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I wouldn't be so quick to call the tax/employment-regulation authorities villainous. The reason these regulations exist is to prevent employers from treating people who "should be" employees as contractors where they get fewer benefits.

The regulatory environment isn't set up to handle a situation where an employee would rather be a contractor, because that's relatively rare.

Ideally there would be some way to take the worker's preference into account, but things just aren't set up that way and so the assumption is that contractors need to be protected from employers who want to screw them.

In any individual case an employer could probably document an employee preference for a certain classification and be fine. But UpWork and state employment regulatory bodies are built for handling scale, so processes will tend towards working for the most common situations.

So you mean to say the tax authorities do this unintentionally ?

Is that supposed to be better, or worse ? They're some combination of incompetence and malevolence. I feel like incompetence is worse.

That's not what I said at all. They are intentionally trying to prevent employers from abusing employees by forcing them into contracting arrangements with fewer benefits.

Trying one thing, not achieving that one, but achieving another bad thing in the process. How is that not failing ?

Upwork has been in the news more than enough to make it VERY clear that if there's any kind of organisation that needs to be prevented from exploiting others, it's Upwork.

Making it possible for the worker to document their “preference” would defeat the entire purpose of these regulations. Companies would simply fire anyone who doesn’t have a contractor preference

So instead we're ram-roding everyone into the wage-slavery model. With health insurance linked to your employer, it's no wonder people are afraid to leave their cubicles.

I think "big evil corporations" like this setup just fine.

> So instead we're ram-roding everyone into the wage-slavery model.

Companies like upwork do absolutely nothing to solve that problem. In fact, they make it even worse by not even considering the idea of offering any healthcare service to any if their "contractors".

That's so naive that it makes me angry.

Companies like upwork provide a place for independents to find clients. I spent the last 10 years earning most of of my income from consulting. The hard problem is not getting health insurance (you can buy it, it's just expensive and paid with after-tax dollars). THE hard part about being a consultant is finding people to pay you.

These marketplaces might not be perfect, but they're a step in the right direction. I want exactly one thing from them - the ability to find work and get paid.

As a salaried employee, I hated the benefits my company provided, but it was worse to go without because I'm ineligible if I turn it down. Since leaving my company and consulting full-time instead, I:

- pay less for insurance - after my subsidy, I pay less than my portion as a W-2 employee for nearly equivalent coverage - pay less for funds in my solo-401k without any other fees - don't get a FICA deduction for my HSA contribution (not sure why you have to be a W-2 employee for that deduction) - make more, even after additional FICA taxes

I was already an "at-will" employee, so I didn't get much more protection anyway, so leaving my company and working as a 1099 was a net win with pretty much zero downsides.

I really don't understand why the IRS is so adamant about making people W-2 employees, it's quite often a worse situation.

> This may not be a matter of Upwork wanting to upsell the client

> Thus: the ultimate villains here are the tax/employment-regulation authorities.

Why be so quick to think that this may not have been Upwork's fault, but the ultimate villains definitely are the tax/employment-regulation authorities?

If there is a regulatory issue at stake, the correct thing to do is to disclose it quickly and transparently.

Upwork (and other freelancing websites) have no communication problem when it comes to telling you that you need to pay them some new fee, or when it comes to allegedly violating their terms and conditions. But when there's a regulatory problem, it's "just" a problem of communication? Hard to believe.

It's pretty clear from their wording if you are already familiar with these issues. This tax classification thing of "contractor" vs "employee" is a standard bugaboo lurking in these waters, and Upwork is doing a terrible job of articulating it and dealing with it.

Their silence comes off at best as "saving their own asses" and at worst as "saving our own asses while doing as little work as possible to retain clients and customers". Neither make for a feel good story.

Because governments are well known to do this and everything about this sounds just like many other cases.

Upwork, Freelancer.com & friends are equally well-known to do this.

To do what? These companies have zero interest in this tax-related issue. It's a burden to them, actually.

Doesn't seem hard to believe that this doesn't happen very frequently and that whatever customer support person happened to respond to the freelancer's ticket went into the internal knowledgebase and just lazily typed up something regarding "compliance."

Have you ever worked with this sort of platforms? Because this is pretty much all in a day's work there. Things have slowly degraded from back in the days of the first freelancing platforms (e.g. Rent-A-Coder) to a state where it's nothing short of a disaster.

Virtually every freelancer or contractor I know uses these platforms when they're starting out in order to develop a basic network of contacts and a steady (if very badly-paid) stream of contracts to build on. But as soon as you can avoid these platforms, you do. And not because of the fees, which aren't that high, but because of the disastrous support (like in this instance) and lack of protection against scamming.

