‘Two-Tiered Caste System’: The World of White-Collar Contracting in Silicon Valley

3 min
In response to a letter demanding equal treatment for contractors signed by Google employees, the company said it will require staffing firms to provide health insurance, 12 hours of paid parental leave and at least $15 an hour. Staffing agencies must comply by 2022. Pictured: Google headquarters on Jan. 30, 2014, in Mountain View. (Justin Sullivan/Getty Images)

Just because someone has a tech job in Silicon Valley, it doesn’t mean they are pulling in a high salary with loads of paid time off, piles of free food and private buses to shuttle them to and from work. Contract workers often don’t share in these perks, even if they’re doing white-collar jobs like developing software, analyzing data or running the servers these tech companies depend on.

“We’re right there looking through the glass at people having this sort of wondrous experience, given loads and loads of perks and benefits. But we don’t get any of it, even though we’re effectively doing the same work,” said one contract worker who did language processing at Google. Like all of the workers interviewed for this story, she asked to remain anonymous for fear of losing her job.

White-collar contractors often don’t work directly for tech companies but for third-party staffing firms. The workers typically earn less than their employee counterparts and have to pay for things like riding the shuttle — which is free for full-timers — to work. They may have limited access to the company campus, and aren’t invited to certain trips, parties and events.

“As a contractor you’re treated like you’re less than everyone else,” said a Latina who did contract work at both Salesforce and the e-cigarette company Juul.

The total number of contract workers in Silicon Valley is unknown. But experts, academics and labor advocates interviewed for this story estimated more than 100,000 white- and blue-collar contractors are working in tech, doing jobs ranging from janitorial work to programming.

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How and Why Silicon Valley Latched on to Contracting

Since the late 1980s, companies nationwide have been switching their labor force over from employees to contractors. Contract workers are often cheaper than employees, they can be hired and fired more easily, and investors generally like to see lower employee headcounts. Silicon Valley has not only been part of this trend, but on the vanguard of it, said Chris Tilly, a UCLA professor who studies labor markets, inequality and public policy.

“Silicon Valley and the tech sector is definitely way out in front of most sectors when it comes to contracting,” Tilly said.

This is how it works in Silicon Valley: The companies go to a staffing firm with a bid and say, “Hey, we need X amount of workers for X price to do something like IT, build out a new division for, say, autonomous cars, or do our janitorial work,” said Pradeep Chauhan, who runs OnContracting — a rating and reviews website for workers to learn about conditions at different temp staffing agencies.

Chauhan said there are more than 1,000 staffing agencies in Silicon Valley. Some have more traditional names like “Mountain View Staffing” and “Palo Alto Staffing.” Others have gone the startup-type route with business names like Akraya. Many specialize in a particular kind of work like IT, security or transportation.

Tilly said in the investor-dependent, quick-pivot world of Silicon Valley, the advantages of the contractor model are even more valuable because it allows firms to quickly scale up and scale down projects with labor.

And, this model saves tech firms money in benefits, too, since it would cost a lot to give contractors the same generous packages used to attract high-skilled programmers and software developers, said Chauhan, who worked in staffing at Microsoft in the 1990s.

In older industries like auto manufacturing, unions guard against switching employees to contractors, but that’s not the case for new companies in Silicon Valley.

“These companies start out with a tabula rasa,” a blank slate, Tilly said.

Stuck in Contracting for Years

All of the temporary contract workers in this story hoped to move on or convert to employee status, but at most tech companies there is no direct path for them to do so. Companies like Google have policies that direct managers not to discuss the potential of converting to full-time work.

Part of the reason for this firm barrier between contractors and employees is legal protection from what are known as misclassification lawsuits. Chauhan said tech companies’ caution over misclassification issues started back at Microsoft.

In the early 1990s, Microsoft had hired lots of contractors to do everything from IT work to software development. Some of these workers got stuck in contracting roles for years and ended up filing a class-action lawsuit against Microsoft for how it was “permatemping” its workers. After almost a decade of battling the lawsuit, Microsoft settled for $97 million.

“After Microsoft lost,” Chauhan said, “every contingent staffing department at every large company started setting up rules over how to best utilize contractors.”

Chauhan said that to avoid legal trouble, companies do two things: They require staffing agencies to offer some kind of benefit package to workers to make them feel like they’re employees of the agency, not the tech company. And the companies require short-term contracts, a year or 18 months at most, which means contractors never settle into a permanent job.

This leaves contract workers who want full-time work in a tricky position, with some believing they can break through if they try hard enough. One worker at Google said he was working overtime, even though he wasn’t supposed to.

“I’ve found myself working secretly after hours, trying to avoid my manager if they’re around,” he said.

