneurs and employees, startups are able to shoot for the stars and change the world.
You’ve heard the names of some of the most famous startups: Netflix, LinkedIn, Facebook, eBay, PayPal. But where should entrepreneurs located outside of Silicon Valley turn to for resources? We hope this list will help.
Washington, D.C., is known as the nation’s capital and the seat of national politics, but it’s also home to a budding startup scene. Heavyweights in the area include Opower and LivingSocial, but there’s plenty of room for other players.
If you’re a Washington, D.C., entrepreneur who feels bold enough to take on the startup challenge, these resources should help you get started.
Washington D.C./Baltimore AcceleratorsAcceleprise
Location: 1367 Connecticut Ave. NW, Washington, DC
Perks: $30,000 in capital from the firm. Access to mentors as well as $60,000 in technology from Microsoft, legal services from Goodwin Procter LLP, customer panels, office space in Acceleprise’s Dupont Circle headquarters, a structured curriculum that includes workshops, guest speakers and demo days.
Backstory: Investor and entrepreneur Sean Glass founded Acceleprise in April 2012. The enterprise-focused accelerator welcomed its first class of six startups in July 2012. That class included web-based event management software ConferenceEdge and competitive weight loss and fitness platform FitFeud. The accelerator boasts an accomplished group of mentors, including Katharine Weymouth, CEO of Washington Post Media; Eric Ries, author of The Lean Startup; and Jawed Karim, co-founder of YouTube.
Location: 2400 Boston St., Factory Building, 3rd Floor, Baltimore, MD
Perks: $25,000 in seed funding, educational seminars, free office space and access to interns, mentors, investors and potential partners.
Backstory: AccelerateBaltimore is an initiative of Emerging Technology Centers (ETC), Baltimore’s award-winning business incubator, and the Abell Foundation. The accelerator provides resources and space for up to six technology-focused startup companies. Ideal companies are able to create business solutions that can be brought to market in a three-month period. Applications for AccelerateBaltimore’s 2013 program closed on December 21, 2012.
Frederick Innovative Technology Center, Inc. (FITCI)
Location: 4539 Metropolitan Ct., Frederick, MD
Perks: Office space, Internet, wet labs and a shared common lab.
Backstory: The Frederick Innovative Technology Center, Inc. (FITCI) offers resources to accelerate the growth of startup information technology (IT), biotechnology and renewable energy companies in Frederick County.
The International Business Accelerator
Location: 4031 University Dr., Suite 200, Fairfax, VA Perks: Office space, business counseling and evaluations of business development plans.
Backstory: The International Business Accelerator is designed to help non-U.S. enterprises establish a market for their businesses in the United States.
Washington D.C./Baltimore Incubators
bwtech@UMBC: Research & Technology ParkWebsite: http://www.bwtechumbc.com
Location: bwtech@UMBC North – 5523 Research Park Dr., Suite 310, Baltimore, MD, bwtech@UMBC South – 1450 South Rolling Rd., Halethorpe, MD
Perks: Access to University of Maryland, Baltimore County (UMBC), resources, including students and faculty, office/lab space with flexible leasing terms, legal services and monthly CEO roundtables.
Backstory: bwtech@UMBC offers university and business resources for clean energy, cybersecurity and life sciences/IT companies. The research and technology park features an intern subsidy program that assists incubator companies that employ UMBC students as interns. Corporate partners include BAE Systems, Northrop Grumman Corporation and SC&H.
Emerging Technology Centers
- ETC @ Canton – 2400 Boston St., Factory Building, 3rd Floor, Baltimore, MD
- ETC @ JHU Eastern – 1101 East 33rd St., 3rd Floor, Baltimore, MD
Backstory: The Emerging Technology Center (ETC) is a venture of Baltimore Development Corporation, a company contracted by the city of Baltimore to help increase the city’s economic growth. The ETC incubator program features two incubator facilities geared toward growing early-stage technology and biotechnology companies in Baltimore.
Fairfax Innovation Center (FIC)
Location: 4031 University Dr., Suite 200, Fairfax, VA
Perks: Shared receptionist, high-speed Internet, classrooms, business library and monthly Lunch-and-Learn seminars.
Backstory: The Fairfax Innovation Center (FIC) is a joint initiative of the Fairfax Economic Development Authority and the George Mason University School of Public Policy. The FIC is the largest university-based incubator in the Commonwealth of Virginia.
INC.spire Business Incubator Program at the Greater Reston Chamber of Commerce
Location: 1763 Fountain Dr., Reston, VA
Perks: Office space, mentorship, 24/7 building access, high-speed Internet, meeting rooms and audio-visual equipment.
Backstory: The INC.spire Business Incubator Program provides mentorship and support for local startup companies.
Maryland Center for Entrepreneurship Innovation Catalyst (iCat)
Location: 9250 Bendix Road North, Columbia, MD
Perks: Dedicated office space, educational programs, hands-on mentoring and access to investor groups.
