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McGraw Hill Rejects Calls to Stop Charging Its Freelancers a Fee in Order to Get Paid

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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.”

This blog originally appeared atIn These Times on April 5, 2021. Reprinted with permission.

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.


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At a Major Education Company, Freelancers Must Now Pay a Fee In Order to Get Paid

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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.”

This blog originally appeared at In These Times on March 24, 2021. Reprinted with permission.

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.


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After Ruling That McDonald’s Can’t Pay Workers In Bank Cards, The Bank Pays Up

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AlanPyke_108x108Paying employees through prepaid debit cards that incur fees when workers try to withdraw their cash is illegal in Pennsylvania, a judge ruled Tuesday. The lawsuit targeting a McDonald’s franchisee in the eastern-central part of the state has already prompted a powerful Wall Street bank to voluntarily give money back, a lawyer for the plaintiffs told ThinkProgress on Wednesday.

The case began in 2013 after a woman named Natalie Gunshannon sued a couple who own and operate multiple McDonald’s franchises in the state. The owners, Carol and Albert Mueller, had been using payroll debit cards provided by JP Morgan Chase rather than traditional paychecks or direct deposit payroll systems. After Gunshannon filed suit, the couple began offering direct deposit and traditional checks as alternatives to the payroll cards, which had previously been workers’ only option.

Gunshannon and other workers faced a $1.50 charge every time they used an ATM to access their wages, and a $5 charge for withdrawing the money over the counter at a cash register. Where a worker who misplaced a standard paycheck would be able to get a replacement check, the JP Morgan Chase prepaid cards charged a $15 replacement fee if lost or stolen. Paying bills online with the card meant spending an additional 75 cents on bank fees, and merely checking the balance of a card triggered a $1 fee.

The Muellers’ hourly workers were charged such fees nearly 47,000 separate times from the fall of 2010 to the summer of 2014, according to an expert witness in the case. That works out to roughly 20 separate fees per person in the class over a 45-month period.

Store managers, meanwhile, were offered direct deposit forms to receive their pay without facing the card fees.

When Gunshannon’s claim gained class action status earlier this year, all 2,380 hourly workers at the Muellers’ chain were able to join the case. Each of those workers would be entitled to a $500 damages payment plus the reimbursement of all the fees they were charged by the payroll cards, should the Muellers’ appeal of Tuesday’s ruling ultimately fail. In that case, the couple would have to pay out roughly $1.2 million in damages, unless they are able to strike a settlement with the workers’ attorneys.

Because the class action decision raised the stakes so significantly, that May ruling was in some ways a bigger deal than Tuesday’s finding that the Muellers had broken the law. The class status ruling in May certainly got Chase’s attention, plaintiffs’ attorney Michael Cefalo told ThinkProgress.

“Our lawfirm became bombarded with telephone calls. All of the class members were getting a form letter from Chase saying, we have decided to refund you all of the fees you have paid Chase,” Cefalo said. “We were shocked.” The voluntary payments from Chase ranged from as little as a penny to as high as $148, the attorney said. A call to the bank’s press office about the payments was not immediately returned.

The checks do little to shield the Muellers from the potentially backbreaking damages payments mandates by Pennsylvania’s Wage Payment and Collection Law. And while the money is nice, Cefalo said, it doesn’t erase what the McDonald’s franchisees and Chase did to his clients.

“Say I come up to you and I have an armed robbery, and then I say ‘I’m sorry, here’s your money back.’ I still committed a robbery,” he said. “You still paid ‘em the wrong way.”

The Muellers’ attorneys told Law360 they intend to appeal Tuesday’s ruling. They may yet succeed in persuading a different judge that the payroll cards fit the state’s definition of legal payment. In Tuesday’s decision, Judge Thomas Burke himself acknowledged that the relevant state law was written in 1961, and the technological progress in payments technology since then may cloud the case. He also asked the state’s Department of Labor and Industry to issue a formal administrative position on whether or not payroll cards that charge user fees are equivalent to cash or checks. The agency has previously said the cards are legal payment, but only in a non-binding advisory letter, according to Law360. A call to the agency for comment was not returned.

Payroll cards such as those the Muellers used are legal in many states, despite the fees that eat into workers’ wages. A handful of state legislatures are weighing new rules to govern the use of such cards, including Pensylvania itself and Washington state. The Consumer Financial Protection Bureau is working on regulations for a wide range of different prepaid debit cards including payroll cards like those in the Mueller case. The agency has warned employers that they must make alternative forms of payment available for any worker who doesn’t want the cards, and is currently soliciting comments on a proposed federal regulation.

With millions of Americans lacking access to banking services, the cards can be an important and beneficial tool for workers so long as they come with the right safeguards, the National Consumer Law Center has argued. Close to 5 million people were paid through such cards in 2012, a number projected to double by 2017. Similar prepaid debit cards are also being used in some cases to pay public benefits such as unemployment insurance. The banks that provide the cards and charge the fees are trying to recoup some of the profit they lost when Dodd-Frank regulations curtailed their old business practices involving fees for standard debit cards.

This blog was originally posted on Think Progress on June 3, 2015. Reprinted with permission .

About the Author: The author’s name is Alan Pyke. Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.


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