The revelation that McGraw Hill (MH), a multibillion-dollar educational publishing company, has begun charging its freelancers and independent contractors a fee in order to get paid has prompted a wave of public outrage, along with a letter from advocacy groups demanding that the company end the practice. The company’s response: No.
Two weeks ago, In These Times reported on the existence of the 2.2% fee that the company began charging last October. The fee applies to freelancers and independent contractors who submit invoices through the company’s invoicing system, called Fieldglass?—?but because that is the only way to invoice the company, it amounts to a mandatory fee that workers must pay in order to get what the company owes. The company calls it an ?“administrative fee” levied in order 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.” But it is, in effect, an across-the-board mandatory pay cut for all of the workers, a brazen and unusual move by the company to shift its normal administrative costs onto the backs of its freelancers.
The story caused an uproar among the wider community of people who do freelance editorial work for a living. On social media, the fee was referred to as ?“incredible,” ?“utter crap,” and ?“bullshit.” The existence of the fee, which was not widely known, even caused mortification inside McGraw Hill itself. ?“The fee is an embarrassment. We’ve always been good to our freelancers so I was very surprised to learn we’d be charging a fee to process their invoices. Taking a cut from their pay is petty and makes us look bad,” said one MH employee, who asked to remain anonymous out of fear over professional repercussions. ?“I really hope the company reconsiders and rolls back this policy. The invoicing system is already a pain to use.”
On March 30, representatives of more than a dozen groups representing editorial and freelance workers, including the National Writers Union, Freelancers Union and the Authors Guild, sent a letter to the company demanding ?“that you immediately cease this inequitable practice that amounts to a wage cut at an unprecedented time… and reimburse all freelancers who have already been charged this outrageous fee.” The letter called the practice ?“shocking,” and noted that MH’s digital revenue has been growing even as the company shifted costs onto its freelance work force.
The company was unmoved. David Stafford, the SVP and general counsel of MH, sent a reply letter on April 1 saying that ?“The 2.2% fee offsets the incremental costs we now incur to ensure proper labor force classification. We communicated the fee in advance to our independent contractors and they agreed to pay it.”
The letter also includes a common rationalization used by ?“gig economy” companies that seek to lower labor costs by using more freelancers and fewer full time employees: ?“Many of the independent contractors we engage already have full-time jobs and the work they do for us provides them with additional income. The rate of independent contractors returning to do work with us is very high and during the pandemic, the percentage of independent contractors who had more than one project with us increased. The high return rate implies satisfaction among the independent contractors who work with us.” This is an example of the gig economy’s underlying sleight of hand?—?to force workers to take up more and more freelance work out of economic necessity, and then use the fact that they are doing that work as proof that they’re satisfied with the arrangement.
The groups that sent the complaint letter are unsatisfied. Mary Rasenberger, the CEO of the Authors Guild, said that the fee itself is ?“exploitative, and an outrage,” and that it sets a ?“dangerous precedent.” Rafael Espinal, the head of the Freelancers Union, called the company’s response ?“tone-deaf.”
“The simple fact that freelancers have agreed to these terms is not evidence that they are happy with the system, it’s proof that they feel they have no recourse when presented with usurious terms such as this,” Espinal said. ?“It is a matter of course that corporations bear the administrative and payroll costs associated with their employees. There is absolutely no reason they should not bear the same responsibility when hiring freelancers.”
Advocates are unanimous in rejecting the company’s assertion that charging a fee in order to get paid is either standard or defensible. ?“In no way is this a common or justified business practice,” said Larry Bleiberg, the president of the Society of American Travel Writers and a signatory of the letter. ?“It’s a scheme dreamed up by his company to squeeze out extra revenue. I’m just disappointed that a publisher that claims to support writers, photographers and graphic artists?—?and profits from their work?—?would so shamelessly try to take advantage of them.”
The company appears to have made the calculation that the revenue it takes in by charging freelancers in order to get paid is worth the bad publicity it has received thus far. There is serious money at stake for both sides. Were it to become common, the practice of shifting administrative costs away from employers and onto freelancers would constitute a permanent decline in wages for independent contractors?—?another incremental step downward for workers in an era when full-time employment is becoming harder and harder to find. The National Writers Union, which represents freelance writers, is actively seeking MH freelancers who have been charged the fee, in order to organize them to fight the practice.
“I understand being hesitant to reach out,” said NWU president Larry Goldbetter, ?“but they can make all the difference here.”
About the Author: Hamilton Nolan is a labor reporter for In These Times. He has spent the past decade writing about labor and politics for Gawker, Splinter, The Guardian, and elsewhere.