Integrity Ideas are specific actions a leader can consider during the Re-Align step of Integriosity^®—actions that will begin to Re-Align the organization with Biblical beliefs, principles, and priorities.  You can find more Integrity Ideas at Integrous | Integrity Ideas (integriosity.com)

INTEGRITY IDEA: 86 the 1099

“86 the 1099” is about faithful leaders resisting the business as usual temptation to replace W-2 employees with 1099 independent contractors primarily to reduce labor costs, shift risk, and increase managerial flexibility.  (“86” is an old slang term for getting rid of something, and “1099” refers to the IRS form used, among other purposes, to report payments to independent contractors.)

It recognizes that aligning an organization with Biblical beliefs, principles, and priorities requires the cultivation of a culture that prioritizes relationships, community, human dignity, and flourishing.

Integrity Ideas are practical actions toward implementing a bigger WHY for the organization.  Some are helpful ideas to consider as a faithful leader prayerfully discerns the best stewardship of the organization. Others may be important steps in the RENEW/RE-ALIGN/RE-IMAGINE/RESTORE process.

“86 the 1099” is in the “if it fits” category, because there may be industries in which workers prefer to work as independent contractors. However, the cultural problems and challenges created by a 1099 model exist whether or not independent contractor status is desired by workers.

W-2 vs 1099

It is estimated that approximately 59 million people in the United States, or 36% of the total U.S. workforce, perform some freelance work, and it is projected that nearly 87 million will be freelancing by 2027. These numbers reflect the growth of the “gig” economy—a term that originally referred to a paid performance by an entertainer.

For some people, working as an independent contractor is a lifestyle choice because it provides greater flexibility in their work hours and location. A freelancer can set their own hours and work for multiple clients. For others, it is a product of the shift toward online platform-based work, such as being an Uber or Lyft driver.

But for many, independent-contractor status reflects a shift by employers seeking to reduce labor costs, shift the risk of idle employees during slowed activity, and increase managerial flexibility. One version of this trend has even been described as “quiet hiring.”

A particularly notable trend is “quiet hiring,” where companies replace laid-off employees with contractors. (David Fornelli)

We had “quiet quitting” and “quiet cutting,” and now we have “quiet hiring.” A 2023 survey of 1,000 business leaders found that 37% of their companies were hiring contractors. Among companies that had recently conducted layoffs and were hiring contractors, 80% said the contractors were performing work previously done by laid-off employees. The survey also found that 53% had moved full-time employees to contract positions during the preceding three months.

W-2 employees may have legal entitlements relating to overtime pay, workers’ compensation coverage, and unemployment insurance. In addition, employees bring the cost of any benefit plans an employer provides, such as health insurance, paid time off, and retirement contributions. Employees also bring the cost of the employer’s share of Social Security and Medicare taxes.  Employers generally do not incur those legally mandated employment costs or benefit-plan costs for independent contractors. Employees often have a greater expectation of job security, while independent contractors understand that they are being hired on a temporary and flexible basis.

In fact, most analyses of the W-2/1099 distinction, including its benefits and tradeoffs, focus on the financial and flexibility differences for employers and the legal consequences of incorrectly categorizing an employee as an independent contractor.

Shifting a workforce toward independent contractors primarily for financial and flexibility reasons reflects the Profit as Purpose focus of business as usual and its assumptions of Scarcity and Self-Interest.  It is the “way of the world,” as we described those characteristics in post #169 (The “Way” of the World).

Cultural Implications of Shifting to 1099 Workers

Those analyses of the W-2/1099 distinction tend to ignore the cultural implications for an organization when it begins to shift its workforce toward independent contractors.

We are certainly not suggesting that the pursuit of faithful integrity through business a better way means eliminating all independent contractors.  There are many situations in which it would be poor stewardship of an organization to hire an employee for a task. For example, most organizations do not need a full-time plumber or electrician. There might also be times when consultants with specialized knowledge or skills are needed for a discrete project.

The conflict with the pursuit of faithful integrity toward Biblical flourishing occurs when an organization begins shifting its workforce toward independent contractors, particularly when roles that were previously performed by employees are fulfilled by workers who are, by the very nature of their contractual relationship, less likely to feel that they are an integral part of the organization and its mission.

