The head of a company can pay a lawyer or an accountant to tell them to break the law and then get away with doing just that.

I got a letter from the Internal Revenue Service the other day and, as far as those go, it was one of the good ones: It said I was right, and that I’d been wronged, and that soon the world would know.

“We’re going to make the enclosed copy of your Form 14430, SS-8 Determination Analysis, available for public inspection,” it said. I had filed a request for that analysis about five years earlier after having worked as a segment producer on a late-night talk show.

In 2012, I thought that job was cool: “A segment producer, in Hollywood,” is how I could describe myself. In time, however, I came to realize, as many workers do, that I was being taken advantage of, by people making a lot more than me, in ways I hadn’t considered.

Casting Producer: “You don’t want to be seen as a whistleblower. If you go down that route you’re nailing your own coffin shut. You’re fucked. You’re never going to work again.”

It began with my title: “Producer” sounds better than “writer,” but the latter is actually protected by a collective bargaining agreement, ensuring basic rates of pay and benefits; the former is not. I was not an employee at all, apparently — the questions I proposed that the host ask, sometimes written down, were ostensibly the product of my own firm, and definitely not “writing.” I was, for tax purposes, an independent contractor, denied overtime, health care and, to top it off, charged twice as much in payroll taxes — my employer (who wasn’t) did not contribute a dime to Medicare, Social Security or the unemployment insurance I would later collect.

“As is the case in almost all worker classification cases, some facts point to an employment relationship while other facts indicate independent contractor status,” the IRS said in the letter. If, however, an employer tells you what to do and when to do it, providing services that are “a necessary and integral part of your business,” that employee is in fact an employee “and not an independent contractor.” I was, according to the federal government, “a common law employee.”

And the consequences? None so far. One has to file another form for those, which at best will mean that sketchy boss of mine will pay some back taxes. But that’s not guaranteed. Lawbreakers who happen to be bosses are, in cases like these, treated with an enviable amount of understanding. According to a pamphlet from the IRS, section 530 of the tax code allows employers to skirt ramifications for their actions if, for example, “You [the employer] treated workers as independent contractors because you knew, and can substantiate, that was how a significant segment of your industry treated similar workers.”

Just because everyone else is doing something does not mean it’s safe or legal, but in the case of employers misclassifying employees, the federal government does consider it an extenuating circumstance. A boss, after being caught, can also say he or she relied on “some other reasonable basis,” like “the advice of a business lawyer or accountant who knew the facts about your business,” and be absolved of their sins under the law.

In essence, the head of a company can pay someone to tell them to break the law — to advise them that breaking it would not in fact be illegal — and then get away with doing just that.

In the entertainment industry, everyone ignores the labor code,” said Christiane Cargill Kinney, an attorney at the firm LeClairRyan who focuses on employment issues within Hollywood. “There’s obvious reasons for that,” she said in an interview, “and it’s not exclusive to entertainment as far as the misclassification goes. But it is rampant.”

For one, there is the way that things have always been done. A manager may treat workers on a production as independent contractors because that’s what the person before them did — and those employee “contractors” may be accustomed to it as well. And complacency begets a culture. But the main reason, “obviously, is employers and production companies have a great incentive to misclassify: They can save thousands of dollars,” Kinney noted.

And if a worker doesn’t like it? In Hollywood, there are plenty more willing to make yet another sacrifice to make their dreams come true.

Workers like Lisa know this. She currently works as a casting manager on a cable television show, the sort of thing she’s done for the last 12 years. She’d always been treated as a traditional employee — until 2018, when she accepted a position, doing what she’s always done, but as an “independent contractor.”

“I took it because I desperately need the money,” she said, asking that her last name not be used. She works on a show aired by a well-known cable news network. As with most productions, the show is actually made by a separate production company, not the network itself, which allows for some plausible deniability. For example, when the makers of a Showtime documentary on basketball star Kobe Bryant were caught using unpaid researchers, Showtime proclaimed innocence and blamed the production company.

Françoise Carré is the research director for the Center for Social Policy, based at the University of Massachusetts, Boston. She’s seen this before. “When lead firms set up either chains or networks,” she said, “and then the lead firm essentially determines the level of resources in the system, the more segments in the chain or the more intermediaries, the more working conditions for workers on the periphery will be undermined.”

That is: A big company can hire a smaller company, give it a tiny budget, and look the other way with respect to how that budget is met. And if someone down the line gets caught, so what? In a 2015 report for the Economic Policy Institute, Carré noted that, “As a rule, companies found to be misclassifying workers and violating tax laws by the Internal Revenue Service usually do not get penalized by federal authorities due to legal constraints on the IRS.”