Backstory: The Maryland Center for Entrepreneurship’s Innovation Catalyst (iCat) provides resources to emerging technology and IP-based companies. Businesses can apply to the center’s Residency program or Premier Affiliate program.
Montgomery County Business Innovation Network
- Germantown Innovation Center – 20271 Goldenrod Ln., Germantown, MD
- Rockville Innovation Center – 155 Gibbs St., Rockville, MD
- Shady Grove Innovation Center – 9700 Great Seneca Hwy., Rockville, MD
- Silver Spring Innovation Center – 8070 Georgia Ave., Silver Spring, MD
- Wheaton Business Innovation Center – 11002 Veirs Mill Rd., 7th Floor, Wheaton, MD
- Bethesda Green – 4825 Cordell Ave., Suite 200, Bethesda, MD
Backstory: The Montgomery County Business Innovation Network offers a supportive environment for emerging businesses in Montgomery County. The county operates five business incubators in addition to the Bethesda Green Business Incubator, created in 2008 in partnership with the Montgomery County Department of Economic Development to support green business initiatives.
Prince George’s County Technology Assistance Center (TAC)
Location: 1100 Mercantile Ln., Largo, MD
Perks: 24/7 facility access, workforce training and flexible lease terms.
Backstory: The Prince George’s County Technology Assistance Center (TAC) promotes the development of early-stage technology companies in Prince George’s County, Md. The center is an initiative of the Prince George’s County Economic Development Corporation (EDC).
When folks march to protest TRUMP whether over immigration or for labor and justice they are being led to protest against the WRONG ISSUES. The issues for our immigrant workers and our US workers is US FOREIGN ECONOMIC ZONE designation and the failure of our DLLR state labor agencies to enforce existing Rule of Law. These conditions worsen every time we allow a rigged election to install a MOVING FORWARD CLINTON/BUSH/OBAMA---
Once US Foreign Economic Zone building spreads and global corporate campuses and factories are built---there will be no PAY-TO-PLAY PRETEND BUSINESSES for that 5% and this is coming next decade. To fix our employee status and labor protections we must get rid of FOREIGN ECONOMIC ZONE STATUS.
Who was that DLLR Labor Secretary in Maryland having ignored all enforcement of labor and regulations these few decades-----OBAMA'S LABOR SECRETARY PEREZ.
Our Latino 5% to the 1% are the biggest supporters of CLINTON . Yes, Trump will continue all these MOVING FORWARD practices leaving yet another US generation of young adults unable to achieve employment stability.
Employee or Independent Contractor?
Employer Fraud Costs Workers
September 30, 2013 / Chris Wagner
Wrongly classifying workers as independent contractors gets around laws like workers' compensation and family and medical leave. It's costing Texas construction workers millions, according to the International Brotherhood of Electrical Workers Local 520 in Austin. Photo: Workers Defense Project.
Misclassification of employees as independent contractors is a serious problem in the Texas construction industry—so serious that my local decided to do an undercover investigation, using covert workers to infiltrate job sites.
The conditions they found were severe.
“The workers sometimes wouldn’t even get paid that week. They were scared to report the violations to anyone. They feared their boss and the government due to deportation,” said Philip Lawhon, assistant business manager/organizer for Electrical Workers (IBEW) Local 520.
“One of our members said that it reminded him of working in Mexico. He said, ‘I came to America to get away from these types of issues.’”
More than 40 percent of construction employees are misclassified as independent contractors, according to the Build a Better Texas report, released earlier this year by the Workers Defense Project.
It’s a problem for the workers who get misclassified: many labor laws do not cover them, exposing them to abuse. It’s a problem for legitimate employers, who are undercut by the unscrupulous ones.
And it’s a problem for all Texas residents, as cities and the state lose out on tax revenue, and social safety nets—already stretched thin—are forced to help out the cheated workers.
As business manager of Local 520, I instructed my organizing department to investigate these illegal employment practices and to act on their findings.
Twelve high-rise projects, 17 to 50 stories, in and around downtown Austin are in some stage of construction, from planning to near completion. My organizers found that, of the eight that have started construction, six are using electrical contractors that misclassify their employees as independent contractors.
Four of them are using the same contractor, Power Design Inc., from Florida. Managers at Power Design, we found, had attempted to insulate themselves from charges of payroll fraud by subcontracting out most of the labor to still other contractors, ESP Electric and ES&R, both owned by brothers Rigar and Alex Espinosa.
What Is an Employee?
According to the Internal Revenue Service (IRS), whether someone is an employee or an independent contractor depends on the degree of control the person has over the work.
Three categories of evidence are used to determine the degree of control and independence:
Behavioral: Does the company control, or have the right to control, what the worker does and how the worker does his or her job? Is the worker told when and where to do the work, what tools or equipment to use, where to buy supplies and services, what order to follow when doing the work? Does the worker get more detailed instructions or less detailed? The type of evaluation system also helps determine behavioral control: an employee would be evaluated on how the work is performed, while an independent contractor might only be evaluated on the end product.
Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) What level of investment has the worker made in the necessary tools of the trade? Does the worker incur substantial unreimbursed expenses? Does the worker have opportunity for profit or loss? What is the method of compensation? Someone paid an hourly wage is usually an employee.
Type of Relationship: Are there written contracts or employee type benefits (i.e., pension plan, insurance, vacation pay, etc.)? Will the relationship continue, and is the work performed a key aspect of the business?
The IRS provides Form SS-8 to help employers and workers determine who is an employee and who is an independent contractor.
We got three of our members hired on with these two companies during the summer of 2012, all of them Mexican citizens fluent in Spanish.
These members found that “90 percent of the installers were undocumented immigrant workers,” Lawhon said. “These workers’ skills were very limited. The workers were trained to do basically one task and that was predominantly all they did.”
How Workers Are Abused
Independent contractors are sometimes called “1099ers,” because of the IRS tax form 1099 that employers must give them at the end of the year, rather than the W-2 required for employees.
These workers are mostly unprotected by labor and employment law. They are not covered by minimum-wage and overtime requirements under the Fair Labor Standards Act.
They are not entitled to the protection from discrimination based on race, color, religion, sex, or national origin afforded by Title VII of the Civil Rights Act of 1964. The Age Discrimination in Employment Act does not protect them, nor do the Americans with Disabilities Act, the Family and Medical Leave Act, or the National Labor Relations Act.
The Build a Better Texas survey of five cities found that 81 percent of Texas construction workers are Latino, and that 73 percent are foreign-born—making them especially ripe for abuse because of their lack of knowledge of U.S. labor and tax laws. The fact that many are undocumented means they are less likely to report abuses.
As far as we can tell, ESP and ES&R exist only to provide manpower to other unscrupulous electrical contractors. We can find no records of either company contracting with any general contractors or pulling any electrical construction permits.
ESP and ES&R both pay their workers as independent contractors, anywhere from $8 to $14 an hour, with no deductions, no unemployment, no workers' comp, and no overtime pay.
Workers are hired by word of mouth and paid by check. Many frankly prefer being paid under the table--but they get upset at the working conditions and getting shorted on their pay, getting paid late, or not getting paid at all.
The workers did not even receive 1099 forms at the end of the year.
Honest Businesses Pay the Price
A fair marketplace for labor assumes that all employers follow the law. Honest contractors are at a disadvantage when competing with those who misclassify their workers.
Companies that operate illegally by not paying payroll taxes, unemployment insurance taxes, and overtime compensation are able to underbid legitimate contractors by 15 to 25 percent, according to Michael White, Vice President for Government Affairs for the Texas Contractors Association.
Responsible businesses are also burdened by increased unemployment insurance tax rates, caused by the recession, when others fail to make their required payments.
Misclassified employees, cheated out of pay, also have less money to purchase goods and services, so the state loses out on sales tax revenue—creating another burden on an already cash-strapped state. Texas has no income tax.
Lost unemployment taxes due to this kind of payroll fraud total around $54.5 million a year—meaning that much less money for unemployment benefits for those who need them.
And workers misclassified as independent contractors get neither health insurance nor worker’s comp. When they are injured on the job, or when they or a family member are sick, they must rely on the charity of public hospitals, driving up the costs of health care for all.
After gathering information for several weeks, in November last year Local 520 filed complaints on behalf of the workers with the U.S. Department of Labor Wage & Hour Division, the Texas Workforce Commission (for failure to pay unemployment taxes), and the IRS.
The wheels of justice move incredibly slowly and quietly in these cases, and as a third party complainant, Local 520 gets very little information on their progress.
We have heard nothing from the IRS.
The most encouraging correspondence has come from the Department of Labor. A representative called Local 520 in May and said that, since ESP and ES&R had kept such poor records, the DOL was expanding the complaint to include Power Design Inc. The DOL was opening an investigation into 147 Power Design projects all along the South from Texas to Florida.
Changing Texas Law
While Texas has long been a business-friendly state, with elected officials loath to restrict enterprise, legitimate businesses have recently made a push to pass stiffer penalties for misclassifying employees as independent contractors.
Bills introduced in the Texas House of Representatives and Senate would increase the penalties for payroll fraud. Many legitimate subcontractors support such laws—though one group very much against stopping payroll fraud is the Homebuilders Association.
The City of Austin recently passed an ordinance to make it harder to misclassify electricians. Its language was developed by a coalition of union electricians, union and non-union electrical contractors, and the City of Austin Electrical Inspection Department.
The ordinance requires that electricians working as “independent contractors” have a Texas electrical contractor’s license.
Most of the workers being exploited have only an electrical apprentice license, which just requires paying a small fee to the state licensing department. The contractor’s license is, of course, much more difficult to obtain, with electrical experience and knowledge requirements involved.
The only way to stop the illegal practices of unscrupulous construction contractors is for organized labor and legitimate business owners to join forces, to work toward stiffer penalties and enforcement and to demand that the government entities charged with enforcing existing labor law do their jobs.