Shifting a workforce toward the use of 1099 workers—even when they remain a minority of the workforce—can create two classes of workers and communicate that those workers are primarily resources and tools to be obtained, deployed, and discarded rather than people to be known, valued, and invited to contribute.

In post #211 (Integrity Idea 041: Don’t “Toolify Humans”), we urged faithful leaders to prioritize people over profit, treating them as the “end” toward which the organization is managed rather than a tool to help achieve an “end” of profit. Our focus was the toolification of employees, but it is an even greater challenge with independent contractors.

The creation of two classes of workers can also exacerbate “us-them” divisions within the organization. Such divisions are characteristic of a business as usual environment in which people see others as tools for their own advancement or protection. In post #075 (Re-Imagined Purpose – People), we urged the identification and elimination of practices that create an “us-them” culture when RE-IMAGINING a culture aligned with Biblical beliefs, principles, and priorities.

In fact, a shift toward the use of 1099 workers runs counter to each of the ways in which we suggested that “people” could be RE-IMAGINED in the pursuit of faithful integrity. For example:

Community. 1099 workers are less likely to feel an integral part of the organization as a community; they are nomads. In his Laborem Exercens, Pope John Paul II observed “Thus work bears a particular mark of man and humanity, the mark of a person operating within a community of persons.”  The fact that an organization is a community does not necessarily make it feel like a community, and a shift toward a 1099 workforce works against a feeling of community.

Caring. Caring for workers is a critical element of business a better way, because it represents living out the Golden Rule and the commandment to love your neighbor. As they are not entitled to the benefit programs offered to employees, 1099 workers are less likely to feel cared for by the organization.

The creation of two classes of workers can also lead to, or exacerbate, the type of “wisdom walls” we warned against in post #198 (Integrity Idea 035: Tear Down Those Walls). “Walls” become tools for success or survival in a business as usual culture. Barriers to the flow of information and wisdom are bad for the organization’s leaders, bad for the organization, and bad for its culture, which makes them bad for the people in the organization.

Beyond the problem of wisdom walls and knowledge flow, a shift to more temporary 1099 workers can impede the development of institutional knowledge itself. A leader without access to the wisdom, knowledge, and experience of other people in the organization, whether because there are walls impeding its flow or a culture that impedes its development, cannot make the best decisions for the organization.

A shift toward 1099 workers can also undermine worker engagement and the development of healthy relationships among workers.  As we emphasized back in post #084 (Re-Imagined Implementation – Culture and People), God created humans to create organizations to organize humans to work together in relationship to create products and services that serve humanity.

Mike Stallard’s “connection culture” is the best tool we know for understanding human engagement at work in an organization. Stallard explains in his book Connection Culture: The Competitive Advantage of Shared Identity, Empathy, and Understanding at Work that a healthy work culture is a “culture of connection” in which humans feel connected to the organization, to their work, and relationally to each other.

This aligns with managing an organization in a way that prioritizes relationships, community, human dignity, and flourishing. It aligns with business a better way.  According to Stallard, a healthy culture of connection exists when people have:

1. Vision:  When everyone in the organization is motivated by the mission, united by the values, and proud of the reputation.
2. Value:  When everyone in the organization understands the needs of people, appreciates their positive unique contributions, and helps them achieve their potential.
3. Voice:  When everyone in the organization seeks the ideas of others, shares their ideas and opinions honestly, and safeguards relational connections.

A shift toward 1099 workers undermines each of these elements. Freelancers are less likely to feel connected to the vision than employees, less likely to feel valued, and less likely to feel they have a voice. As a consequence, they are less likely to feel engaged.

In post #230 (Integrity Idea 054: Onboard with Intention), we urged faithful leaders pursuing faithful integrity through business a better way to design an onboarding process for new employees that introduces, reflects, and reinforces the most important elements of the organization’s Re-Imagined Purpose, Re-Imagined Values, and Re-Imagined Culture.

Onboarding is the first opportunity for a faithful leader to humanize or dehumanize—the first opportunity to beautify or uglify—the work experience of a person whose God-given gifts of productivity and creativity are coming under that leader’s stewardship. We suspect an intentional onboarding process designed to ensure that each new worker sees, understands, and experiences the heart and bigger WHY of the organization is less likely to occur for 1099 freelancers, further undermining the development of a “real” culture that aligns with the Re-Imagined Culture.

