Independent Contracting is Under Attack. With California’s AB5 bill, and subsequent Proposition 22, new Department of Labor Rules, and the current “Pro Act” before Congress, Independent Contractors are being squeezed by state and federal governments.

Mike Rowe’s opinion on the Pro Act:
https://youtu.be/RPYpdZ0oljA?si=keikuQoJ5hH8oYR7

California’s AB5 Bill:
https://en.wikipedia.org/wiki/California_Assembly_Bill_5_(2019)

ABC Test
Under the “ABC” Test, the default presumption is that a worker is an employee. The burden is on the employer to prove, with through documentation, that the individual satisfies all 3 criteria of the “ABC” test to be an independent contractor. The 3 criteria are:

The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
The worker performs work that is outside the usual course of the hiring entity’s business; and
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

California Proposition 22:
https://en.wikipedia.org/wiki/2020_California_Proposition_22

New Department of Labor Rule:
https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking

6 Metrics:
Opportunity for Profit or Loss Depending on Managerial Skill
Investments by the Worker and the Potential Employer
Degree of Permanence of the Work Relationship
Nature and Degree of Control
Extent to Which the Work Performed Is an Integral Part of the Potential Employer’s Business
Skill and Initiative

Further Reading:
Mercatus Center from George Mason University:
https://www.mercatus.org/research/working-papers/assessing-impact-worker-reclassification-employment-outcomes-post

ADP Article on the New DOL Rule:
https://sbshrs.adpinfo.com/blog/the-new-independent-contractor-test-key-points-to-know

Understanding the Field Nation System: https://www.youtube.com/playlist?list=PLeKQphKP6d0agikXwgsxwNF-HaLvbVNQf

Understanding the WorkMarket System: https://www.youtube.com/playlist?list=PLeKQphKP6d0ZDxB_ZoUifgsoPTSp7aYYj

Understanding the CloudWork Pro System:
https://www.youtube.com/playlist?list=PLeKQphKP6d0ZDYywPS9HGDbvxdCZnPu0a

I offer one-on-one coaching and have a downloadable skillset and equipment list on my website to help you maximize your Field Nation and Work Market profiles: https://fieldtechacademy.com/shop/

I have been in the freelance IT tech industry since 2000, on Field Nation since 2010, and on Work Market since 2011. Field Tech Academy gives you the secrets of 20+ years of experience how you can succeed as an Independent IT Field Tech.

Have questions about Field Nation or other platforms or want me to cover something I missed in a video? Feel free to leave me comments and I’ll do my best to help! If you would like to learn more about how to find clients or about being an independent IT field technician, watch our other videos and visit our website for coaching services.

Subscribe to Field Tech Academy’s YouTube Channel: https://youtube.com/@fieldtechacademy

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Video Transcript:

The independent

contracting industry is under attack.

I recently saw a video from Mike

Rowe of Dirty Jobs

where he talked about the Pro Act.

And that sent me down a rabbit hole.

I’m going to go over

what has led up to this,

what is happening now,

and how some of the leaders in my industry

are taking steps to try

to protect their independent contractors.

A new law in California and new rules

from the Department of Labor

are really going to make it more difficult

to be an independent contractor.

Let’s get into it.

My name is Michael Firey

and I run this YouTube channel, Field Tech

Academy, to try to help I.T. technicians

understand how to navigate the independent

contracting business in our industry.

But the changes here

apply to all industries.

I run a small computer

repair business as well as being

an independent contractor myself.

And I’ve done this since the year .

I’m concerned about how these changes

are going to affect my ability

to continue

to be an independent contractor.

Before I go any further,

let me just say this

video is for educational

and entertainment purposes.

I’m not an attorney

and I’m not an accountant.

So none of this should be construed

as advice.

So what’s brought us to this point?

California passed a law called AB.

And that went into effect

January st of .

The goal was to address California

employers when they hired individuals

and classified them as independent

contractors, supposedly incorrectly.

One of the changes that AB implemented

was to put in an ABC test

to determine whether a worker

was an independent contractor,

or whether they were actually an employee

and being misclassified.

Under this ABC test,

the default presumption

was that a worker was an employee.

It put the burden of proof on the employer

to force them to prove

that who they were

hiring was an independent contractor.

And so they had to meet all three

of these ABC test requirements.

The three requirements are…

Number Two

And Number Three

So what was the goal of AB?

The idea was to stop employer abuse of the

independent contractor classification.

AB turned some independent contractors

into employees.

It was thought that workers

were being taken advantage of

and were being classified

as independent contractors

when they should have been employees

and therefore entitled to minimum

wage, overtime pay,

expense reimbursements, health

insurance, rest breaks, and on and on.

It was supposed to create a level

playing field

between gig workers and regular employees.

What are some of the drawbacks of this?

From an employer standpoint,

having an employee

instead of an independent contractor

adds a lot of costs and more regulation.