So you're waiving all blame for Upwork not bothering to actually tell the freelancer that they have crossed this "you're working like a full-time employee and the law says you need to actually become one" threshold?

Because this sure feels like something that should generate a big HEY YOUR RELATIONSHIP WITH THIS CLIENT NEEDS TO CHANGE email/banner/etc.

Not "waiving all blame", just attempting an accurate diagnosis of what's obviously Upwork's fault (bad communication), and what's the root cause of the disruption in Wallace's earning capability (laws which essentially force Upwork to suppress an otherwise-desirable contractee-contractor relationship).

I’m surprised Upwork didn’t spell this out for the freelancer from the beginning.

I was in a similar situation with a company in LA, and my contracting company alerted me to it, and helped me transition to full time employee status with the client company, once i’d Worked enough hours with the contracting company.

> Upwork has just been clumsy in communicating

That’s a pretty big “just”

Depriving someone of what had been a key business relationship without any communication is an abject failure.

We know that Wallace is angry, and didn't get clearer info until he hunted it down, and that's certainly a failure.

But his account doesn't include a timeframe of how many days he was in this "lockout" state. (Was it a day? A week?) It's not clear if other details would have come via other channels, if not for the early warning he got from his direct backchannel-contact.

And suppose he and the buyer had reached a de-facto understanding: "we want to contract you for all your hours; please hold back your hours from other buyers to be ready to take our assignments". That's somewhat indicated by way this was quickly discovered at the moment he finished prior assignments (seemingly from the same buyer), and the buyer tried to hire him for immediate followup assignments. It's exactly that kind of de-facto exclusivity, where a single employer assigns all your work, that gets you slapped by tax/employment authorities.

Were there other highly-rated, qualified freelancers the buyer could have used instead? Were there other buyers ready to contract for Wallace's services, at the same rate as he'd been getting? If either or both, then rather than primarily "depriving someone of… a key business relationship", Upwork could in fact have been ensuring enough independent-contractor relationships to keep both buyer and freelancer on the right-side-of-the-law. (It's possible placing a single gig with another freelancer, or taking a single gig from another buyer, would have been enough to prevent the lock-up.)

After all, the buyer chose Upwork as the only way they hire contractors – and explicitly rejected the option to hire or contract with Wallace directly. They wanted Upwork to ensure compliance with tax/employment-law... which may be exactly what Upwork did for their paying customer, albeit with missing, poor, or sluggish communication.

Yeah sure so what. All that rationalization is out the window if they just cut someone off like that without actually communicating those reasons.

The reason I take exception to it is that the concept of shadowbanning is deeply baked into the SV/startup culture and it's very often completely unethical. It's a pet peeve of mine.

Sure, if you're trying to stop forum spam then who cares. And I do understand that when startups were small they were incredibly vulnerable to just being overwhelmed by an avalanche of fraud. So historically, I get why there's a culture where platforms just ban or restrict people without telling them comes from.

But one thing SV has been enormously bad at is not realizing that they aren't feisty underdogs any more, they're the ruling class, and they often have tremendous economic power over people. When people depend on you for their livelihood, or for transportation or housing or similar, then you actually do owe them transparency and an explanation of what's going on.

Could they have done better? Yes. If they wanted to.

Could they have "warned" both parties of the legal regs? Yes again. None the less, I suspect this was also in the T&Cs.

Whatever the case might be, Upwork is in the matchmaker business - not the relationship business. It's not an agency. It's an escrow of sorts in a fancy wrapper. The less legal exposure - including legal "advice" about what's been happening between the service-needer and the freelancer - is probably, truth be told, what they seek to maintain. It is, after all, not their job / role to do that.

Long to short, Upwork could have done better, but so could the other two parties using Upwork.

p.s. All both sides needed to do was open an account on another "escrow" site and then split the work between the two. The escrows wouldn't know. But of course, the IRS might.

That definitely sounds like a very plausible explanation.

But Upwork still handled it very poorly. They communicated nothing to the contractor, and they told the employer that the only option whatsoever to deal with this contractor at all was to use some expensive "Wework Payroll" service.

That's ridiculous. Absolutely nothing about the situation requires that service. Essentially, Wework was taking over the relationship and then acting as his exclusive agent while making decisions that were against his interests. But you can't have it both ways like that (own the relationship while acting against the client's best interests).

They should have been upfront: "Hey, he's worked for you enough that he has to become, legally, an employee; we can't keep billing you through the Wework platform like before. [give possible workarounds]." And copy the contractor on the email.

