The PRO Act

Under this heinous piece of U.S. legislation, anyone writing programs in return for money from a company which employs programmers is now deemed an employee rather than an independent contractor :hot_face:

I have to read it but, on the surface this sounds terrible.

Sounds like the laws here for Scheinselbständigkeit (False self-employment).
There are a couple of rules like if you work for a client >70% of your time, take direct orders, are integrated in the company and you don’t decide what you do yourself.

You may not have a problem, if you run your own company (e.g. limited), you are employed there with proper social security and bill your clients for projects.

An example is to fire a truck driver as employe and then hiring them as contractor to do the same work for the company at lower rate.

Read here:

That’s how it used to be in the US, and still is in places that haven’t yet enacted this horrible “PRO” act. The PRO Act is very different and much more stringent. As I said, one new criterion is that if the company you’re providing services to employs people to perform essentially the same service, then you’re an employee, not a contractor.

The wikipedia page sounds much more reasonable than the PDF:

What’s actually bad about it? On the face of it it seems like it’s designed to stop employers from avoiding Fair Employment, employee benefits, etc. laws by improperly declaring their staff to be independent contractors. It also seems to strength unionization rights.

The UK did something similar a number of years ago with IR35. There are ways around it and I’m sure given time there will be ways around this one. Unfortunately, it will only affect those who can’t afford the accountants to get them around it.

Well, for one, it has ramifications for who may own the copyright to the programming. Previously under USA law, an independent contractor could own the copyright but employees never do. (It was best if a contract explicitly cited copyright ownership. But a company always owns the work of an “employee” in the USA.)

But there are all kinds of financial impacts that spring to mind. From payroll stuff like withholding, workers compensation, “employee” benefits (health care, 401k, paid time off, whatever). To other tax related things: if you buy a computer or renew a Xojo license or whatever, as an “employee” you no longer have a business where you can expense these things.

The potential impact here seems much wider than union / nonunion issues. Or even employee benefits. It seems like a profound restructure of how a relationship would be treated by the government, regardless of what the parties have agreed to in any contracts.

The wikipedia page seems to be written as if by the act’s authors trying to spin as positive as possible. The PDF by lawyers who understand what the actual implications may be in court.

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The existing law already has reasonable requirements to address this kind of abuse: you have to have multiple clients, your own workspace, control over your own time and its allocation etc. I have no problem with those requirements being in place or in meeting them, nor do I have a problem with unions. This new law, however, would destroy the engineering services business I’ve operated for 35 years, despite its meeting all the current requirements and being a bona-fide consultancy. It would require me to become an employee of almost every one of my clients. Many of my clients do have engineers, but they’re not sufficiently capable in some areas that I excel at, hence they contract with me for projects requiring my expertise. Or maybe their staff engineers are too busy to take on a particular one-off project that’s too small or short-lived to warrant the investment in a full-time employee. Other clients contract with me to write desktop apps to control hardware I’ve designed for them, despite the fact that they have programmers on staff doing other types of applications. The tax and employment law authorities are not going to listen to or care about these fine distinctions - to them, an engineer is an engineer and a programmer is a programmer. This thing would literally ruin my life if it came into full effect and was rigorously enforced.

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[quote=“Julia_Truchsess, post:9, topic:64405”]
The existing law already has reasonable requirements to address this kind of abuse…
The tax and employment law authorities are not going to listen to or care about these fine distinctions - to them, an engineer is an engineer and a programmer is a programmer.[/quote]

And therein lies one of the major problems when laws are written by career politicians who have zero experience with how things work in the real world.

So if they require your expertise, that does sound like you are a specialist and their regular business doesn’t include that?

In some cases, yes, I’m clearly a specialist, for example in EMC mitigation. Very few small-to-medium size companies can afford to carry an EMC specialist as a full-time employee, so it’s perhaps unlikely I’d run into problems with that service. In other cases it’s a lot less clear, where I’m brought in for design work where they already have designers, just less experienced or too busy. My fear is not so much that this new law will say to me “You’re really an employee” (which is how the existing law is targeted), but rather that it will say to the client “You cannot use a contractor for this, you have to hire an employee”, in which case I am out of work, because I don’t want to be an employee.

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Why not? You can have a contract for 5 hours each week (or flexible hours) and still run your own business

I would expect some details to follow in the legislation process.

Like for example with minimum wage in Germany the government published the details and those included a limit. If you pay above a certain amount a month, it is impossible to get below the minimum wage since you pay for something like 70 hours minimum wage and then there is no reporting of hours needed anymore.

I expect whatever comes out of this, there will be details and then some paragraphs will end up in court to determinate what is meant.

The most terrifying words in the English language: I’m from the government, and I’m here to help.

This is DOA as I can’t imagine they will get the majority of Republicans to sign on.

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I’m no Republican, but this thing just seems completely anti-business; bad for both contractors and for those who use them. It’s like mandating that everyone be a wage slave.

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What about Uber drivers?

Again I ask: how? Where is the problem with having 5h/week or flexible hour or consultant contracts?

I guess the real problem is for those working 20 hours / jobs and only declaring 3 on their tax form … that becomes impossible if you have (employee) contracts everywhere.

I don’t know about Uber drivers. I’m concerned about the potential impact of this law on contract engineers like myself and others on this forum. If Uber drivers need some kind of law for protection that’s fine, but it shouldn’t have a negative impact on non-Uber drivers.

Sorry Markus, I just don’t understand what you’re saying here, and I don’t see where hr/wk comes into it at all. The problem is that the law would in many instances preclude companies from using contractors. I’m a contractor.

The problem that the IRS guidelines address is that of people taking deductions for things that are not usually deductible for employees, by claiming to be contractors. Nothing to do with failing to report income.

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I am also paying very close attention to this at OWC. We quite often hire contractors/consultants to handle a temporary load issue that is short-lived and does not warrant an additional full time employee. Our legal department is speaking with other entities and the representatives from multiple states regarding this.

If you are all interested, I will be happy to share our progress/failures here as they occur.

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Absolutely, @Tim_Jones, would love to hear any further news and developments about this, thanks.

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