In her case, Lisa doesn’t even work for the production company hired by the network, but by a separate casting company that the former hired. She complains of a bait and switch, having accepted the rate offered, thinking it meant 40 hours a week, but in practice it meant “about 80 hours,” for roughly half the paycheck an employee entitled to overtime would collect.

“My boss has texted me every day, even on weekends, saying, ‘We need this. We need that,’” she said. “And because I want a job again, I gotta do it.”

She will, at least, have gained an appreciation for the difference between a W-2 and a 1099: lots of money, the latter requiring her to pay another 7.7 percent in taxes on her wages to make up for those her employer should be paying but does not. (Independent contractors do get some benefit from the 2017 federal tax law, which lets them deduct the first 20 percent of their earnings.) A 1099 also means no paid sick days or employer health insurance.

Lisa does plan on filing unemployment after this gig is over. And she will get it, despite her employer having classified her a contractor and not paying any money in to the state insurance program.

When assessing an alleged contractor’s unemployment claim, California’s Economic Development Department applies much the same test as the federal government. Does the employer “control the manner and means by which the work is performed”? If yes (if one’s hours, for example, are set by one’s boss) the employee is an employee and entitled to an unemployment check.

The other things an employee is entitled to, however, require more work to attain, and most won’t bother appealing to the IRS — not for a formal determination, much less the back taxes owed by past, delinquent employers that require yet more paperwork. That hurts the employee, but it also deprives the state of revenue and puts at a disadvantage other businesses that do follow the rules.

It is not like bosses don’t know what the rules are, even if that’s what some claim when the IRS comes around. Entertainment Partners, one of the largest payroll firms in Hollywood, is unequivocal: as far as it is concerned, in film and television production there is no such thing as an independent contractor.

“The federal government considers any person under your direction or control an employee,” the company states on its website. “As such, withholding, as well as employer taxes (e.g., FICA, [state unemployment insurance] and [federal unemployment insurance]), are due on wages and taxable allowances,” it says, noting that a failure to comply means “potential liabilities exist for all unpaid federal/state/municipal taxes…. Therefore, EP does not pay independent contractors.”

But culture often trumps the letter of the law, and the same culture that for so many years condoned unpaid internships — before the class-action lawsuits came — tolerates this particular form of wage theft as just another cost of doing business. That culture is, of course, the product of power dynamics: What’s a worker going to do: say no? Turning down a job or burning a bridge by defending one’s rights can cost a career.

“You don’t want to be seen as a whistleblower,” said Christina, a casting producer on a popular network dating show. She has been working in the entertainment industry since 2009, almost always as an independent contractor. She complains to her friends, but not to the state. “If you go down that route you’re nailing your own coffin shut,” she said. “You’re fucked. You’re never going to work again.” (She did not want her last name used for this story.)

So much depends on individual initiative, in terms of catching employers who misclassify. And there’s also the question for understaffed state agencies: Where to start?

“It’s a whack-a-mole dilemma,” said Kinney. “There’s so many people that have been misclassified. We’re talking [such] vast, vast numbers, that our bodies of government that are designated with regulating these things cannot manage. So people are going to get away with it.”

Misclassification, then, remains a systemic issue treated as an individual’s problem, with misbehaving employers given the benefit of the doubt — a benefit that no worker who has run afoul of the law is likely to receive.

There have been efforts to change that, however.

In 2013, Ohio Democrat Sherrod Brown introduced legislation in the U.S. Senate that would have eliminated the get-out-of-an-audit provision in the current tax law for employers who misclassify their employees. Among its 10 cosponsors were some big names — Vermont Senator Bernie Sanders, Massachusetts Senator Elizabeth Warren and Illinois Senator Dick Durbin, the second-highest ranking Democrat in the chamber — none of whom were Republicans.

The bill went nowhere.

States could pick up the slack, but the 2017 tax law that reduces some of the financial burden on contractors also makes it harder to raise revenue for state-level enforcement of labor and tax laws. That won’t change under the current president. What potentially could, however, is the culture: A status-conscious industry like ostensibly liberal Hollywood can arguably be shamed into living up to its alleged values. In fact, a crusade against misclassification can be seen as consistent with, if indeed not part of, the Me Too campaign: under federal law, independent contractors have a much harder time fighting sexual harassment in the workplace.

Copyright Capital & Main