IRS “Safe Harbor” Allowing Tax Cheating and Wage Theft

Contact Workers at the Smithsonian protest in 2013

Contact Workers at the Smithsonian protest in 2013

New Orleans          It’s not news that wage theft and the problems of mis-classification of workers as independent subcontractors is rampant.  What I had not realized is how much of it was allowed directly by Congress and lax enforcement by the IRS.  You think you know the whole score, but it was not until I was reading the tail end of a story developed as part of a longer series by McClatchy news service’s Washington Bureau that I got a better handle on how easy it has been for employers to get away with this mischief.

The story’s slant was the IRS and tax cheats, rather than workers and wage theft, but it adds up to about the same thing, just double trouble.  McClatchy probably just figured the article would attract more readers if it was slanted towards tax scofflaws, rather that workers being ripped off yet again.  Just keep in mind that when workers are misclassified not only does the government not collect the state and federal withholding taxes, but the worker also doesn’t have Social Security paid on her hours or unemployment insurance and workers’ compensation paid in their behalf.   The tax cheating may be the government’s problem on the short run and worth billions, but the inability to retire with qualified hours worked, have a safety net during unemployment, or support when injured, hurts workers today, and puts them at the will and whim of the government both now and later as well, letting the corporations walk, whistling a happy tune all the way.

Interviewing Kim Bobo, executive director of Interfaith Worker Justice on Wade’s World, she had a simple definition that is easy to remember for whether or not a worker is truly an independent contractor.  You just ask, “Do you work for yourself or someone else?”  If they answer “yes,” to the first, then they are, and if “no,” then they aren’t.  That’s a bright line test.

It turns out though that during the Carter Administration and the recession then, Congress passed a law in reaction to a lot of business complaints that the IRS was hounding them to pay taxes on their workers which gave them “safe harbor” with a rule officially known as Section 530 of the Revenue Act of 1978.  Technically this was supposed to be a one-year temporary kind of deal allowing a company that had messed up and “misclassified” its workers as independent contractors to get its act straight and fly right.  Instead the loophole in the words of the McClatchy reporters has meant,

“Every year, billions of tax dollars are squandered in the United States because of a decades old loophole in federal law that allows tens of thousands of businesses to do the wrong thing – simply because they have been doing it all along…Under the safe harbor rule, the company just has to have a ‘reasonable basis’ for doing so.  Generally, companies must just show they’ve been doing it continually and that others in that industry do it the same way.”

So, the double bind is that the IRS has not enforced the section and neither has the Department of Labor.  The companies skate.  The workers are screwed.

We watched the movie, “Nightcrawler,” the other night where a fellow desperate for a job was offered an internship by the psycho and negotiated first $30 for a night’s work and then $75 for a raise, and essentially got a death sentence for then asking for even more for dangerous work.  This movie of amorality ends with three young people, now “interns” jumping into vans to work for this so-called “news” gathering service.  You might say, hey, but that’s in the movies, dude.   Unfortunately, similar scenes, perhaps less exotic and appealing, are duplicated for millions of workers in thousands of companies every day.  Come on, man!

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Progress on Payday Lending and the Digital Divide in Canada

10872772_10205576017666745_904929552335494071_oChicago     Like clockwork the ACORN Canada staff continues the tradition of mid-December YE/YB or Year End / Year Begin meetings.  Getting snowbound in Montreal one year and caught again another year in Niagara Falls, convinced them that perhaps meeting in the USA made sense, given that plane fares was actually cheaper.  Several years ago we managed to meet in Miami on the coldest day ever for that time of year.  The other advantage of such locations has been the opportunity to meet with organizations on the US-side and compare notes, pick up tips, and generally keep current in the work.  This year found the crew in mid-20 degree temps in Chicago.  Meetings with Kim Bobo, Executive Director of Interfaith Workers’ Justice, Lawrence Benito, the ED of Illinois Refugee and Immigrant Rights Coalition, one of the leaders in the fight for immigration reform, and Ed Shurna, executive director of the unique and activist Chicago Coalition of the Homeless should add spice to the meetings as well.

Listening throughout the day to the reports from the offices, it was clear 2014 had been another banner year for ACORN Canada.  Almost 7000 members of their 70,000 were full payers on bank drafts giving the organization almost $200,000 of steady dues income to power the program.  The likelihood of a federal election next year also provided a fertile field for discussion about how ACORN can bundle our issues and leverage the campaign.  I may not have been in the United Kingdom but it sounded like the same discussion!

Perhaps the most interesting measures of progress were found in listening to the reports from the offices where solid work on both local and national issues was yielding big wins.

Scott Nunn, reporting from British Columbia, detailed a breakthrough in a new, locally-based strategy to stem the advance of predatory payday lending operations.  After preliminary discussions the city council in Surrey passed a zoning restriction pushing such stores away and limiting the numbers possible in our neighborhoods almost preempting our campaign.  We are also engaged heavily in this fight in neighboring Burnaby, so they could be the next city to fall.

Shay Enxuga surprised everyone with a report from Nova Scotia, the newest ACORN Canada outpost, with details on discussions and negotiations with cable internet provider, Eastlink, who seem ready to not only implement our $10 internet access plan, but to extend the program outside of public housing to the general neighborhoods.

The likely April consideration of the internet access by the federal commission could find itself under real pressure by the Rogers telecom plan for access we had won earlier in Toronto and now the Eastlink breakthrough.  Telus had seemed to be moving in British Columbia, but has stalled.  ACORN Canada may see an opportunity to expand the fight for the internet to be regulated as a public utility in the north as well?