For many reasons, we believe a shift toward 1099 independent contractors works against the pursuit of faithful integrity through business a better way toward Biblical flourishing, undermining the cultivation of a culture in which workers experience vision, value, and voice and impeding the development and free flow of horizontal wisdom. These effects are antithetical to the prioritization of relationships, community, human dignity, and flourishing that characterizes business a better way.

CONTINUUM: Practices

The Integriosity model organizes “heart change” along six Covert-Overt Continuums.  There is nothing inherently magic about these categories, but we believe they are helpful in thinking about practical execution of a Re-Imagined Purpose, Re-Imagined Values, and a Re-Imagined Culture.  The Continuums are Prayer, Proclamation, Policies, Practices, Products, People.

Each Continuum represents an area in which leaders can begin to think about, plan, and institute Re-Alignment changes to the heart of the organization.

“86 the 1099” is on the Practices Continuum. It involves practices the organization can adopt to reflect its culture while also helping to shape and reinforce that culture. 

COVERT-OVERT RATING: Highly Covert

The Integriosity model breaks the Covert-Overt Continuums into six gradations—from Highly Covert to Highly Overt—that we believe are helpful in beginning to pray and think about what is most appropriate for an organization at a particular moment in time.

Most Integrity Ideas have one place on the scale.  Some can vary depending on how they are implemented.  We identify “86 the 1099” as Highly Covert (an action that would be taken by a secular company), because even secular organizations recognize the importance of employee commitment, loyalty, and continuity.

It can be moved toward the Overt end of the Continuum by, for example, explaining the Biblical roots of prioritizing relationships, community, human dignity, and flourishing.

STAKEHOLDERS SERVED: Employees

When we categorize faith-based actions, we also consider the stakeholders principally impacted by the action: Employees, Customers/Clients, Owners, Suppliers/Vendors, Community, and Kingdom.

“86 the 1099” principally serves employees.

IMPLEMENTATION

In one sense, for an organization that has not shifted toward independent contractors, implementing “86 the 1099” is about as straightforward as an Integrity Idea can be. It involves not following the cultural business as usual trend.  It involves a twist on the Nike slogan—”Just Don’t Do It.”

Where “86 the 1099” can become more challenging is if the organization’s industry shifts in that direction and workers come to expect the flexibility of being freelancers. In that case, “86 the 1099” will require prayer and discernment about how to show prospective workers the value of W-2 employment and of maintaining W-2 employment relationships in a culture that is committed to fulfilling the Creation Mandate, recognizing Imago Dei, and living out the Golden Rule and the commandment to love your neighbor.

“86 the 1099” will be more challenging for an organization that has already begun shifting. Faithful leaders will need to prayerfully consider how to begin a shift back, which may require rethinking positions and tasks.

The shift toward independent contractors has been occurring largely for business as usual reasons that do not prioritize people. We believe the result will be increasing dehumanization of workers and increasing disengagement. Paul reminded those with authority over workers that their responsibilities extended beyond what was legally permissible:

Masters, treat your bondservants justly and fairly, knowing that you also have a Master in heaven. (Colossians 4:1)

Faithful leaders pursuing faithful integrity through business a better way toward Biblical flourishing have an opportunity to set an example by putting profit in its proper place as a means rather than the end toward which the business is managed.  It is an opportunity to stand out through a bigger WHY of Humanizing People, Beautifying the World, and Glorifying God.

PERSONAL NOTE (from PM): I believe loyalty is critical to maintaining a healthy organizational culture.  Loyalty is a two-way street. Reciprocal career-long loyalty was common in large U.S. corporations. Members of the generation before mine tell stories of working for IBM or General Electric for 40 or more years before retiring with the proverbial gold watch.  The traditional Japanese model of shūshin koyō, or “lifetime employment,” reflected such a reciprocal commitment: the employee gave the organization loyalty, and the organization gave the employee security, development, and belonging. Although that model had serious limitations, it recognized something that increasingly transactional employment arrangements ignore—loyalty requires reciprocity.

