# What's the prohibition that makes these wage agreements illegal? **URL:** \ **Category:** Factual Questions\ **Created:** [September 21, 2017, 12:53am UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842 "2017-09-21T00:53:20Z")\ **Posts on this page:** 16\ **Page:** 2
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [September 21, 2017, 5:18pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/21 "2017-09-21T17:18:10Z")
> [@Senegoid](#): > > Okay then, what stops the Big Boss from making all his widget-makers “managers” and putting them on salary? The fact that Judges & Juries are not fools, and would see through this immediately. You aren’t the first corrupt businessman to attempt to cheat their employees. And if you think the hourly wage is your only cost for employees, like you said in the OP, you will soon be out of business. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 21, 2017, 8:54pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/22 "2017-09-21T20:54:48Z")
Here’s an interesting bit - I picked on Indiana as an at will state that recently had a less that labor-sympathetic governor, IIRC . > **[Employment & Labor in Indiana](https://www.lexology.com/library/detail.aspx?g=5fd5f5cc-d241-4d11-bbfd-a84d62652650)** > > A structured guide to employment & labor law in Indiana... > [@](#): > > For the purposes of eligibility for unemployment insurance, the Indiana Department of Workforce Development will consider a worker an independent contractor only if all of the following apply: > •the individual is free from control and direction in connection with the performance of their service; > •the service is performed outside the company’s usual course of business, and the individual’s usual area of employment is not within the company’s business; and > •the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the work that he or she does for the company or is a sales agent who is paid commission only and has complete control over his or her own time and effort. And this… even better. [http://www.in.gov/library/files/NewDirectorsManual\_Chapter\_09.pdf](http://www.in.gov/library/files/NewDirectorsManual_Chapter_09.pdf) > [@](#): > > **Administrative Exemptions** > To qualify for the administrative employee exemption, all of the following tests must be met: >  The employee must be compensated on a salary or fee basis (as defined in the regulations) > at a rate not less than $455 per week; >  The employee’s primary duty must be the performance of office or non‐manual work > directly related to the management or general business operations of the employer or the > employer’s customers; and >  The employee’s primary duty includes the exercise of discretion and independent judgment > with respect to matters of significance. There are descriptions of the exemptions for Executives, for Professionals, Creative professionals, IT workers, and outside sales. For example: > [@](#): > > Professional Exemption > To qualify for the learned professional employee exemption, all of the following tests must be met: >  The employee must be compensated on a salary or fee basis (as defined in the regulations) > at a rate not less than $455 per week; >  The employee’s primary duty must be the performance of work requiring advanced > knowledge, defined as work which is predominantly intellectual in character and which > includes work requiring the consistent exercise of discretion and judgment; >  The advanced knowledge must be in a field of science or learning; and >  The advanced knowledge must be customarily acquired by a prolonged course of specialized > intellectual instruction. this for a seriously at-will state. So you can see, between the feds and the states, Bob really can’t weasel his way out by calling blue collar assembly workers anything except regular employees. ---
**Author:** ![Flyer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/flyer/32/7298_2.png) [@Flyer](https://boards.straightdope.com/u/Flyer)\ **Post date:** [September 21, 2017, 9:24pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/23 "2017-09-21T21:24:53Z")
If the hypothetical employer can figure out some sort of extended training program (maybe these particular widgets are complicated?) then he MIGHT be able to get away with calling his workers interns. It would help a great deal if there was some sort of studying involved–sort of like a trade school type of thing. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 21, 2017, 9:53pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/24 "2017-09-21T21:53:50Z")
In the end, it boils down to “what are they doing?” If they are spending 95% of their time assembling widgets, no judge is going to buy the excuse they are interns or students. Each of those job descriptions carries with it implied tasks like the definitions for manager or contractor above. Plus, there’s been a certain backlash against unpaid interns. Not sure if they are still legal in many states. the complaint is of course, that rich entitled pricks can afford to take a semester of unpaid work while mommy and daddy pay their rent and bar bill; whereas real students have to earn real money in the semester they are off. Since internship is a foot in the door to getting a full job after graduation, all the companies were doing is taking advantage of free labor while screwing over the working class. (Kind of like what they do anyway.) ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [September 22, 2017, 3:05pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/25 "2017-09-22T15:05:39Z")
