Freelance workers everywhere are subjected to a wide variety of indignities and ripoffs. They are the workers who are most at the mercy of their employers’ whims, and least able to fight back. Now, into the pantheon of freelancer exploitation comes a truly jaw-dropping policy: Forcing freelancers to pay money in order to get paid.
McGraw Hill (MH) is a multibillion-dollar educational publishing company, with thousands of employees and offices around the world. Beginning in October of last year, the company instituted a new policy for all of its freelancers and independent contractors — they are now required to pay a fee of 2.2% every time they file an invoice through the company’s invoicing system, called Fieldglass. (There is no other system, meaning the fee is mandatory.) In other words, if a freelancer does $1,000 of work for MH, they will be paid only $978. The other $22 will be taken as an “administrative fee.”
In effect, the company has imposed an across-the-board wage cut on all of its freelancers and contractors, without having to come right out and say it. An email sent to all freelancers explaining the new fee offered this explanation: “McGraw Hill has chosen to align with market standards and transition to a Supplier funded model. The 2.2% Small Supplier fee included on your invoice supports labor market compliance, administrative tasks, and the Vendor Management System (VMS) associated with payment processes.”
Likewise, the company says that under its new policy, the costs of MH complying with various laws and regulations are now being offloaded onto freelancers themselves. “Since October 2020, contractors providing services to McGraw Hill have been charged a fee to cover the cost of third-party vendors that help us ensure that each contractor meets the requirements needed to be classified as an Independent Contractor under various state laws and IRS regulations,” said MH spokesperson Tyler Reed. “We need to ensure that those classifying themselves as Independent Contractors are in fact contractors, according to state and IRS guidelines, otherwise there is a legal and financial risk to McGraw Hill and to the contractor.”
State laws and IRS guidelines were around long before last October, so it is unclear why the company decided then that it was no longer able to bear the costs of compliance. Reed did not respond to that question.
The new practice of charging workers the costs associated with normal company functions does not sit well with one longtime MH freelancer, who said that it felt indistinguishable from “wage theft.”
“This will cost me a few hundred dollars over the course of this year — not the end of the world, but still, it’s a de facto pay cut,” the freelancer said, who asked to remain anonymous out of fear of reprisal. “But I can’t figure out what to do about it, except try to spread the word.”
Though the policy may be unfair, it does not violate any laws, according to the New York City Department of Consumer Affairs, and labor law experts. “It’s likely that these practices are legal. There is very little regulation of independent contractor relationships, which is precisely why many independent contractors need the rights and protections that come with being an employee,” said Laura Padin, a senior staff attorney with the National Employment Law Project. “It’s telling that McGraw Hill unilaterally imposed this fee on its freelancers. A true independent contractor would be setting or negotiating the terms and conditions of their work.”
The ability of a major company like MH to push its own costs onto its most vulnerable workers goes to the heart of the gross power imbalance inherent in the world of independent contracting. The company’s claim that its new fee is a move to “align with market standards” is dubious. Dave Hill, vice president of the National Writers Union, which represents freelance writers, said that such a mandatory fee is “certainly not the industry standard among freelancers working in media.”
Nor is it the case that every invoicing platform charges freelancers a cut of their own invoice in order to pay them. Few people can say that more definitively than Matt Saincome, a longtime freelance writer, editor, and publisher of The Hard Times and other publications, who founded the invoice company Outvoice, which specializes in paying freelancers, and does not charge them a fee. Saincome called the MH fee “horrible,” and added “This is a pay cut.”
“It’s not market standard to push admin or processing costs off on freelancers,” he said. “Employers already save money by using freelance work instead of W-2 employees. It’s shameful and wrong to ask freelancers to pay the already heavily reduced administrative costs related to working with them.”
In America, the incentive for companies to offload their own costs onto their labor force is embodied in the very fabric of labor law governing the independent contractor relationship. It is, for example, why Uber drivers pay to maintain their own vehicles. Such arrangements are tempting for employers, but never benign from the perspective of workers, who are forced to accept less for no reason other than a lack of bargaining power.
“Is this McGraw Hill’s 21st Century company store? No one should pay the boss in order to get paid,” said Larry Goldbetter, the president of the National Writers Union. “When McGraw Hill freelancers are ready, NWU will represent you and together, end this practice.”
Hamilton Nolan is a labor writer for In These Times. He has spent the past decade writing about labor and politics for Gawker, Splinter, The Guardian, and elsewhere. You can reach him at Hamilton@InTheseTimes.com.