How To Work as a Freelancer While Also Being an Employee [e150]

February 11, 2015

Nasir and Matt discuss working as a freelancer and what both employees and employers must know to make sure it is done correctly.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist for you, the listener. My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: Welcome. Welcome to our podcast.

MATT: Business in the news. Business news.

NASIR: Yeah.

MATT: News about businesses.

NASIR: Legally Sound Smart Business.

MATT: Well, you know, I know you hate…

NASIR: I hate a lot of things. What do I hate?

MATT: I could have stopped there and we could have filled the rest of the episode with things you hate. It’s weird. For sure a nice guy, you do hate so many things. I don’t really understand it.

NASIR: Yeah, it really should just be, “I know you hate,” and that’s it, just period.

MATT: Anything. We have to talk a little bit about Uber in this episode, but we’re not going to really focus on it.

NASIR: I think that’s, like, six weeks in a row, but that’s fine.

MATT: It’s not the focus of the episode, but it’s just the precursor to the main topic at hand. So, we saw this story this week – or I guess last week now when it comes out – about an Uber driver who makes $252,000 a year which seems pretty high for driving people around.

NASIR: A little, yeah.

MATT: What this guy does is he is a typical Uber driver – drives people around from Point A to Point B, gets paid for that – but he also has this side business where he sells his custom jewelry which – I don’t know if you took a look at it – some of it’s actually pretty expensive.

NASIR: The question is how do I get this guy to ride with so I can take a look at his jewelry to buy?

MATT: Well, he has a website.

NASIR: Oh, no, no, no, I want to buy it like everyone else – get in his car and be pitched.

MATT: An in-car purchase?

NASIR: I guess he doesn’t pitch people though, right?

MATT: Yeah. So, basically, just a little bit more on this guy, he respects the customer’s privacy if they’re on the phone or don’t want to talk, but a few times a day or however many rides he does, he will get people that are engaged to speak and then he kind of talks to them about this little side business that he has and makes them jewelry sales on the side. I have a lot of questions about this but one of them is I’m sure there are times when he just finishes a ride, has tried to close a sale, and he’s sitting there for ten minutes, hopefully the customer isn’t getting charged for that in terms of the Uber ride, but I guess he probably has the power to turn that off.

NASIR: Yeah.

MATT: So, the point here is this sort of freelancing or side project work. What Uber says is, “One of the greatest things about the Uber platform is that it offers economic opportunity for a variety of drivers – full-time, part-time, veterans, teachers, artists, and students. More than 260 cities around the world, supporting and fueling the local economy is important to Uber and our driver partners to help us achieve this goal.” So, my question is how much do you think they paid Forbes to produce this story to make this seem like they actually were these actual independent businesses and bypass this employee independent contractor issue? Because I think that’s the real thing.

NASIR: Yeah, you’re right, I agree. I think that’s a very big point you’re making because, on one hand, we already know Uber’s techniques in marketing so I wouldn’t be surprised. To be fair, there is a disclaimer at the end, I don’t know if you read that. It said disclosure, this is the author, they thanked a couple of people for the actual article, but at the end it says, “I work for Google whose Google ventures as an investor in Uber. However, I’m not involved with Google ventures and I wrote this story completely independently.” So, okay, let’s give them that benefit of the doubt. But, of course, who pitched it to them and how did this come about? But this aspect of somehow not these Uber drivers are able to do this side business and make even more money is, again, going along the same lines of them trying to sell this great business, this great side business that you can make a million dollars from driving people around in the world where, in reality, these guys are in not that great a position and they’re selling a franchise. I still think that’s the case but what do I know? I’m just an attorney. But what you mentioned – the whole independent contractor – we mentioned in the past that there is a class action lawsuit against Uber for possibly misclassifying its independent contractors – I think in a particular state, I don’t think it’s nationwide. There’s been a few similar lawsuits. But this goes too along the lines of an independent contractor status. If they are able to operate a second business pretty freely and independently, it’s more likely that they’re an independent contractor. But, as you guys may have known from me, I don’t think they’re misclassified personally. I think they’re doing other things that are not necessarily kosher.