Most of these INDEPENDENT CONTRACTOR frauds are indeed tied to Federal, state, or local government contracts from global Johns Hopkins to our local small business association. When WE THE PEOPLE keep allowing these illegal actions against our employee citizens we are losing all around----revenue needed in our communities to keep other small businesses afloat----tax revenue---school revenue et al.
We cannot stop this with corrupted elections---we need rolling protests for economic disruption for weeks and months to force global Wall Street pols and players our of our US cities deemed Foreign Economic Zones so we can redefine what that FTZ policy looks like.
If Baltimore recovered a fraction of these frauds over these few decades we could rebuild all communities in Baltimore ---it is our Baltimore City Attorney Marilyn Mosby---our Maryland State's Attorney Frosh and Elizabeth Embry----who should be in court recovering these frauds 24/7.
If Baltimore recovered a fraction of these frauds over these few decades we could rebuild all communities in Baltimore ---it is our Baltimore City Attorney Marilyn Mosby---our Maryland State's Attorney Frosh and Elizabeth Embry----who should be in court recovering these frauds 24/7. Who benefits? Those global Wall Street Baltimore Development 'labor and justice' organization 5%.
These fraud cases do not disappear----we need to enforce, convict, and collect here in Baltimore.
Supreme Court clarifies government contract fraud
Richard Wolf , USA TODAY Published 2:46 p.m. ET June 16, 2016 | Updated 3:03 p.m. ET June 16, 2016
WASHINGTON — The Supreme Court ruled unanimously Thursday that companies doing business with the government can be sued for fraud if they fail to disclose significant legal or regulatory violations, a decision that could increase false claims lawsuits against health care providers and defense contractors.
At the same time, the decision made clear that the alleged violations must not be "insignificant," such as a health care provider failing to disclose that it did not comply with a requirement to buy American-made staplers.
That would not seem to apply in the case that came before the court in April — one that attracted an outpouring of briefs from health care providers and consumer watchdog groups on opposite sides. The defendant in that case, Universal Health Services, billed Medicaid for services provided by employees who were not licensed to offer mental health counseling or prescribe a medication that led to the death of a 17-year-old patient. That information was omitted from the contract.
"The claims in this case do more than merely demand payment," Justice Clarence Thomas wrote for the court. "They fall squarely within the rule that half-truths — representations that state the truth only so far as it goes, while omitting critical qualifying information — can be actionable misrepresentations."
Rather than simply affirming a federal appeals court decision against the health care provider, however, the justices sent the case back for further review because not all violations omitted from government contracts rise to the level of fraud. That part of the ruling was meant to protect government contractors from trivial claims that could result in hefty false claims awards.
"The False Claims Act is not an all-purpose anti-fraud statute ... or a vehicle for punishing garden-variety breaches of contract or regulatory violations," Thomas wrote. "Materiality ... cannot be found where noncompliance is minor or insubstantial."
The decision was heralded by lawyers who represent whistle-blowers in false claims lawsuits, including unaffected consumers who initiate such claims and share in the penalties assessed against the contractors.
“By issuing a unanimous opinion, the Supreme Court made clear that those who receive payment from the government, whether for health care of Medicare patients or for weapons to arm our troops, must comply with important regulations and contract provisions or may be required to repay the government and pay penalties,” Colette Matzzie of the law firm Phillips & Cohen said.
But Colin Wrabley of the law firm Reed Smith, who co-authored a brief for the National Association of Criminal Defense Lawyers that sided with Universal Health, said the ruling offered something for both sides. By narrowing the definition of what constitutes a material violation, he said, the decision makes clear that the False Claims Act "is not properly brought to bear where undisclosed regulatory or contractual violations are minor."
We see those global transportation corporations are ground zero for simply ignoring US labor laws----so too many new startups-----the tech and financial industry lead in breaking down our US standards and labor laws but those global corporate campuses in US cities deemed Foreign Economic Zones are the gorilla-in-the-room offenders.
MAKE NO MISTAKE--THIS IS A DELIBERATE, WILLFUL, AND WITH MALICE MOVING FORWARD TO ONE WORLD ONE GOVERNANCE US OPERATING AS OVERSEAS FOREIGN ECONOMIC ZONE WAGE POLICY.
“Quite frankly, I don’t think that’s fair,” the former cleaner said. “At every organization I’ve worked for, I considered myself an employee.”
'Start-ups aren’t the only companies being targeted for worker misclassification'.
The tech industry of course hits heavily on our global labor pool as across all industries and they are the ones unable to fight ----WE THE PEOPLE on the other hand have the legal standing to fight but don't because those labor and justice organizations getting much of the money resources are not tied to these issues.
/ silicon valley September 18, 2014 8:42 a.m.
Does Silicon Valley Have a Contract-Worker Problem?
By Kevin Roose
Diane Hohen, with TaskRabbit, delivers a bouquet of flowers in Boston on March 29, 2012.
TaskRabbit is a task and errand service that allows people to hire others to do small jobs.