This worker grew up in the Bay Area and recently became a contract worker in tech. He is hoping to jump to full-time employment and build a career in the industry. But in his first months on the job, he is concerned he is not doing enough work in his contract role to move to full time and that he may be let go.

“You feel like a full-time employee and you feel like you’re going to be evaluated as a full-time employee,” he said. “But on the books and in your paycheck and your benefits — and some of the way you’re treated — you’re not a full-time employee.”

Silicon Valley's Shadow Workforce

Silicon Valley's Shadow Workforce

Many white-collar contract workers see full-time employment as the only way to have a decent life in the Bay Area.

A worker at a major Silicon Valley tech company has been waiting to get a full-time job so he can bring his pregnant wife and their young child — both who live in another country — to the U.S.

But after more than four years working contract to contract at different companies, it doesn’t look like he will land a full-time job soon.

“I’m willing to work really hard to eventually have a path for conversion,” he said. “As long as that’s possible, I’m going to keep trying. There’s nothing else I can do, really.”

'A Two-Tiered Caste System'

One worker interviewed for this story had previously been an adjunct professor at an Ivy League university. Adjuncts receive far less pay than full professors and have limited to no job security; tenured professor jobs are difficult to come by.

The worker left for a tech job, hoping to find the kind of steady career path that wasn’t available in academia. She couldn’t believe the similarities.

“I found myself in effectively the same situation,” she said, “It’s totally a two-tiered sort of caste system.”

Contracting White-Collar Workers

Contracting White-Collar Workers

A 2016 study of the contract workforce in Santa Clara County found deep racial and economic divides between contractors and full-time workers in the tech industry.

Latinos and African Americans are underrepresented in Silicon Valley and in the tech industry as a whole. Often when they do get jobs, they aren’t hired as employees, but instead brought on as contractors. You can see that reflected in the UC Santa Cruz study numbers in Santa Clara County.

The study found that while African Americans and Latinos make up only 7% of full-time employees, they account for 26% of white-collar contractors and 56% of blue-collar contractors. So, as you go from the preferred full-time jobs down to white-collar contractors and finally blue-collar contractors, you see fewer and fewer white workers and more and more African Americans and Latinos.

The study also found that contractors more often depend on public services and are vulnerable to homelessness, too, said Chris Benner, a professor of environmental studies and sociology who co-authored the study published by UC Santa Cruz.

The contract worker previously employed at Salesforce and Juul said that as a Latina she has experienced tech’s racial gap.

“The only people that I see that look like me, they’re cleaning up,” she said. “They’re doing custodial services. They’re at the front desk greeting people. They aren’t actually in the office.”

Contract Workers Increasingly Voice Their Concerns

It’s hard for contract workers to organize: They often aren’t at companies long enough to form bonds with other workers and push for changes to the system. They also fear they could lose their jobs by speaking out.

Even so, some tech contractors have taken a stand: In 1998, Microsoft contractors formed WashTech/CWA to fight for higher pay and benefits. And in 2016, labor organizers succeeded in getting a union for bus drivers at tech companies like Facebook and Apple.

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Today, contractors are speaking out through groups like Silicon Valley Rising and the Tech Workers Coalition. They’ve helped organize protests and published open letters to tech CEOs demanding better treatment. Some of the workers we spoke with for this story contacted us through these organizing groups.

Under increasing pressure from workers, tech companies have been addressing the contracting model. In response to a letter demanding equal treatment for contractors signed by Google employees, the company said it will require staffing firms to provide health insurance, 12 hours of paid parental leave and at least $15 an hour. Staffing agencies must comply by 2022.

At least one of the workers interviewed for this story succeeded in getting a full-time job. She is at a small company, different from where she did contract work, and is relieved to have some stability.

She wants to use her role as an employee to advocate for contractors.

“I’m hoping to tell people at my new company how important it is to treat their contractors with respect. How important benefits and sick time is for these workers.” She said "it’s hard to imagine changing a big tech company," but she hopes she can stick her foot in the door where she can and push for small changes.

How Tech Companies are Responding

KQED asked 10 tech companies about their response to concerns from contract workers. Apple, Palantir, Salesforce and Juul did not respond, while Oracle and Microsoft declined to comment.

Starting in 2015, Facebook required vendor partners to provide a minimum set of benefits to “their employees,” a spokesperson said in an email. That includes 15 paid days off, $4,000 for new parents and a guaranteed $15 an hour minimum wage.

“We feel strongly that agencies should provide fair compensation and benefits for all contractors,” a Twitter spokesperson said in a statement. A Cisco representative made a similar comment, too.

Amazon said contractors made up a small part — a single-digit percentage — of the company’s U.S. workforce. Also, unlike many other tech firms, Amazon encourages contractors to apply for full-time roles — with nearly 1-in-4 such workers hired for permanent jobs in 2018.

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