Ottawa continued to win the staff awards for activity and took the prize after spirited competition.  Toronto is leading with more work on an exciting initiative to increase the living wage.  The coming convention in June in Montreal should see ACORN Canada expanding the organization there in 2014 and meeting hundreds coming to make decisions for the organization.

I hated to have to leave the meeting early.  There’s great work happening in the north!

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The AFL-CIO Continues to Step Forward with “New Labor”

New uale logo Orleans John Hiatt, now the AFL-CIO chief of staff under Richard Trumka, and previously general counsel under John Sweeney, was the lead speaker on an early morning plenary before the United Association of Labor Educators (UALE) meeting in New Orleans on the topic of “Building a New Labor Movement for a New Economy.”  He and his co-panelists who included Kent Wong from the UCLA Labor Center as well as a leader of the Domestic Workers Alliance and a lawyer with an interesting bi-national (Mexico/USA) legal project with migrants offered some refreshing perspectives not heard every day in your usual labor oriented gathering.

John and I go back almost 40 years now to common ties with welfare rights even before ACORN and to his several weeks in Little Rock one summer helping organize unemployed workers with ACORN around 1972 or so.  It’s sometimes a rocky road but given his last 15 years as an erstwhile and sometimes controversial keeper of the keys in the “house of labor,” I see these kinds of initiatives among “informal” workers as a kind of “values” statement for John and his inside advocacy within the corridors of labor power that help justify some of the more contentious weight he has carried in various disputes.  His personal crusade as general counsel for immigration reform was one such touchstone, as well as his merging of labor law and labor organizing strategies with his efforts to support the organizing of carwashers in Los Angeles as an affiliate of the Steelworkers is another.  Not all of these efforts have worked out well, and who despite the steps forward labor made in the 2009-10 campaign for immigration reform, it’s a mixed bag as well and a conundrum still unresolved.

Nonetheless there is no questioning the sincerity with which the AFL-CIO has adopted some of the “newer” forms of organizing under a bigger tent philosophy particularly with new organizing experiments among informal workers including day laborers, domestic workers, and others.  The AFL-CIO has formally taken steps which would have been unheard of 20 years ago to come to agreement with organizations representing these groups like NDLON (the National Day Laborers’ Organizing Network), Enlace (a multi-national membership based organization of where Local 100 and ACORN International have been charter members), and the Domestic Workers Alliance, which recently won breakthrough labor standards protection in New York State and seems to have new campaigns in California and others pending in the next year in Colorado, Maryland, and Massachusetts.  They have also signed agreements with the Interfaith Worker Justice, a labor/religious support organization based in Chicago and headed by our friend, Kim Bobo, and John mentioned that the Restaurant Opportunities Council (ROC) in New York and elsewhere may be moving towards a form of affiliation as well.

I have argued in Citizen Wealth and in a coming essay in Social Policy (The Maharashtra Model v.41#1) that the future of the labor movement lies not only in the USA , but worldwide in our effectively organizing what one speaker called “excluded” workers and what I call “informal” workers.  These steps by the AFL-CIO are encouraging in that sense though they are largely symbolic unfortunately.  They are signals and placeholders of change and openness without being taken seriously as “real organizing.’  These efforts by and large are not backed by resources and organizers, but by favors and suasion or the leverage of “powerful pockets” as the DWA leader argued.  All of this that is part of a successful organizing plan and what has been proven to create victories, but that’s a lot more than a piece of paper and some good dialogue.

Saying hello to John after the plenary and before my panel, I complimented him for his remarks and the AFL-CIO’s initiatives, but he quickly interrupted me with a grin, and said, “if we could only figure out how to collect dues and bring in members!”

It’s a longer conversation and a different kind of conversion experience on the way to the “new labor movement,” but as Cesar Chavez argued 40 years ago and as I say all the time, “you can’t collect dues without asking people to pay.”

This is the future, if we can just step up to get there.

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Preventing the ACORN Tragedy

Channah_gileshicago First in a session with Kim Bobo and her talented staff at Interfaith Worker Justice and then with the great immigration rights organizers, Josh Hoyt and Lawrence Benito and some of their staff at Illinois Council of Immigrant and Refugee Rights, it was only a matter of time that we stopped talking about Citizen Wealth and what was needed in the world, and each in their own way asked essentially, “How do we prevent ‘stings’ from crippling our work?” These are smart and effective organizers who understand in the wake of the devastating ACORN tragedy that there is no magic cloak protecting them from any unprincipled stingers if their organizers acquired a sudden bullseye.

Organizers are not paranoid for the most part. We know there are people and forces dedicated to our destruction.

What is so chilling for social change organizations in the lessons of ACORN’s demise is two things: (1) that no one can control or prevent how something “might seem” on the screen: the old Richard Pryor problem of the facts versus your lying eyes, and (2) any non-profit director with an ounce of sense is horrified at the “holier than now” shunning that they are still hearing from funders who are still knocking right at the door of saying that essentially “ACORN got what it deserved.”

For IWJ Kim’s nightmare is knowing that with separately constituted independent affiliates all over the country that obviously IWJ does not control, who knows if all their paperwork is in order and timely filed with every “i” dotted and “t” crossed. These are semi-volunteer operations. Kim told me a telling story of how great her board has been, and having met with her board before, I knew that was the case with major church and union leaders with deep leadership and administrative responsibility. She had me laughing at the irony of funders pretending that if ACORN’s board had just had more big names and upper class folks rather than democratically electing its own members to provide its governance, how little it would matter. She went through an array of questions that she had never been asked by her board and furthermore knew for a fact they would have been clueless about that some anti-outsider could plaster all over the news. True that!

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