Earlier this year, I hired a house cleaner. I wouldn’t have done so normally, but my place was a mess, I was busy at work, and I saw an offer on Facebook that looked too good to be true — a San Francisco start-up called Homejoy was offering home cleanings in the Bay Area for $19. (Not $19 per room or $19 per hour. Just $19.) So I booked an appointment through Homejoy’s website, and a day later, a young man showed up at my door.
As the cleaner laid out his tools, we made small talk, and I asked him where he lived. “Well, right now I’m staying in a shelter in Oakland,” he said. I paused, unsure if I’d heard him right. A shelter? Was my house cleaner — the one I’d hired through a company that has raised $40 million in venture-capital funding from well-respected firms like Google Ventures, the one who was about to perform arduous manual labor in my house using potentially hazardous cleaning chemicals — homeless?
He was, as it turned out. And as I told this story to friends in the Bay Area, I heard something even more surprising: Several of their Homejoy cleaners had been homeless, too.
To explain why it’s possible for a cash-flush tech start-up to have homeless workers, it helps to know that the man I hired through Homejoy wasn’t a Homejoy employee at all. That’s because Homejoy doesn’t employ any cleaners — like many of its peer start-ups, it uses an army of contract workers to do its customers’ bidding. To hear Homejoy tell it, it’s simply the digital middleman that allows people seeking home-cleaning services to find people willing to do it. The worker dusting off a bookshelf might look like he works for Homejoy, when he’s really the sole employee of John Smith, LLC. As the Washington Post wrote, “Homejoy is just organizing the masses of people who already offer their cleaning services independently.”
With Uber valued at $18 billion, Airbnb valued at $10 billion, and new imitators popping up daily, Silicon Valley is clearly infatuated with the middleman model. A recent study by venture-capital firm SherpaVentures, which has invested in start-ups like Washio (Uber for laundry), BloomThat (Uber for flowers), and Shyp (Uber for packages), estimated that venture capitalists invested $1.6 billion in so-called “on-demand” start-ups in 2013 alone. SherpaVentures predicts that so-called “freelance marketplace” or “managed-service” labor models used by these companies are poised to transform industries like law, health care, and investment banking, and that fewer people have traditional full-time or part-time jobs as a result. This, in the firm’s mind, is a good thing.
“Perpetual, hourly employment is often deeply inefficient for all parties involved,” the report reads.
But increasingly, critics argue that the freelance model is being abused, with workers being treated as if they were on payroll without getting any of the benefits afforded to payrolled employees. Some Silicon Valley insiders are beginning to worry that start-ups’ overreliance on contract workers could come back to haunt them if they run afoul of longstanding labor rules. If that happens, these high-flying disruptors could be facing serious disruption themselves.
One former Homejoy cleaner who asked to remain anonymous because he feared reprisal from his current employer told me that when he signed up for Homejoy, he was issued a cleaning kit and a uniform and given a training session at a Homejoy employee’s house. The company, he said, let him make his own schedule, but encouraged him to work certain days rather than others. And although he gave Homejoy credit for letting him work without any prior professional cleaning experience, he now takes issue with the company’s policy of not covering independent contractors if, for example, they get injured on the job.
“Quite frankly, I don’t think that’s fair,” the former cleaner said. “At every organization I’ve worked for, I considered myself an employee.”
I first heard the term “1099 economy” at this year’s TechCrunch Disrupt conference, where it was uttered not as a pejorative, but as a way to praise the innovative labor practices of Silicon Valley start-ups. When you order a service from one of these companies, the people who get paid to perform it don’t file W-2 tax forms because they’re not officially employed. Instead, they file the independent contractor form, the 1099-MISC. The most famous examples of 1099 companies are on-demand car providers like Uber and Lyft, but there are dozens of others: Homejoy, Handy, Postmates, Spoonrocket, TaskRabbit, DoorDash, Washio. All of these companies employ similar jargon to describe their labor model — if you hear the words platform, provider network, or Uber for ____, you’re likely talking to one.
Homejoy, one of the more successful start-ups to adopt the 1099 model, insists that its method is better for workers. “Our partners are free to create their own availability and scope of work,” CEO Adora Cheung said in an email interview. “That flexibility is one of the main appeals of the platform.” (As for the homeless cleaners, Homejoy says its Bay Area contractors earn, on average, between $17 and $20 an hour, well above minimum wage. “While we sympathize with anyone who is in an economically difficult situation, we don’t think that relating that to Homejoy’s website or its practices makes sense,” Cheung says.)
For start-ups trying to make it in a competitive tech industry, the benefit of opting for 1099 contractors over W-2 wage-earners is obvious. Doing so lowers your costs dramatically, since you only have to pay contract workers for the time they spend providing services, and not for their lunch breaks, commutes, and vacation time. Contract workers aren’t eligible for health benefits, unemployment insurance, worker’s compensation, or retirement plans. And contractors don’t have to be fired if they mess up, since they were never employed in the first place. Instead, they’re simply removed from the network, and life goes on.
