How Employers Can Legally Strip Your Job Of Benefits

Last week, the entire editorial staff of Out magazine, the most-read gay monthly in the U.S., was laid off. They were told to finish up the week, pack up their desks, walk away with a month's severance, and then wait for a call. Some would be rehired at the magazine, as part of an outsourced operation, but as freelancers -- without benefits and probably with a salary cut.

"Everyone was stunned," said one of the laid-off employees, who would only speak anonymously, since his severance is at stake. It was so sudden, he said, that many of the staffers will have to accept the offer to work at this new company, Grand Editorial, even if they don't want to. A month isn't a whole lot of time to find a new job.

Out is an especially dramatic example of a larger trend throughout America. While many think of outsourcing as American companies shedding workers and replacing them with low-cost temps abroad, employers are increasingly outsourcing at home. Across many industries, American companies have been laying off employees and then rehiring them as "independent contractors" to do pretty much the same job.

Big Pharma, under pressure to cut costs, was a pioneer in this less-than-noble trend. Merck, one of the largest pharmaceutical companies in the world, for instance, sold a Philadelphia factory in 2008, and then contracted with the company that bought it to continue making antibiotics for them with the exact same 400 employees. In 2009, the Arizona PR firm LP&G fired 88 percent of its staff, and then rehired them as freelancers, allowing them to take their desks and computers on the way out.

Out's editor-in-chief, Aaron Hicklin, who will preside over Grand Editorial, admits the outsourcing will cut costs, but he argues that it's also in the workers' best interests. They'll find it more fulfilling, he says, to work out of a more intimate "creative lab space" in Brooklyn, where they'll be "partners as opposed to being employees."

As freelancers, Out's staff will be able to make their own hours, work from home, take on different projects, and get rewards for bringing in clients. One day, he says, they might even get a profit share. The team will be more "nimble" with more time to "play." More of "a team" and more "autonomous" at the same time.

"It's finding ways to motivate good people to do good things," Hicklin explains, "as opposed to pouring cement into a template."

"The way that they're spinning it as a positive is such a joke," said a laid-off employee.

Perfectly Legal Way To Cut Costs

Freelancers don't get that glittering array of labor protections that workers have enjoyed since the New Deal and the civil rights era. No health and unemployment insurance. No pensions. You can be denied work because you're black, or a woman, or Buddhist, with no recourse.

Firing full-time employees and rehiring them as freelancers is completely legal, as long as the person's job description changes enough. There is no hard and fast rule for what defines a freelancer versus an employee; the Department of Labor judges it on a case-by-case basis. Usually if a business depends significantly on the freelancer's work over a long period of time, that person is strolling into employee territory.

In the media world, that line is often blurred. MTV's army of freelancers are often dubbed "permalancers," because they've been working for the company full-time for so long. At last count, a third of U.S. workers were freelancers. It's a shift in the job market as seismic as the Industrial Revolution, according to Sara Horowitz, the founder of the Freelancers Union.


We Need A New, New Deal

Hicklin does regret that everyone will be losing their benefits, including himself. "I hope that will change very soon," he said. "It's not me trying to screw people, it's me trying to be realistic about a small company. "

He hopes his employees will be able to find coverage. Hicklin is British, and "horrified" that we "live in a country where Obama couldn't pass universal healthcare."

Freelancers also have minimal protections when they don't get paid. Last year, 44 percent had trouble collecting the money that they were owed, according to a survey by the Freelancer's Union. The 135,000-member organization even launched a campaign last week on Twitter for the "stiffed" to speak out.

"Client handed me a blank (unsigned) check -- then a MSKCC baseball cap -- said 'Chicks did it.' #GetPaidNotPlayed"

"I once assumed a millionaire wouldn't stiff us on a $250 invoice. I was wrong. #GetPaidNotPlayed"

Out doesn't have the cleanest slate when it comes to paying its contractors. In April 2010, a photo production company wrote a letter to Hicklin, saying that it's "been quite patient with regard to Out's financial difficulties," but it really needed the $35,000 it was owed. Here Media's group publisher Joe Laundry declined to comment on such allegations, but he said Out is profitable.


Shaky Finances Behind The Decision?

Like many media companies, though, Here Media was badly battered by the recession. Since 2009, Here Media has shuttered four magazines and took The Advocate, the country's oldest continuously running lesbian, gay, bisexual and transgender magazine, off newsstands, and turned it into a supplement for Out, it's trendier and less angry younger sister. The company made its publishing house, Alyson Books, e-book only, leaving 12 authors under contract in a lurch. It slashed its workforce by almost a quarter and closed down some offices.

PlanetOut, the company which originally owned Out, The Advocate, and a bunch of other titles, was the first all-queer company on the stock exchange in 2000. At the end of 2004, it was trading at $136 a share. In 2009, it merged with Here Media, and dropped out of NASDAQ with a departing share value of 38 cents.

Here Media hasn't handled these struggles particularly gracefully. In 2010, it threatened to sue a former editor for writing negative things about the company on Facebook. Last year, it filed a lawsuit against a blog that was covering its financial tailspin for "intentional interference with contractual relations" and "prospective advantage," and then dropped it.