Some companies may not be able to handle

those higher costs

and may have to raise prices

on the same products

or simply get rid of the independent

contractor and not replace them at all.

From a contractor perspective,

an independent contractor

may not want to be an employee.

It’s the whole point of being an independent

contractor;

is you’re working for yourself.

You have freedom.

So what’s been the results so far?

According to the Mercatus Center at George

Mason University, selfemployment

decreased after AB

by . percent on average

for the affected occupations.

Overall employment,

which was supposed to go up, decreased

after AB by .% on average

for the affected industries.

AB didn’t really create the hoped

for transition to employment

and an increase in employment.

The thing that drives me nuts

is if this law was so great,

it should apply to all industries.

If employees are being abused

in one industry, then are

they not being abused in another industry?

And that’s not how government works.

When this law was passed,

they put in a slew of exemptions.

So who got exempted?

Let’s see.

It was physicians, dentists,

psychologists, veterinarians,

lawyers, architects, engineers,

accountants, securities brokers dealers,

investment advisers, real estate

licensees, private investigators,

certain marketing and human resource

professionals, and licensed

manicurists and barbers

who can meet certain conditions.

Basically, this whole list of people

aren’t being abused and this law doesn’t

need to apply to them.

However, gig drivers

like for Uber and Lyft and DoorDash

and the trucking industry,

and from what I’m reading,

even technology

independent contractors were not excluded.

So those industries have to follow

the rules while these other industries

don’t.

Big money from companies like Uber

and Lyft came into California after that

to at least

try to get their gig drivers exempted.

And so they did Prop  and it passed.

So the people of California passed it,

and then it got held up in court

and then it got upheld in court.

And it’s it’s a battle back and forth.

But effectively,

now that gig drivers are now covered

as independent contractors,

As of March th, ,

the Department of Labor

has now implemented a new rule

which changes the game for independent

contracting from a federal level.

And it’s probably been inspired

by California’s AB law.

The new Department of Labor law

is called “The Employee or Independent

Contractor Classification Under the Fair

Labor Standards Act”.

I will link to it in the description.

What irritates me about all

this is it’s not like it’s a law

that was passed by Congress.

This is just a government

department saying, You know what,

I think we should do this.

Were there a bunch of constituents

hitting up their members of Congress

saying, hey, there’s a lot of independent

contractor and employee abuse here.

This needs to be fixed.

No… it’s government.

And that’s probably

because they’re trying to gain control

and push more people into being employees

and not being selfemployed

and having more control over their lives.

The Department of Labor

rule has added a six pronged approach

towards interpreting whether or not

someone is an independent contractor.

So what are these six metrics

to be classified

properly as an independent contractor?

Number One

Number Two

Number Three

Number Four

Number Five

Number Six

All right, so what all those mean.

So factor one opportunity for profit

or loss, depending on managerial skill.

Can the worker determine

or meaningfully negotiate

the charge or the pay for the work

performed?

Can the worker accept or decline jobs

or choose the order

and or time

in which the jobs are performed?

Can the worker engage in marketing,

advertising, or other efforts

to expand their own business

or secure more work?

Can the worker make decisions to hire

others, purchase

materials, equipment, and or to rent space?

Obviously,

if you’re doing all of those things, it’s

pretty clear

that you’re an independent contractor.

Factor number two Investments

by the worker and the potential employer.

Now this to me is the cloudiest

one that even I had trouble understanding.

But I’m going to tell you what

I found on it.

Under this factor,

do the workers investments support

an independent business

and serve a business like function

such as increasing the workers ability

to perform different types

of or more work, reducing costs

or extending market reach?

And how do the workers investments

compare to the employer’s investment

in the overall business?

Factor number three The degree

of permanence of the work relationship.

You’ve got two ways to look at this.

If you’re trying to be

an independent contractor,

the work relationship needs to be

for a defined period of time.

It needs to be nonexclusive.

You can work for other people.

It needs to be project based or sporadic,

based on the worker

being in business for themselves

and marketing their services

or labor to multiple entities.

If the work was more indefinite

in duration,

it was continuous, or exclusive of work

for other companies, then

it’s more going to look like an employee

employer relationship.

They also point out

that seasonal or temporary work alone

does not necessarily favor classification

as an independent contractor.

So you could be seasonal,

and still be considered an employee.

Factor number four

is nature and degree of control.

Do you set your own schedule?

Does anyone specifically supervise

the performance of your work?

Does a company use technological means

to supervise the performance of your work?

And does a company reserve the right

to supervise or discipline you?

Does a company place demands

or restrictions on you that do not

allow you to work for others or work

when you choose?

Does the company control economic

aspects of the working relationship,

such as control over prices

or rates for services

and the marketing of those services

or products provided by the worker?

If the employer is doing some of

these things because of regulations,

then that won’t automatically mean

you’re an employee.