In other words, the 1099 economy is almost perfectly calibrated to serve the needs of fast-moving start-ups — lower costs, less liability, the ability to grow and shrink the labor pool quickly — but is it good for the people doing the work?
That depends on whom you ask. Start-up workers generally “fit into three buckets,” explains Josh Felser, a venture investor at Freestyle Capital. “There’s the control-your-hours contractor. That group seems to be very happy with where things are. There’s the full-time employee. And then there’s the middle group — where they’re acting like full-time employees and being paid like contractors. That group is disenfranchised.”
What is a worker, anyway?
The question of where, exactly, “contractor” ends and “employee” begins is a matter of debate. The IRS has a 20-factor test to determine whether businesses are treating their service providers like contractors or employees. Most of the factors have to do with the degree of control the company exerts over a worker. Does the worker have a schedule set by the company? Does the company require the worker to wear a uniform, receive job training, or use tools provided by the company? If so, that 1099 worker might be properly classified as a W-2 employee — and the company might be on the hook for thousands of dollars in back payroll taxes. (Just how widespread is this practice of improperly substituting freelancers for payrolled employees? It’s hard to say, but a recent paper by the National Employment Law Project claims that “state and federal governments lose billions in revenues annually as a result” of worker misclassification.)
The marketing materials used by these companies can complicate things further. For example, the main page of Homejoy’s website offers “Trusted, Affordable, and Convenient Home Cleaning & Home Services,” but makes no mention of the fact that these services aren’t provided by Homejoy employees. (For that, you have to look at the bottom of the company’s “About” page for a disclaimer set in small type.) A Craigslist ad recently placed by the company to seek new cleaners didn’t mention the independent-contractor model either. “Join our team of Cleaning Professionals!” the ad read. No mention was made of the fact that people who responded to this ad would not, in fact, be invited to “join a team” at all, but would be self-employed contractors working on Homejoy’s platform.
In some industries, the independent-contractor model makes sense — part of the appeal of being an UberX driver, for example, is that you get to pick your own hours. But when companies begin to control their contractors as if they were employees, trouble often follows. Recently, a group of New York–based Uber drivers threatened to quit the service if Uber continued to penalize them for declining lower-cost UberX fares in favor of black-car fares that would earn them more money. Eventually, Uber backed down, reversing its policy and letting its drivers keep their choice of fares.
“It’s a balancing of a lot of factors,” David Schwartz, a labor and employment lawyer at Skadden, Arps, says of the contractor/employee question. “But the things the regulators look at the most are: Where are the services performed? How much supervision are you getting? And how much time is devoted to the project?” Schwartz adds: “If the person is highly dependent on one company for work, it starts to look like an employment situation.”
At least one on-demand start-up, Handy.com, has a contingency plan for a possible change in the law. The company’s terms of service states that “if Handy.com is found to be liable for any tax or withholding tax in connection with your use of Users’ services, then you will immediately reimburse and pay to Handy.com an equivalent amount, including any interest or penalties thereon.” In other words, if Handy.com is forced to reclassify its contract workers as employees, its customers – not the company itself – will be on the hook for any extra costs.
The two-way street of contract work
Spoonrocket, which offers 10-to-15-minute delivery of cheap meals in the Bay Area, is one of the companies whose growth will depend on existing rules staying in place. Its drivers, who are independent contractors, earn a flat fee each time they drop off a meal (the company estimates that most drivers end up making between $10 and $25 an hour). And although Spoonrocket used to pay its drivers hourly and lent them Spoonrocket-branded cars to use for delivering meals, it ultimately decided to switch to contractors using their own vehicles.
“For a certain amount of time we tested out W-2 drivers, but that’s when we provided equipment,” Steven Hsaio, Spoonrocket’s CEO, said in an interview. “It wasn’t the most financially sound decision.”
Like many start-ups, Spoonrocket could afford to bring contractors onto its payroll if it wanted to. (In May, the company announced it had raised $11 million in a funding round led by Foundation Capital.) But optimizing for growth means lowering costs, and lowering costs means constantly looking for new ways to squeeze out inefficiencies. Hsaio says that Spoonrocket may begin testing a new model, in which drivers will be paid commissions for deliveries based on how far they’re willing to drive.
“I ultimately think it’s really good,” Hsaio says. “We can’t tell [drivers] what to do or how to do their job. They’re their own entrepreneurs.”
Billy Hasan, a former Spoonrocket contractor who drove for the company until June of this year, remembers the moment that the company switched from paying drivers hourly wages to paying them on a commission basis. Under the old system, Hasan says, he often made between $50 and $60 working a six-hour shift. Under the new one, it took him eight or nine hours to make the same amount.
“Before they made the switch, it felt like one big team working together,” he says. “After, it kind of felt like, ‘We don’t really care about you guys, we only care about the money coming in.’”