Still a stupid law, but they could have handled it much better.

Yes, it is plausible that there is a potential regulatory issue.

Even if it is the key issue, that in no way excuses this horrible treatment, or passing it off as a mere "communication should have been clearer".

Complete, absolute failure to contact the worker using your platform in any way?!?

Nope, absolutely unacceptable.

All UpWork needed to do was to say something like "This work profile, with many projects on a single employer is passing the threshold of 1099 vs W-2 employment, and as such we cannot continue supporting this hiring/working pairing as a freelance intermediary due to regulatory issues. BTW, we have a W2 Payroll solution that you can sign up for immediately to solve this problem. More details here...".

The fact that UpWork did no such thing indicates clearly to me that they are not in fact concerned about regulatory issues, but merely using them as an excuse to upsell, while trying to lock-in their worker base by keeping them in the dark. IOW, completely unethical practice.

As a biz owner currently using freelancers on several platforms, Upwork just got crossed off my list (just as I'll never intentionally use Uber).

The time frame isn't completely explicit in Wallace's account, but the references to discovering it "this week" and spending "all day" Thursday-before-2pm getting to the bottom of it could indicate a timeframe as short as:

(1) Wednesday PM, Wallace finishes "several assignments" for this one client, marking them done in the system - and that on top of the other "dozens" of jobs he's done for them in the last few weeks, including "rush" jobs, flips his account into the "compliance concern" status which hides him from that one client.

(2) Thursday AM, friend at agency says, "hey, we can't seem to hire you for more gigs"; Wallace says, "that seems wrong, ask Upwork"; agency quickly responds, "they can't explain, ask on your end".

(3) Wallace finally reaches someone at Upwork after lunch Thursday PM, getting the unsatisfying explanation, then posting his angry tweetstorm 2:21PM Thursday/8th.

Taking a day or two to explain an exceptional situation, or perhaps a situation that's part of a brand-new policy adopted under legal pressure, is not necessarily an awful failure.

We don't really know if there might have been other explanations that would have come a few hours later, or that he missed somehow.

It's even possible the status of his account was some short-term temporary "gray out" status, that nudges freelancers/buyers to diversify their counterparties, and that this gray-out status almost always results in a "cure" quickly with no explicit communication required.

I would prefer explicit transparency in such situations... but could also understand why the company might be a little coy about directly coaching freelancers. (If they get that coaching even just a little wrong, according to some later interpretation of the contractor rules, it could wind up being used as additional evidence against them.)

If they are anything but completely stupid (admittedly, not unheard-of for startup jockeys), they have competent legal counsel, who can explicitly draw the boundaries for them and write the appropriate notices.

Relying on some kind of quasi-plausible timing/delay issue, as does the parent comment, it's even less of an excuse.

The more I see, the more clear it is that Upwork are

If they were going to give proper notice of what they were doing, they should have done so simultaneously with shutting off service. If not, they're also wrong.

It really has narrowed down to two choices:

1) Upwork are completely incompetent to even perform their primary functions

2) Upwork are playing a very unethical game.

Either way, they are not qualified to operate their business, and shouldn't be hired from either side.

The contractor/employee "boundaries" are somewhat fuzzy, and subject to later (re-)interpretation. You might think you're safe, but then lose a regulatory/court case later! They might have to look at things case-by-case once a certain risk threshold is met.

As far as we can tell, he learned the details from Upwork within 12-48 hours of when the issue was discovered. That's not so bad!

He wasn't prevented from appearing to other buyers during that period – just the single buyer with whom repeated jobs jeopardized his independent contractor status.

Tempest in a teapot. Wallace's anger at the communication is legitimate, but he's likely misinterpreting the root causes, and the downstream demonization of Upwork is out-of-proportion with the particulars.

Much irrelevant hand-waving.

Legal issues are always somewhat 'fuzzy' and subject to judgement -- it's why we have judges. And this is not that fuzzy, the IRS has published clear standards for decades and it's well litigated. Nothing about that prevents a company from defining the boundaries of it's behavior and communicating clearly & behaving ethically.

Timing is utterly irrelevant here. The ONLY reason he found out is that he had the good luck to have a well-placed friend who could see the issue AND had a communication side-channel. Absent that luck, he'd be permanently screwed.

We've got no data on what other customers were able to buy or not, and it is also irrelevant -- particularly for a contractor primarily occupied with a single buyer, who would not have tuned his marketing to the broader market, and due to Upwork's unethical behavior would have no notice that he needed to.

"...in a teapot"? BS! A scaled business like this is a large system, and this is an example of how the system works, and limits the range of possible root causes.

