Bringing in the specialist

When economic conditions are fluctuating wildly, a company has to strike a balance between avoiding overstaffing and avoiding understaffing. Hire too many staff, and they won’t have anything to do. Hire too few staff, and they’ll burn out.

Factorial HR published an article that provided some solutions to understaffing, one of which was to bring in contractors. Not just any contractors, though; contractors who are specialists.

Yet, unlike a temp agency, these workers have unique, specialist skills, that could be extremely useful to your business.

Factorial HR assumed that you’d have to go to an agency (a specialist sub-contracting agency) to find these specialists.

I disagree.

Incidentally, one benefit of bringing in a specialist for a particular project is that the specialist can concentrate on that project alone, and not get bogged down in other things.

When a business should use a (non-driving) independent contractor

In my previous post, I talked about the recently-passed California Proposition 22, how it relates to Assembly Bill 5, and the three criteria that Assembly Bill 5 uses to determine whether a worker is an employee or an independent contractor. As a reminder, those three criteria are as follows:

(A) The person 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.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

So when does it make sense for a company to contract with an independent contractor, rather than hire an employee?

The most obvious reason for a company to use an independent contractor is when the contractor provides services that are outside what the company usually does.

I could provide a whole list of examples of what those “services” could look like, but let me focus on a single example.

Wendy’s Widget Company has been manufacturing round green widgets since 1969, from a factory in Columbus, Ohio. (For various reasons, foreign or overseas round green widget manufacture was not desirable.)

One day, someone in a quality circle (Wendy’s Widget Company was old school) suggested that the company introduce square blue widgets. Square blue widgets had been around for a while, but Wendy’s Widget Company had never produced them.

By Down10 at English Wikipedia – Transferred from en.wikipedia to Commons., Public Domain, https://commons.wikimedia.org/w/index.php?curid=3279986

The company decided to produce a small run of square blue widgets, and then get someone to market them.

But the company’s existing marketers were all accustomed to round and green things, and were incapable of marketing the square blue ones. (Not that they didn’t try, but the marketers did not understand the concept of 90 degree angles, so the effort was doomed to failure.)

The company could have hired an square blue widget expert, but what would have happened if the small run experiment was a failure, and the expert would have been terminated in a few weeks?

So the company hired an independent contractor to complete a well-defined project. This project required the contractor to develop marketing materials for a possible Wendy’s Widget Company square blue widget. The contractor would go off and work on the assignment, checking in with Wendy’s Widget Company at well defined checkpoints.

But when the company lawyer found out that the contractor was based in California, the lawyer asked, “Does this meet California AB5 criteria?”

Let’s see.

  • In this case, the contractor was NOT under the direct control of Wendy’s Widget Company. The contractor was not told to work from 8:00 am to 5:00 am Ohio time, was not assigned a Wendy’s Widget Company computer, and did not get matching contributions to the company’s 401(k) plan.
  • And, in this case the contractor was performing work outside the usual course of business for Wendy’s Widget Company. The contractor not only had in-depth knowledge of 90 degree angles, but also had a deep appreciation of the music of both Bobby Vinton AND Eiffel 65.
  • Finally, in this case the contractor regularly worked with a variety of companies to provide marketing materials for widgets of all shapes and colors.

The lawyer was satisfied, the contract was completed, and the contractor went on to help another company with its red octagon widgets. Everyone was happy.

OK, that whole example was made up. (But now I’m hungry for a hamburger.)

But there are times when a company wants to pursue something outside of its comfort zone, but doesn’t want to dedicate an employee to do it.

If your company has such a need, and if my experience (in biometrics, identity, and other areas) suggests that Bredemarket can help your company meet your goals, contact me.

California Proposition 22 and non-driving independent contractors

In case you haven’t heard, Tuesday was an election day in the state of California, and throughout the rest of the United States. There were a number of candidates and propositions on ballots throughout the country, but for this post I’m going to concentrate on a single California proposition, Proposition 22.

By Alexander Torrenegra from Secaucus, NJ (New York Metro), United States – On my first @Uber ride in Bogota heading to a Startup Weekend. Priceless easiness and safety. I love disruptive innovation., CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=37982760

In ballot legalese, this proposition’s title was “EXEMPTS APP-BASED TRANSPORTATION AND DELIVERY COMPANIES FROM PROVIDING EMPLOYEE BENEFITS TO CERTAIN DRIVERS. INITIATIVE STATUTE.” What that means is that if the proposition passes, drivers for “app-based transportation and delivery companies” (think Uber, Lyft, DoorDash, etc.) will be exempted from the provisions of California’s Assembly Bill 5, and therefore will NOT be classified as employees.

And for the record, it looks like Proposition 22 has passed.

However, Assembly Bill 5 still applies to people who are NOT drivers for app-based transportation and delivery companies. Specifically, Assembly Bill 5 provides the following test to see whether a person is an employee or an independent contractor.

 Section 2750.3 is added to the Labor Code, to read:

 (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person 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.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

When AB5 was passed, a lot of attention was focused on the need for companies to properly classify their workers as employees, when warranted.

But not a lot of attention was focused on the times when companies would PREFER to use independent contractors instead of hiring employees.

I’ll talk about that in a future post.