Monday, March 01, 2010

Organize MBO?

A visual effects artist emailed today:.

Several people have mentioned to me that they are disgusted by the way freelancers are being asked to sign up and pay for "Employer of Record" services in order to get jobs. Typically these freelancers would not be eligible for union representation since their are neither a group nor employees, however thousands of them are now employees of companies like MBO and Yurkor who serve as their "Employers of Record" while not providing any of the benefits employers customarily provide. ...

Welcome to the Brave New World of "squeeze the nickel 'til it bleeds."

I talked to the artist on the phone later in the day, and said that it was certainly possible to organize MBO or Yorker, but there were interesting challenges:

1) MBO would probably fight tenaciously to avoid unionization. And getting sufficient representation cards from far-flung visual effects houses across the fruited plain would be a bit daunting.

2) And when you did get enough cards, there could be an argument at the resulting National Labor Relations Board hearing over who the actual employer was, MBO or the various Mom and Pop houses it was serving. One legal eagle I consulted said it could well be a joint employer situation -- MBO and the viz effx houses might both be "Employers of Record."

3) Lastly, you'd have to get a lot of artists onboard, construct phone and e-mail trees to communicate, build momentum. (All these things are achievable, but they take time.)

Much of the problem of visual effects employment, of course, stems from the way that it's done. Different sub-contractors bid for the work, low-balling one another to get the job, and this usually results in narrow (or non-existent?) margins and big pressure to cut wages and benefits to the bone.

Hence "independent sub-contractors" and the emergence of MBO. Visual effects companies know that there will be pressure from tax agencies, both federal and state, to make workers the actual employees they should be so that taxes can be withheld.

This, of course, is where MBO comes in. The charming "Employer of Record" middle-man collects the effects studio's checks, pays the required taxes to the federal and state governments, then passes the remainder to the men and women doing the work. The sub-contracting studio is protected from the IRS auditors, the government bureaucracies get their taxes, and the "employees" get shafted. All very neat and tidy.

But it probably works well for a chosen few.


Kevin said...

I'm sorry, but isn't organizing an EOR the equivalent of a Turducken?

Interesting article thought. I've also seen articles in the NYT that indicate that animation and VFX aren't the only industries affected by EOR, questions.

Anonymous said...

But [MBO] probably works well for a chosen few.

It's been OK so far for me, but I'm able to use two ways to reduce the sting of employer taxes.

Under the MBO system, I'm contributing 30% of my pre-tax income to a traditional 401(k). The 30% contribution is exempt from both employer and employee taxes, since it represents an "employer" self-match from my own earnings.

I'm also deducting everything I can -- mileage, medical co-pays, prescriptions, office equipment, parking, etc. If I enter $500 in deductions, for example, $500 passes tax-free to my next paycheck as reimbursed "expenses."

It's working OK for me, because I can afford to set aside income for retirement and have expenses I can deduct.

I think most of my co-workers would prefer a Local 839 setup, though. Hell, I'd love to work at an 839 studio, myself. I just need to learn the right skill set, first.

organizer_x said...

Turducken is delicious.

Organizing the EOR companies is an odd idea but I'm new at this and thought it was intriguing and worth talking about. EOR's "employ" a large number of marginalized freelancers whose forced participation in the EOR may actually make them eligible for trade union representation they would otherwise not qualify for.

The down side, for the artist, that they'd get stuck paying for both the EOR and the Union, a bit of a double financial whammy, but some may feel that the health care, pensions, legal counsel and fairer labor practices under contract would be worth it.

I just thought it was a topic worthy of discussion and hope people join in to say what they think on the topic.

Anonymous said...

Anyone want to name some of the LA studios that do this? I would like to avoid any studios that practice this MBO stuff. A list of studios who insist that employees are "independent contractors" would be good too. You can post anonymously. Heh heh.

I'll start with two independent contractor studios:
Brand New School

Anonymous said...

Can this group do anything ?

Anonymous said...

Anyone want to name some of the LA studios that do this? I would like to avoid any studios that practice this MBO stuff.

Motion Theory


MBO might work well for those VFX artists who can't buy health insurance on their own. I know at least three VFX artists whose applications for private health insurance were rejected here in California. They each had a preexisting condition.

Under the MBO system, these artists would be able to purchase guaranteed-issue group health insurance from Anthem with pretax dollars. This insurance starts the first month after they start working at an MBO studio. After the project ends and the artists get laid off, they could enroll in COBRA and continue paying the premiums with post-tax dollars. After they exhausted COBRA, they would qualify for a HIPAA plan.

The MBO system is not as good as the MPIHIP system that protects animators. For those with gaps in their insurance coverage, preexisting conditions have to wait up to 12 months for coverage, depending on how long the applicant was uninsured before purchasing the Anthem coverage. These are typical health insurer terms and not unique to MBO.

Still, it's better than what most VFX artists had before. Few VFX studios offer health insurance, and few VFX artists work long enough at those VFX studios to qualify for the company plan. Too many VFX artists go without health insurance right now.

This situation could change after the Visual Effects Society starts offering its members the chance to purchase guaranteed-issue group health insurance from Aetna. This won't happen until much later this year, however. Until then, MBO could be the best chance for health insurance some artists have in the VFX industry.

organizer_x said...

I am beginning to compile a list, sticky to the front page, at of companies that insist on joining an EOR as a condition of employment. I'll keep an eye on this thread but if it dies down here you can help keep the list up to date at the web site.


Anonymous said...

Uh, I listed Ntropic and Brand New School as places that insist on classifying employees as independent contractors. To my knowledge they are not using MBO. Which is worse really, and they should be investigated by the iRS.

organizer_x said...

I have amended the fxdag blog to reflect your report that Ntropic and BNS classify employees as freelancers. Thanks for the clarification.

Anonymous said...

This is the things with MBO/yakur. The reasons these places are using them is because technically we are not our own business, in the eyes of the Government. As such we should be hired onto these companies, temp hires, and they shoudl be paying our employment taxes on all freelancers. What they are doing instead is passing their obligations onto MBO/yakur, and that isn't exactly legal. So basically by going with these places we get screwed out of 5% plus being able to deduct as a business because we are now employees of MBO and or Yakur. It's a big scam and these places are making a buttload of money off from us. we should fight back against this. this is NOWHERE as good as a union, it has practically no benefits for us.

Site Meter