MATT: I knew I would bait you into that long…

NASIR: The long rant.

MATT: Yeah.

NASIR: Well, like you said, I do hate, period.

MATT: Just to let you know, I did find the site. So, there’s one necklace on there, it’s $9,800 – just under $10,000.

NASIR: How many Uber rides do I get with that though?

MATT: I don’t know. That’s a good question. He’s got a ring for $4,800. I don’t know. Anyways, I can’t find the exact numbers, but he made significantly more in his jewelry selling business than he did actually driving. I mean, the predominant business is his jewelry one and the Uber is more of a side business, but he wouldn’t have one without the other so it’s interesting. But the whole point I want to get to this was the idea of freelancing in general. I know we’ve been big advocates of finding people to do side projects if we need something done.

NASIR: Yeah. No, absolutely. Freelancing and independent contractors and working virtually and remotely. I mean, this is a great time for that kind of development. But what if one of your employees wants to do that? That’s the real question.

MATT: Exactly, that’s what we’re getting to here. If you’re an employee and you’re working your typical 40 hours a week, full-time, can you then go do other jobs or moonlight or whatever you want to do or side projects in your spare time? It deals with a couple of things. If it’s going to interfere with your main job, you know, you’re not going to be able to do that. I guess it all depends on what their employment agreement says. But, typically, if it’s affecting their main job – like Michael Scott when he was doing his…

NASIR: Telemarketing.

MATT: Telemarketing thing and he was falling asleep and all stuff like that, that’s a perfect example so that’s an issue. Another big thing – and this should all just be obvious things – is, if it competes with your current employer, then that’s another issue as well. You know, people might kind of say, “Oh, this definitely isn’t competing,” but I think there’s more times than people realize that the work they’re actually doing is competing with their main employer and they don’t realize that right away.

NASIR: Yeah, those are some interesting points because, in most states, whether you have a contract or not, there’s a duty of loyalty to your employer that isn’t quite the same as a non-compete but, at the same time, like, if one hand you’re working for an employer and then they go to another firm at the same time and you’re kind of sharing secrets or whatever – even without any kind of confidentiality policy – that may be of an issue. But the question is can you prohibit other employees from working outside of the office for other things? Yeah. I mean, you can have in a contract an agreement to do that. Can you add a non-compete provision? Yeah. During the employment, in pretty much every state that I know if, you can have a non-compete provision in there. The non-compete issue always becomes an issue post-employment because the public policy is that we want to be able to have people to have the ability to earn a living and non-competes may interfere with that. So, in general, an employer can prohibit them from doing other things outside. But I do want to add a caveat that there is some limitations and it can be very, very subtle and I’m reluctant to even just mention this because it may complex things a little bit more, but there is a law, for example, in California and in a few other states that prohibits discrimination against any employees for lawful activity outside the work time. So, this law, particularly in California, has been narrowed and construed to not give an additional right that hasn’t been laid out before. But I’m only mentioning it because that law still hasn’t been parsed out in too much detail and there could be slight argument that, when someone’s doing some freelance work and so long as it doesn’t interfere with your business whether you can prohibit them from doing so is somewhat murky. But, I think, if you were to make a decision, so long as you consult an attorney first, you’d probably be safe.

MATT: Well, yeah, let’s flip this to the employer’s perspective. You know, if you have an employee coming to you, assuming they’re going to come to you and ask about it.

NASIR: Which they should, yeah.

MATT: Which we’d hope they should. To me, if I’m the employer, I’m going to look at, you know, what’s the reason that they want this second job? Most likely, it’s because they’re in a tight situation with money, you would think.

NASIR: I think a lot of reasons too is people are looking for something bigger and better in the sense that they may not see a long-term future in what they’re doing currently and maybe see something else somewhere else. Maybe they have a garage band or something, you know.