In June, a group of Uber drivers joined a class-action lawsuit against the company in California and Massachusetts. The drivers, represented by Boston attorney Shannon Liss-Riordan, alleged that Uber misclassified them as independent contractors, thereby requiring them to bear upkeep and maintenance costs that normal employees wouldn’t be liable for. (Uber, in a statement to the Boston Globe, said it would “vigorously defend the rights of riders to enjoy competition and choice, and for drivers to build their own small business.”)
Start-ups aren’t the only companies being targeted for worker misclassification. But they are the most vulnerable to a change in the law. Require a 1099 start-up to reclassify its workers as W-2 employees, and you radically change its ability to lower prices and undercut the competition — which was, in many cases, a key reason investors were interested in the first place.
“If their drivers are classified as employees then that suddenly makes their business model untenable,” Denise Cheng, a research assistant at the MIT Center for Civic Media, told the Globe.
One warning shot for 1099-dependent start-ups came in an August ruling by a federal appeals court, which found that 2,300 FedEx delivery drivers in California were being misclassified as independent contractors, since FedEx exercised broad control over their schedules and methods. “The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards,” Judge William Fletcher said. The three-judge panel ultimately ruled that since the contractors were being treated like employees, they were entitled to employee benefits such as overtime pay and reimbursement of expenses.
The implicit threat to start-ups like Homejoy, Spoonrocket, and Uber couldn’t have been clearer. If you want to use independent contractors, the judges told FedEx, you’ve got to give them real independence.
As some start-ups push the 1099 model even further and others are challenged in court, a small group of companies is trying to reverse the trend.
MyClean, a New York–based on-demand cleaning service, tried the 1099 model in its early days. But it found that customers weren’t happy with cleaners who came from third-party agencies. (“Almost almost all of our 1-star Yelp reviews are from those days,” a post on the company’s blog says.) So MyClean CEO Michael Scharf and COO Ken Schultz decided to go in-house instead, hiring cleaners instead of bringing them in as contractors.
The result of switching to W-2 labor, Scharf says, was labor costs as much as 40 percent higher than the competition’s. But it also resulted in better customer satisfaction and better performance as a company. MyClean now has around 200 employees and has grown to $8 million in annualized revenue in the past two years.
“We see [independent contractors] as a legal risk,” Scharf says. “We also want, for lack of a better word, control — the ability to manage, dispatch, train, have processes in place for what our end service looks like. We wanted MyClean to have one consistent level of service.”
Another company bucking the 1099 trend is Munchery, a San Francisco–based food-delivery start-up that has raised $32 million in venture-capital funding since launching in 2012. Unlike Spoonrocket, Munchery classifies its drivers as employees and gives them health benefits as long as they work at least 30 hours per week.
Munchery’s co-founder, Tri Tran, doesn’t mind adhering to a more expensive labor model. “We know that delivery drivers are the face of the company,” he says. “They’re the only human-to-human interactions customers face, and they have to represent us well. When you get contractors do to the work, we tend to get poor results. They don’t really care. And some time ago, we realized that’s not the way to go.”
Companies that use W-2 workers to deliver services — which include food-delivery start-up Sprig and personal-storage start-up MakeSpace — face steep challenges compared to their 1099-dependent rivals. In a pre-Uber world, if you wanted to hire a house cleaner, you’d have had the choice of either using a traditional maid service or finding an independent cleaner on your own. But start-ups like Homejoy have been able to combine these two models, wrapping solo practitioners in the banner of a well-funded parent company, such that many customers can’t tell the difference.
The ability of certain start-ups to thread that needle has peeved their competitors.
“In a world without laws, it would be great to be able to hand someone supplies, train them, and give them 30 bucks under the table,” says Ken Schultz, MyClean’s chief operating officer. “But we’re compliant, and the result is employees who have rights. We’d like to have a level playing field.”
In the end, lawsuits and organized efforts by contractors could force many 1099-reliant companies to overhaul their practices. But more likely is that Silicon Valley will self-correct first. If it’s true, as Munchery and MyClean say, that workers who are employed directly provide better service than independent contractors, the market will reward those companies accordingly.
Already, there are signs that a sea change could be underway. At this year’s TechCrunch Disrupt (the same place I first heard the term “1099 economy”), the winner of the start-up competition was Alfred, a personal-service start-up that sends helpers to customers’ homes to stock their refrigerators, fold their laundry, and in all ways ease their burdens.
Like Homejoy, Alfred provides an intimate, personal service, the kind that requires implicit trust between customer and company. Unlike Homejoy, it offers its errand-runners regular employment — and benefits — once they work 20 hours a week or more. It’s a model Alfred knows will be more expensive in the short-term, but that it hopes will pay dividends down the road in the form of happy employees and satisfied customers. And if it works, it may just convince the rest of Silicon Valley’s 1099 start-ups to scale up their payrolls as well as their profits.
This is why we shout to our 99% of citizens being tracked into coding, computer programming, and what will be those same global tech factories coming to US Foreign Economic Zones-----it will literally be slave labor.