When reciprocal loyalty breaks down, anything special about the culture begins to break down.  I have watched this play out in the area of Big Law.  It used to be the case that a person joined a law firm and, if they became a partner, stayed with the firm for the remainder of their career.  But somewhere along the way, at least at large law firms, law shifted from being a profession to being a business.  Partners in law firms began to leave for more money, even when they were already making a great deal of money by any normal standard.  Today, the pursuit of more money has led firms to create non-equity “partners” who are not really partners in the sense of owners—they are essentially salaried employees. As a consequence, they feel even less loyalty to the firm.  It is a shift not unlike the shift from W-2 employees to independent contractors.  It is a shift that says, “We value you as a tool but not truly as one of us.” In those law firms, there are now two layers of “us-them.” One is the traditional layer between partners and associates, and the other is a new layer between two classes of partners.  I think it is an unfortunate development, not only because it was born of Profit as Purpose, Scarcity, and Self-Interest, but also because it further erodes the culture of a professional partnership.

There is another side of this tension, which became clear to me through a revelation while taking The Masters Program with Bob Shank. This occurred after I had left my Big Law partnership. Bob pointed us to 1 Corinthians 7:21, “Were you a bondservant when called? Do not be concerned about it. (But if you can gain your freedom, avail yourself of the opportunity.)” He told the story of a CEO of a large public company who wanted to take The Masters Program but whose busy schedule would not allow it.  Bob suggested metaphorically that W-2 employment could be seen as a modern-day form of bondservice and 1099 work as a form of freedom. Even though I was not a W-2 employee for the 15 years I was a partner, it still felt like being a bondservant.  I sensed that I had been freed and should avail myself of the opportunity and should not readily return to being a bondservant.

That experience helps explain why “86 the 1099” is in the “if it fits” category. From the perspective of a worker, 1099 status can represent welcome autonomy, flexibility, and freedom. But an employer’s decision to replace W-2 employees with 1099 workers primarily to reduce costs, shift risk, and increase managerial flexibility presents a different question. “86 the 1099” is not about denying workers the freedom they desire. It is about faithful leaders resisting practices that toolify people, create two classes of workers, and erode the prioritization of relationships, community, human dignity, and flourishing that characterize the culture of an organization pursuing faithful integrity through business a better way.

ESSENCE:  Integrity Ideas are specific practical actions a faithful leader can consider in leading faithfully through business a better way.

INTEGRITY IDEA: 86 the 1099

“86 the 1099” is about faithful leaders resisting the business as usual temptation to replace W-2 employees with 1099 independent contractors primarily to reduce labor costs, shift risk, and increase managerial flexibility.  (“86” is an old slang term for getting rid of something, and “1099” refers to the IRS form used, among other purposes, to report payments to independent contractors.) It recognizes that aligning an organization with Biblical beliefs, principles, and priorities requires the cultivation of a culture that prioritizes relationships, community, human dignity, and flourishing. Most analyses of the W-2/1099 distinction, including its benefits and tradeoffs, focus on the financial differences and the legal consequences of incorrectly categorizing an employee as an independent contractor. They tend to ignore the cultural implications for an organization when it begins to shift its workforce toward independent contractors. While there are certainly situations in which the use of independent contractors is wise stewardship (e.g., most organizations do not need a full-time plumber or electrician), shifting a workforce toward the use of 1099 workers—even when they remain a minority of the workforce—can create two classes of workers and communicate that those workers are primarily resources and tools to be obtained, deployed, and discarded rather than people to be known, valued, and invited to contribute. It can also exacerbate “us-them” divisions and “wisdom walls” within the organization. Such a shift works against the pursuit of faithful integrity through business a better way toward Biblical flourishing, undermining the cultivation of a culture in which workers experience vision, value, and voice and impeding the development and free flow of horizontal wisdom. These effects are antithetical to the prioritization of relationships, community, human dignity, and flourishing that characterizes business a better way. 

COVERT-OVERT CONTINUUM (six Continuums for action): Practices

COVERT-OVERT RATING (several levels from Highly Covert to Highly Overt): Highly Covert

STAKEHOLDERS SERVED: Employees

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Photo credit: Original image by Paul Michalski using Gemini
(photo cropped)