MATT: Well, it depends on the nature of what they’re doing. But, as the employer, you have to evaluate that and see the reason behind it and you’ve got to let them know that it can’t affect their work – not just in obviously showing up to your normal work hours – that’s a given – but, you know, you can’t let late hours on another job, you show up to work and you’re tired or even if it’s ten minutes a day, you’re doing some work for this side project you’re doing while you’re on the clock with your main employer, that’s obviously not going to cut it.

NASIR: No, quality, of course, and I wouldn’t want an employee that’s working full-time doing other things because, in general, I think most people, I mean, I work more than 40 hours a week – definitely – and I think most people can work more than 40 hours a week and be functioning. But, if I’m paying an employee, I want those 40 hours to be the best 40 hours of the week and, if they’re spreading their time, then it’s not going to be, from my humble opinion. So, from an employer’s perspective, I’d be cautious. But I can see, I mean, it kind of depends upon, like you said, it depends upon what the job is. You know, I mean, if they’re answering phones, they just need to be very lively.

MATT: There’s a difference between being good at one job or being mediocre or average at two different things and I feel like that’s what you might get into at times if you’re not allocating your full efforts towards one instead of splitting things up amongst two. Even if you think you’re doing well, I think the main job is going to suffer – at least a little bit – maybe not.

NASIR: Yeah.

MATT: You work more than 40 hours a week so it’s probably 240 hours a week.

NASIR: Oh, no, it’s like 41 – that’s what I meant by that. I work one hour on Saturday or on Sunday because I start thinking about what I’m going to be doing that week and it takes me about an hour so 41.

MATT: There you go.

NASIR: All right. You really baited me on that Uber topic.

MATT: I really do think this is all a ploy by Uber to make it look more favorable for them. Obviously, we’ve talked about it a bunch. There’s this big lawsuit that’s going on with Uber in terms of whether their drivers are employees or not.

NASIR: Yeah. On their website, it talks about how much an average or the median Uber driver made. It was, like, $90,000 for a year but that was for, like, New York City – no, I think it was even more than that, frankly, but nonetheless, it was pretty high up there.

MATT: Yeah.

NASIR: Where is this driver? I don’t even know if he’s in New York, but it just makes me laugh that, okay, he made $252,000 a year. How much do you really think he made from Uber? It’s a great idea because, if you have a cool product that you can expose customers to, you’re not going to be able to get that attention from anybody else. They’re calling you for a ride and just have a little advertisement in your car for it and they ask you about it. It’s an easy sale. If you have, like, a high-dollar item like this jewelry, who cares if you’re even being paid for the Uber drive?

MATT: You asked the question and I finally found it. He only makes $3,000 a month gross with Uber so it’s $18,000 a month in those jewelry transactions. Uber is his main job because he’s getting the customers through there. But, in terms of what’s really the meat in what he’s doing is selling the jewelry.

NASIR: You know, that’s the real story here. He makes $36,000 a year and, if he wasn’t selling jewelry, would he even be able to meet minimum wage if this was full-time for him? I should say more than full-time because, I mean, even just waiting and then, because you also keep in mind the cost on the car, the gas, you know how expensive gas is these days.

MATT: Well, that’s the thing. That’s $3,000 gross. So, you have gas which driving around.

NASIR: I think you missed my joke because gas isn’t that expensive right now.

MATT: Oh.

NASIR: Because oil prices.

MATT: Actually, it is pretty cheap. Oh, you’ll appreciate this year, Midwest, when I was back there in December, it was like a dollar. I saw it somewhere, like, $1.70 a gallon which is insane.

NASIR: That is insane. I was just watching, I think, Die Hard – the first Die Hard – and they had a gas station in the background with the prices and it was under a dollar and I’m like, “Hey, we may get there.”

MATT: It has been dropping so we’ll see.

NASIR: Yeah, I think it came back up a little bit, stabilized or whatever. Anyway, next week, on our oil future’s podcast, we’ll cover that.

MATT: Yeah, Legally Sound Smart Oil.

NASIR: Very bad, very bad. All right. Thanks for joining us, everyone.

MATT: Keep it sound and keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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