> [@md2000](#): > > Plus, there’s been a certain backlash against unpaid interns. Not sure if they are still legal in many states. the complaint is of course, that rich entitled pricks can afford to take a semester of unpaid work while mommy and daddy pay their rent and bar bill; whereas real students have to earn real money in the semester they are off. Since internship is a foot in the door to getting a full job after graduation, all the companies were doing is taking advantage of free labor while screwing over the working class. (Kind of like what they do anyway.) Wow, hope you feel better getting that off your chest. FWIW, I agree with you regarding unpaid internships, but the fact is that they have become standard for certain majors, degrees and industries. I don’t like it either, but I suspect that interns don’t really add much of anything to the bottom line, whether paid or unpaid. Hiring interns gives companies insight into attitude, work ethic, intelligence and “fit” to decide whether to float an offer. Based on my observations and reports from students, I don’t see any “screwing over” or “taking advantage of free labor” by having interns. Still, I agree that all interns should be paid at least minimum wage. ---
**Author:** ![American\_Horse](https://avatars.discourse-cdn.com/v4/letter/a/e9bcb4/32.png) [@American\_Horse](https://boards.straightdope.com/u/American_Horse)\ **Post date:** [September 22, 2017, 3:51pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/26 "2017-09-22T15:51:36Z")
There’s noting wrong with contracting labor for a lower price no matter how low it appears to be; talented people can produce work multiples of times faster than ordinary workers can. Think of shingling a roof: an ordinary laborer might only put on 5 square and feel stressed out and a talented individual might put on 40 square in the same amount of time, earning 8 times as much as the first guy if they’re doing it for the same price per square. We see it all the time in the construction industry. Only the talented survive in trades like roofing, tile laying, siding installation, masonry (brick block and stone), concrete finishing. it’s called bidding and the low bidder gets the job not the high bidder. The feds have nothing to say about it. Talent will out. ---
**Author:** ![sbunny8](https://avatars.discourse-cdn.com/v4/letter/s/c77e96/32.png) [@sbunny8](https://boards.straightdope.com/u/sbunny8)\ **Post date:** [September 22, 2017, 5:22pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/27 "2017-09-22T17:22:28Z")
> [@American\_Horse](#): > > There’s noting wrong with contracting labor for a lower price no matter how low it appears to be; talented people can produce work multiples of times faster than ordinary workers can. Think of shingling a roof: an ordinary laborer might only put on 5 square and feel stressed out and a talented individual might put on 40 square in the same amount of time, earning 8 times as much as the first guy if they’re doing it for the same price per square. We see it all the time in the construction industry. Only the talented survive in trades like roofing, tile laying, siding installation, masonry (brick block and stone), concrete finishing. it’s called bidding and the low bidder gets the job not the high bidder. The feds have nothing to say about it. Talent will out. The situation you’re describing are contractors, not employees. They “bid” on jobs, they have their own business, are required to handle their own taxes (e.g. self-employment tax), carry their own liability insurance, and take jobs from several different customers throughout the year. Minimum wage doesn’t apply to that situation. You can own your own business that way, work 60 hours per week, and make a profit of just $90 after expenses ($1.50 per hour, waaay lower than minimum wage) and that’s perfectly legal. But then the foreman on the job site doesn’t get to micromanage your work, doesn’t get to tell you what time to take your lunch break, and can’t stop you from working for the competition on other days. All that is completely different from employees working in a factory producing widgets. ---
**Author:** ![American\_Horse](https://avatars.discourse-cdn.com/v4/letter/a/e9bcb4/32.png) [@American\_Horse](https://boards.straightdope.com/u/American_Horse)\ **Post date:** [September 22, 2017, 5:59pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/28 "2017-09-22T17:59:09Z")
> [@sbunny8](#): > > The situation you’re describing are contractors, not employees. They “bid” on jobs, they have their own business, are required to handle their own taxes (e.g. self-employment tax), carry their own liability insurance, and take jobs from several different customers throughout the year. Minimum wage doesn’t apply to that situation. You can own your own business that way, work 60 hours per week, and make a profit of just $90 after expenses ($1.50 per hour, waaay lower than minimum wage) and that’s perfectly legal. But then the foreman on the job site doesn’t get to micromanage your work, doesn’t get to tell you what time to take your lunch break, and can’t stop you from working for the competition on other days. > > All that is completely different from employees working in a factory producing widgets. All that’s true, however the business owner can stipulate quality and if it doesn’t meet the spec can reject the product. By getting the work (in this case the building of a product, a widget) done by a qualified “builder of widgets” with his own facilities he can forget about the overhead costs, reporting to the feds except for a 1099 and be more assured of a higher profit not a profit at risk. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 22, 2017, 6:32pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/29 "2017-09-22T18:32:33Z")