Starting Fresh

And it's bilked some of its vendors. A writer claimed that a year later he was still owed $175. A freelance photographer for The Advocate sued Here Media in 2010, after he wasn't paid for more than nine months. Xerox sued that same year; PlanetOut leased a bunch of its equipment, failed to pay up for four years, and owed $290,000, plus interest.

Is Moving Out's operations to a separate company a way to rebuild some burned bridges? Hicklin, a well-respected editor and charming voice of the gay community, denies that. But he did say that the new arrangement would give him "more ownership over the production, in the way we allocate our own resources."

The era when everyone clocks in at 9 a.m. for 40 years at the same company, and then retires with a full pension, is already long gone. Many members of the "creative class" prefer to do their work on their own schedule, with one hand prepping a baby's bottle, or nursing a Starbucks latte. Others, like the staff of Out, find that they suddenly don't have a choice. Some find this brave new world liberating. For others, it's terrifying.

"I've never been in a position where I've been laid off from a job," said Hicklin, "or been in a position when an entire department's laid off. That experience can be traumatic, I'm not trying to mitigate that. But I think it's something that will be fulfilling in the long run."

"But is it about taking control of Out's finances from Here?" we asked, one last time. "It's about taking control of my destiny," Hicklin replied. "Doesn't everyone want to do that?"



Don't Miss: Companies Hiring Now



More From AOL Jobs


Scott Adkins on Freelancing

Add a Comment

*0 / 3000 Character Maximum

28 Comments

Filter by:
apelseed29

I have been a reader of "OUt" since it was a newspaper published in San Francisco. It evolved into a "Magazine" format with very few pages, but I stayed with it for sentimental reasons. However, now I can let go of it, and say "Goodbye" without remorse.

April 29 2012 at 11:06 PM Report abuse rate up rate down Reply
nluvwlif0344

I agree with you, mirthfullly. November is just around the corner!

April 27 2012 at 8:05 PM Report abuse rate up rate down Reply
mirthfully

Since Congress is supposed to be working for us, sounds like we can legally cut their benefits and those of anyone else on the government payroll. Anyone agree with me on this?

April 27 2012 at 7:56 PM Report abuse rate up rate down Reply
Keppler

Truth be told, while "Out" may be the most-read gay magazine, content-wise it is decidedly third rate. I will not have any trouble doing without it.

April 27 2012 at 7:36 PM Report abuse rate up rate down Reply
1 reply to Keppler's comment
nluvwlif0344

That is the ultimate "gotcha." We still have the power!

April 27 2012 at 8:06 PM Report abuse rate up rate down Reply
MR. STOVALL

Why is it that gasoline will go up and down to the consumer, same with food at the grocery but any kind of insurance cost goes up and stays up and getting higher? This ain't Obama's fault folks, just remember what a tremendous pile of s*** ol' "W" left for Obama to deal with. The Bush family made millions in the oil business. Lastly just yesterday I received a pamphlet in the mail from Global Pharmacy in Canada and OMG what an ungodly tremendous amount of savings on generic drugs from Canada vs. what they cost us here in the U.S. Depending on which prescription you have it varies from a minimum of 40% to 90% savings!!!!!!!!!!

April 27 2012 at 6:48 PM Report abuse rate up rate down Reply
David

This is exactly why everybody needs a union to stand up to these mighty than thou biggots! At least with a union, you have someone to go to bat for you. But the younger generation seems to think that everything is going to be just hunky dory, with the corporations, large and in charge. Wake up people, and get a grip.

April 27 2012 at 4:36 PM Report abuse rate up rate down Reply
Sterling

this is wrong ,wrong ,wrong. They did this at wifes company. It's chinese owned and they make no quallm about telling you this because thats how they ran it. She was making the best money in her life in an upper-middle management position. One day they laid off the entire wharehouse then then told them they could come back to work through there new temp agency. Half didn't come back because now there was no health insurance. If I knew of a company doing this,I personally wouldn't shop there products. Stop useing your credit cards and pay in cash america banks are not your friend

April 27 2012 at 4:15 PM Report abuse +2 rate up rate down Reply
jay love

I am not going to say its funny....maybe ironic that this happened to a gay themed company which I assume espouts very liberal agendas? I bet all those writers, probably gay writers, are not getting that warm and fuzzy feeling from their liberal magazine now??

April 27 2012 at 3:57 PM Report abuse -2 rate up rate down Reply
freeetob

Oh yeah, I still remember IBM's (Ive Been Moved) slogan of the '50's--"You Be Good to the Company and The Company Will Be Good to You. It was a lie then and a damned lie now.

April 27 2012 at 3:09 PM Report abuse +3 rate up rate down Reply
cpenrod

Couldn't have happend to a more derserving (gay magazine) entity. Let them bleed purple alligator p--s.

April 27 2012 at 2:34 PM Report abuse -2 rate up rate down Reply

Search Articles

Top Companies Hiring

Week of July 27 - Aug 3
View All

Picks From the Web