They may just have to be

following the law.

And then number five, the extent

to which the work performed

is an integral part

of the potential employers business.

This one I don’t like either,

because when does a company hire

somebody to do something that isn’t

integral and important to their business?

This factor considers

whether the work performed is an integral

part of the potential employers business.

This factor doesn’t depend on

whether any individual worker

in particular is an integral

part of the business, but rather

whether the function they perform

is an integral part of the business.

So it really isn’t based on the person,

it’s based on the need.

This factor weighs in favor of the worker

being classified as an employee

when the work they perform is

critical, necessary,

or central to the potential employer’s

principal business.

This factor weighs in favor of the worker

being an independent contractor

when the work they perform

isn’t critical, necessary,

or central to the potential employers

principal business. And finally, factor

number six is skill and initiative.

This one, again,

to me is a little muddled.

This factor considers

whether the worker uses

specialized skills to perform the work

and whether those skills contribute

to business like initiative.

This factor indicates employee status

when the worker does not use

specialized skills in performing the work

or where the worker is dependent

on training from the potential employer

to perform the work.

Where the worker brings specialized

skills to the work relationship.

Just that fact in itself is not indicative

of being independent contractor status

because both employees and independent

contractors may be skilled workers.

It’s the worker’s use of those specialized

skills in connection with business

like initiatives that indicates that

the worker is an independent contractor.

So they’re saying

you could have an employee

that has a very specialized skill set.

Obviously,

an independent contractor is going to have

a specialized set of skills

that they’re using in other places

in their business

and working for other people.

So it’s really about

whether they’re using those skills

to contribute to business

growth and business initiative.

So this is our new reality.

Like it or not,

this is what we’re going to have to deal with.

The main company

in my independent contracting industry

world is a company called Field Nation.

They’re a platform

that creates a marketplace for companies

to place tickets and for technicians

to bid on and accept those tickets.

Field  Nation just operates as a middleman,

as a referee.

So Field Nation doesn’t

control the pay rates.

They don’t control who does the work.

That’s all the decision of the companies

that place the tickets and the technicians

that do the tickets.

Now, there are different types of clients

that I receive work

from. The platform style like Field Nation…

there’s other ones like WorkMarket,

CloudWork Pro. There

again, they’re just a marketplace.

Then there are a lot of other clients

that I deal

with where it’s a direct relationship

in regards to.

I work for the client.

Now the client has their own customer

and that’s who I’m servicing in the end.

But it’s a direct relationship

to where I always work

for the same company and they may send me

to different types of sites.

You know, one day it could be an Old Navy,

the next day it could be WalMart, etc..

So the question is,

are these new rules and new laws

going to affect my direct clients

or my platform clients?

One of the biggest platforms

is Field Nation.

And so they’re taking some steps to try

to protect their independent contractors.

And before I get into what

they’re trying to do to help,

If you’re getting value today

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content like this and check out my website

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I offer one on one coaching for people

that are interested in becoming

independent contractors

in the IT industry.

Field Nation has listed some guidelines

to try to help their clients

to stay in compliance

with these new rules and laws.

Number one, don’t post assignments

that are  hours a week with set hours.

That’s one of those six categories

we saw in the Department of Labor rules.

Don’t post long term assignments

that last consecutive weeks or months.

Don’t require providers

to work exclusively

with you

without the ability to do other work.

Don’t provide training on

how to do the job in its entirety.

And I think they’re using that

as the whole specialized skill thing,

because if you don’t have the specialized

skill to do the work,

then you may be classified as an employee.

And then number five don’t provide

all the tools and equipment necessary

to complete the job.

So if the buyers and the clients

on Field Nation use these five guidelines,

then they should be in compliance

to maintain technicians

as independent contractors.

What are some of the things that Field

Nation is doing to try to protect

their actual technicians

as independent contractors?

One of the things they’re suggesting

is to get set up

as a registered service company,

and that is a term that Field Nation has

where you can get set up,

you can have a company profile,

you can have sub technicians.

Field Nation encourages

you to use formally employed technicians.

In other words, you should be hiring

people that work for you as employees

and not hiring techs as independent

contractors to work for you,

who is an independent contractor.

They’re encouraging their technicians

to carry workers comp insurance.

They’re encouraging technicians to obtain

an employer identification number

from the IRS.

That, again, is another sign

that you are your own company.

And another way of trying to protect

yourself is to employ three

or more people.

The bottom line is educate yourself

on the AB law,

Prop ,

the new Department of Labor rules,

and look into the Pro

Act that’s sitting in front of Congress

right now.

Make sure you know what is coming.

What has happened.

Get in touch with your representatives

and find out where they stand on these

issues and let’s try to join together

as independent contractors

to protect our industry.

And as always, my goal is to help you

to get out in the field making money.

I’ll see you in the next video.