You’ve just moved the problem backwards a step. The business bidding on the widget contract still has to pay its employees. ---
**Author:** ![Yarster](https://avatars.discourse-cdn.com/v4/letter/y/7c8e57/32.png) [@Yarster](https://boards.straightdope.com/u/Yarster)\ **Post date:** [September 22, 2017, 6:52pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/30 "2017-09-22T18:52:37Z")
I work in the defense industry, and I can tell you that interns are a critical part of our hiring process. We will often bring interns on between their junior and senior year of college during the summer to try them out, but more importantly, it allows us to start their security clearance process. The Defense Security Service (DSS) that processes DoD clearances moves at a speed that makes the DMV look downright fast and efficient. We have seen basic Secret clearances take upwards of 9-10 months, and because Government contracts, even when they involve totally unclassified materials, often require a Secret clearance, you want to start that glacially slow process as early as possible. So, we hire interns to work basic unclassified research tasks, and we see who does tasking quickly and in a methodical way, shows up on time, helps others out without being asked, and select who we are going to hire when they graduate. By about the mid-point of the summer, we know who we want, and we pull them aside to start the paperwork. Then a year later when they graduate, they are ready to start on a contract right away. These are unpaid internships, but 1) the clearance they get does not require them to work for us when they graduate, and 2) we also give them $5,000 to spend on additional education during the summer, tax free. Many Government jobs require additional computer security or other credentials that we pay for during the internship. Again, these college kids are free to take that credential and go to our competitors if they like, but we hope they will be loyal to us, and about 95%+ are. That said, I have gotten screwed a few times myself in the contractor vs. employee game. I worked at a large contractor that hired me as a contractor, which I loved. Though we were treated the same as employees, we were paid a significantly higher salary because it was easier to get rid of the dead weight contractor than their employees, and we weren’t getting benefits. That worked great for me because I had benefits through my wife. Then Microsoft got in trouble in 1998 for doing the same thing and my company suddenly announced that all the contractors had to become employees and take a huge pay cut to do so because of the added costs. I quit shortly after that. Another company I worked for hired you at one salary and then lowered your salary and tried to put you on a “you get a percentage of the work you win” bonus program for proposal writers like myself. I also quit that job, because as soon as they implemented that, it because clear they would weasel you out of the bonuses through a number of bullshit loopholes. ---
**Author:** ![dtilque](https://avatars.discourse-cdn.com/v4/letter/d/d6d6ee/32.png) [@dtilque](https://boards.straightdope.com/u/dtilque)\ **Post date:** [September 22, 2017, 7:32pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/31 "2017-09-22T19:32:19Z")
> [@American\_Horse](#): > > All that’s true, however the business owner can stipulate quality and if it doesn’t meet the spec can reject the product. By getting the work (in this case the building of a product, a widget) done by a qualified “builder of widgets” with his own facilities he can forget about the overhead costs, reporting to the feds except for a 1099 and be more assured of a higher profit not a profit at risk. And if the the contractor happens to be located in a country with lower minimum wage than the US? Congratulations! You’ve just invented globalization. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [September 22, 2017, 7:46pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/32 "2017-09-22T19:46:36Z")