It has reached epidemic because CLINTON/BUSH/OBAMA pretended to be allowed to simply ignore enforcing Federal labor laws when they did not have that power------under the guise of operating as Foreign Economic Zones overseas when none of the legal structures in the US existed. Of course Trump will MOVE FORWARD with this and completely ignore these wage abuses as they now climb up the income ladder.
Saturday, Jul 30, 2016 11:30 PM EST
Gig economy workers: Independent contractors or indentured servants?
We need to stop worker misclassification and the abuse of so-called “independent contractors” Julie Gutman Dickinson, Capital & Main
(Credit: Reuters/Chris Keane)This article originally appeared on Capital & Main.
What if millions of American workers were being denied health insurance, job security and the most basic legal protections, from overtime pay to workers compensation to the right to join a union? What if tens of billions of dollars in taxpayer revenues — money desperately needed to address everything from crumbling roads to education to health care — were never making it to local, state and federal treasuries? What if thousands of companies were violating the law with impunity?
That is exactly what is happening in the United States today, thanks to a rampant practice known as worker misclassification — illegally labeling workers as independent contractors when in fact they are employees under the law. In some cases it’s occurring in plain sight, in others it’s more hidden — but regardless of the circumstances, it is taking an enormous toll on the country.
According to the Economic Policy Institute (EPI), workers misclassified as independent contractors can be found in nearly every industry, and the phenomenon has grown considerably with the rise of the gig economy. Uber, the ride-hailing company, has become the poster child for worker misclassification, with numerous lawsuits alleging that Uber wrongly classifies its drivers as independent contractors. But Uber is hardly alone — examples of worker misclassification can be found in scores of new sectors, from housecleaners to technical workers.
Workers misclassified as independent contractors are also legion in established sectors of the economy, notably residential construction, in-home caregiving and the port trucking industry. Conditions for these workers have been compared to indentured servitude, and for good reason. Misclassification enables employers to get away with widespread wage theft and a range of other illegal practices.
In a 2015 report, EPI described the advantages to employers of misclassifying workers. “Employers who misclassify avoid paying payroll taxes and workers’ compensation insurance, are not responsible for providing health insurance and are able to bypass requirements of the Fair Labor Standards Act, as well as the 1986 Immigration Reform and Control Act.” If this weren’t enough, the report continues, “misclassified workers are ineligible for unemployment insurance, workers’ compensation, minimum wage and overtime, and are forced to pay the full FICA tax and purchase their own health insurance.”
How do employers get away with such violations? The answer is complex, involving anemic labor laws, lax enforcement of the protections that do exist and the savvy exploitation of both by companies in key industries. While some businesses misclassify their workers out of ignorance, others do it very deliberately, and have spent millions of dollars defending the practice.
A case in point is the port trucking industry, which was deregulated in the 1980s, leading to a proliferation of companies whose business model was predicated on the use of independent contractors. That model has resulted in a workforce of close to 75,000 truck drivers at ports across the country laboring in mostly abysmal conditions. Among the indignities endured by drivers are such neo-Dickensian schemes as negative paychecks — an inconceivable but well-documented occurrence in which drivers labor full time or more, yet actually owe money to the trucking companies they work for due to paycheck deductions for everything from truck payments to insurance to repairs.
In the last several years, port truck drivers and their labor, community and political allies have begun to successfully challenge misclassification, winning a series of legal victories, particularly in California. Every government agency that’s conducted an investigation into the practices of the port trucking industry — from the United States Department of Labor and National Labor Relations Board to the California Labor Commissioner and Economic Development Department — has determined that port drivers are employees, not independent contractors. The state’s labor commissioner alone has issued more than 300 decisions on misclassification of drivers in Southern California, and drivers have prevailed in every decision, winning over $35 million in back pay.
How can these successes be replicated and enhanced to end misclassification? Three strategies stand out:
Litigation: The successful track record in California has proven that misclassification is vulnerable to sustained litigation. An important factor is whether elected and appointed officials are willing to aggressively pursue or support such litigation — if not, the efforts will yield far less favorable results.
Policy changes: The enactment of policies that clamp down on misclassification, increase penalties and ban law-breaking companies from operating can have significant impact. However, as with litigation, this strategy depends on the presence of lawmakers willing to take on the issue.
Worker organizing: In Los Angeles, port truck drivers frustrated with the exploitative conditions in their industry have waged a multi-year campaign to expose the practice of misclassification. That effort, which has included multiple strikes, has been supported by a broad coalition of community groups — a potent combination that has played a crucial role in challenging the trucking industry’s “independent contractor” business model.
Taking on misclassification is important not just to workers, but to businesses and taxpayers as well. In the current system, law-abiding companies are forced to compete with low-road operators, creating an uneven playing field. Likewise, the cost to taxpayers in lost revenues from employers that illegally misclassify workers as independent contractors is enormous, cheating government out of resources that could and should be used for the common good.
Reining in worker misclassification and the abuse of so-called “independent contractors” is one of the more daunting challenges in taking on economic inequality. But any serious plan to address the nation’s economic divide must include an aggressive strategy to take on this costly epidemic.