In Upwork's case, it is either one of two things.

1) A sloppy mess of incompetence and make-it-up-as-you-go-along supported by ill-invested venture funds. Or,

2) A management that has specifically decided to implement a system of unethical behaviors in hopes of extracting higher profits regardless of the cost to it's users.

Either way, they are either unqualified to be in biz, or unqualified for anyone to do biz with.

I'm left wondering why you are such an eager and persistent apologist for this behavior, grasping any straw to excuse it . . .

I'd buy this hook-line-and-sinker (especially since I've lived it as a developer) except for the fact that the author stated they hadn't even been contracted 2 months yet when this issue came up.

There's no way in even 2 whole months that this would trigger any sort of action, as far as I am aware.

Then Upwork need to communicate that. And not in a "we will call you privately" manner, but:

- Making a public statement regarding specific case with Michael. Especially why they decided to go behind his back to communicate with his agency.

- Making a public disclosure of reasons they acted so ignorantly toward freelancer.

People could and will leave Upwork if they're going to keep this absurdly behavior.

The only thing that spread faster than California fire is public opinion in a Twitter age.

Have you read the whole thread? According to MW Upwork even said they have no real limit it's just guesswork and apparently the laws also don't have any tangible limits (bu t that's not really an argument, I agree).

"Clumsy"

That's bull in a China shop levels of clumsy. And that's the best case

I concur. Some companies (look at ridesharing) have been fast and loose with these rules. Others go stricter towards both the spirit and letter of the law. And may times companies go through agencies (and Upwork) to avoid converting people. This isn’t a commentary of the justness of the laws - just that they exist. (The urban legend is they were founded over a MSFT janitor losing out on an IPO windfall.)

In this case, I suspect the client is aware of the constraints which is why they insist on having a middleman.

There are two sides to the morality of this, but I’m not sure Upwork is guilty of anything other than crappy communication. (All staffing agencies profit on the conversion)

OK, but explain why they didn't tell the freelancer this?

They did – just not as fast or as clearly as they ideally would have.

See my other post on the vagueness of Wallace's time-frame: he might have even gotten the answer less than 24 hours after his account entered this "no more work with this client" status.

I'd share his frustration that it wasn't instant and automatic at the moment he was "shadow-blocked" from his primary buyer's interface, but I also understand that legal-compliance exceptions sometimes take a day (or a few!) to be fully investigated/explained/etc. Maybe there's a human-in-the-loop at Upwork who does a case-by-case review, when an bilateral-relationship hits these might-be-an-employee danger-triggers – and his rapid discovery, same-day inquiry, and rant outraced another process.

That would be absolutely illegal. The guy is a company, there is absolutely no regulatory requirements to convert companies into full time employees. Most of that comes from lawsuit fears not regulatory action.

I didn't see anything in the tweetstorm indicating that Mr. Wallace has incorporated. Do you have a link to where you got that impression?

(If Mr. Wallace has his own corporation, that might provide some extra cover, but that also might be a rare/expensive enough situation that even Upwork can't pay Wallace Inc., but has to pay Wallace-individual. In fact, there's an answer at Upwork's support forum suggesting that a corporation can't sign up as a freelancer: https://community.upwork.com/t5/Freelancers/Company-account/...)

Then why didn't they "just" say so when pressed multiple times about it?

They ultimately did, and it seems like it may not have taken more than a day or half-day for him to get his (ultimately unsatisfying) answer.

Sometimes handling exceptional situations takes a day!

If many Upworkers are hitting this, then more automation and coverage in public FAQs would be appropriate. But if very few are, or it's a new policy that's fluid and involves case-by-case review, then maybe a day or two clarity is fine for now, even though it caused anger in this one case.

Wallace wasn't blocked from all work: just that one buyer, where Upwork's expertise – expertise that Upwork's customers are paying for, to cover their legal risks – flagged a potential "contractor rules" compliance problem.

I didn't see anything in the tweetstorm indicating that this only took a day for Mr. Wallace. Do you have a link to where you got that impression?

Its the same in Germany. In a misguided attempt to protect workers, they made life much more difficult for freelancers. Some say this was intentionally done to reduce the number of freelancers, because those are not forced to participate in the social systems, which is financially advantageous.

You come from wrong end with the 'misguided' assumption.

There is loads more people who fear loosing their job than entrepreneurial freelancers. There is load more minimal wage workers which would be abused.

I totally agree that a certain sector of workers needs more protection, not less. But if they really wanted to protect the working poor, they would stop labor leasing and raise the minimum wage. That this goes on as it is currently is outrageous.