> [@Orwell](#): > > Wow, hope you feel better getting that off your chest. FWIW, I agree with you regarding unpaid internships, but the fact is that they have become standard for certain majors, degrees and industries. I don’t like it either, but I suspect that interns don’t really add much of anything to the bottom line, whether paid or unpaid. > > Hiring interns gives companies insight into attitude, work ethic, intelligence and “fit” to decide whether to float an offer. Based on my observations and reports from students, I don’t see any “screwing over” or “taking advantage of free labor” by having interns. Still, I agree that all interns should be paid at least minimum wage. Yeah, I chuckled as I wrote that because the wording had a “Fair and Balanced” sound to it. nothing wrong with hiring students for term positions. I’ve worked at several companies that did that - Waterloo has a “Co-op” program, one term school, one term work, repeat as necessary. However, these jobs pay a decent wage to help with university expenses (although not full qualified worker wage). And like interns they also do productive work on projects that are relevant to their field of study. A large multinational that pays its CEO and executives well above a million or several a year can afford to pay interns a decent wage. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 22, 2017, 8:56pm UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/33 "2017-09-22T20:56:58Z")
> [@American\_Horse](#): > > All that’s true, however the business owner can stipulate quality and if it doesn’t meet the spec can reject the product. By getting the work (in this case the building of a product, a widget) done by a qualified “builder of widgets” with his own facilities he can forget about the overhead costs, reporting to the feds except for a 1099 and be more assured of a higher profit not a profit at risk. Then you have to make sure that the builder of widgets doesn’t undercut you, which is easy for them to do without your markup. I worked for a place on 5th Avenue in New York that was supposedly a jewelry manufacturer. What they really did was to buy jewelry from suppliers, relabel them, and sell them to places like Sears. A Sears VP got his son a job in the warehouse, and we had to keep him from figuring out the scam. But they bought from lots of places, and your widget maker makes but one thing. ---
**Author:** ![glowacks](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/glowacks/32/5548_2.png) [@glowacks](https://boards.straightdope.com/u/glowacks)\ **Post date:** [September 26, 2017, 12:47am UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/34 "2017-09-26T00:47:17Z")
> [@Voyager](#): > > Then you have to make sure that the builder of widgets doesn’t undercut you, which is easy for them to do without your markup. > > I worked for a place on 5th Avenue in New York that was supposedly a jewelry manufacturer. What they really did was to buy jewelry from suppliers, relabel them, and sell them to places like Sears. A Sears VP got his son a job in the warehouse, and we had to keep him from figuring out the scam. > > But they bought from lots of places, and your widget maker makes but one thing. That’s not a scam. That’s called being a wholesaler. Even if you buy from other wholesalers, it’s possible that those wholesalers require such large orders that the end of the line retailers can’t afford to buy from them. A client of my firm at one point was a supplier of nail salons. They bought from wholesalers on a scale that their customers could not afford to, able to make money by being the connection between the supplier and the retailer. The same is true for another company I’m working on now. They buy from wholesalers in China and sell to retailers in the US. Those small retailers would never be able to buy from the wholesalers in China, and the manufacturers in China could never be able to sell their products easily without a local wholesaler to buy them, and need an additional reseller in the US to get them to retailers’ hands. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 26, 2017, 1:10am UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/35 "2017-09-26T01:10:35Z")
> [@glowacks](#): > > That’s not a scam. That’s called being a wholesaler. Even if you buy from other wholesalers, it’s possible that those wholesalers require such large orders that the end of the line retailers can’t afford to buy from them. A client of my firm at one point was a supplier of nail salons. They bought from wholesalers on a scale that their customers could not afford to, able to make money by being the connection between the supplier and the retailer. The same is true for another company I’m working on now. They buy from wholesalers in China and sell to retailers in the US. Those small retailers would never be able to buy from the wholesalers in China, and the manufacturers in China could never be able to sell their products easily without a local wholesaler to buy them, and need an additional reseller in the US to get them to retailers’ hands. The reason it was sketchy was that they led their customers to believe that they manufactured the jewelry, not bought it from third parties. In electronics distributors are a big deal, who have a wide variety of parts under one roof. But they always say who made the parts and where they came from - they never relabel them like this place did. A regular wholesaler or distributor would not have to try to disguise their real business model. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [September 26, 2017, 1:14am UTC](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842/36 "2017-09-26T01:14:29Z")
Yeah, but the whole jewelry industry is full of shenanigans and deceit. Putting brand labels on purchased jewelry is SOP. [Previous page](https://boards.straightdope.com/t/whats-the-prohibition-that-makes-these-wage-agreements-illegal/796842.md?page=1)