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Silicon Valley has a labor caste system. Workers at $2 billion firm SurveyMonkey want to end it

Rick Morgan
SurveyMonkey is providing benefits to all the contract workers in its San Mateo office. It remains unclear when, or if, other Silicon Valley companies will follow suit, but job security concerns and financial challenges of the working class in the tech region are rising.

Rossy Vargas has worked with SurveyMonkey since 2011. She has followed the company that provides free, customizable surveys through moves, and she has worked closely with the company leadership as the start-up has grown to a valuation of $2 billion.

"To me, we are like family," said Vargas. "We feel like we are treated like a part of the team."

But even though Vargas works at SurveyMonkey's San Mateo headquarters, she doesn't work for the company as a full-time employee. She runs the cleaning company Clean & Green, and her role with SurveyMonkey is technically that of a contractor.

That places Vargas in a similar position to a rising number of Silicon Valley workers brought in by tech giants to work on third-party firm contracts, not only janitorial services and caterers that can be found in any corporate campus, but more specific roles created for contractors as projects evolve.

Tech companies rely heavily on contract workers, who allow companies to scale up or down depending on the upcoming workload. Researchers Chris Benner and Kyle Neering from the University of California Santa Cruz estimate as many as 39,000 workers in San Mateo and Santa Clara Counties are contracted to tech companies. If tech companies focus on hiring full-time employees only for the core mission, they can be more adaptable. This means many software testers, finance managers and administrative assistants are contractors.

That means once a project is over, there's no reason to keep certain workers on the payroll. The Silicon Valley worker benefits and perks — the free, fresh produce and transcendental meditation pods — have become symbols of the riches created in the tech sector and how good it has been to workers, but the hype belies the truth that many of the employees operating within big tech companies are working on second-class contract terms.

"Each year the contract penetration rate increases," said David Chie, the CEO of Palo Alto Staffing."There are a lot of resources that are project-based."

Companies generally save money by using contractors according to Chie, but it's the ability to easily scale up or down that makes temps so appealing to tech companies.


Tensions between Silicon Valley and rest of society are rising

As economic tensions between Silicon Valley elites and the rest of society increase — affordable housing in California among the flash points — the approach to contract workers may need to change. After polling its full-time employees, SurveyMonkey found that although the employees were satisfied with their own benefits, they felt the company wasn't doing enough for contractors in the building.

Since January, SurveyMonkey has provided benefits for all contract employees working within its San Mateo headquarters. These benefits include health (medical, dental and vision), time off and transportation. There are three contract companies providing workers for SurveyMonkey: the food service company Bon Appetit, Clean & Green, and the temp agency Eastridge Workforce Solutions (SurveyMonkey finds its own temps, but Eastridge technically hires and pays them). In total, these three groups account for about 50 employees.

"They weren't in a competitive position compared to all our employees," said Becky Cantieri, head of human resources at SurveyMonkey, who explained the company's decision in a blog post. "They're usually the first people I see when I come in the morning and the last people I see at night."

Over the years, she and Vargas have become close friends.

For Vargas and her 37 employees, the benefits make a major difference. She made sure the deal included all her employees, not just those working at SurveyMonkey. As the cost of living continues to skyrocket in the Bay Area, many working outside of tech struggle to make ends meet. In San Mateo County, where Vargas works for SurveyMonkey, an average one-bedroom apartment cost $2,867 per month in 2015.

"For small companies like mine, we struggle to get full package benefits for employees because it's so expensive here," Vargas said. SurveyMonkey gave her employees health insurance, dental, vision, paid time off and sick leave. They were able to put their families on the plan. "We jumped to the next level."

A 401(k) plan for Vargas and her team is not paid into by SurveyMonkey, but the tech company's benefits consultant worked pro bono with Vargas to create it.


'There are absolutely two labor forces'

In an industry with increasing disparity, many working in tech can't kick their second-class employee status. Temps make it easier to downsize because companies can just start using less of them instead of laying off full-time employees. These employees face stress with job insecurity and less robust or nonexistent benefits. The disparity is even more striking for employees working service jobs.

"There are absolutely two labor forces," said Rick Wartzman, director of the KH Moon Center for a Functioning Society at the Drucker Institute. Wartzman, who wrote the book "The End of Loyalty: The Rise and Fall of Good Jobs in America," describes Silicon Valley as a barbell economy — tech has superstar jobs at the top, a hollowed-out middle and lots of service work on the low end.

A 2016 report from Benner and Neering found the average yearly pay for tech employees was $113,000 while the pay for blue-collar contract workers was $19,900. White-collar contractors made $53,200. Black or Latino employees make up only 10 percent of full-time Silicon Valley employees, but this same demographic makes up 58 percent of blue-collar contractors and 26 percent of white-collar contractors.

Maria Noel Fernandez, deputy director at Working Partnerships USA — an organization that fights to make Silicon Valley a place working-class families can survive in — said contractors in a workplace often feel excluded, and sometimes that exclusion has to be worn on the surface: they often have a different work ID badge color. They also don't get access to all the perks at Silicon Valley's playground-like campuses.

Contract workers often fear speaking up about their status

Third-party contracting firm benefits aren't only less generous, but the exorbitant Silicon Valley housing prices and rents make life as a contractor so difficult workers from contract companies often can't afford to elect a benefits package, because doing so will take too much out of their paycheck. "What's important is that workers have a voice on the job," Fernandez said. "There's a lot of fear of speaking up."

The tendency in tech to need a few hyper-specialized workers to develop an app or website makes the field especially prone to contract work, but there's been a rise of contractors across the country.

"It's something you're finding increasingly across corporate America," Wartzman said. Organizations can overestimate the number of contract workers in the U.S. because they count anyone who does anything on the side, even if they have a W-2. But Wartzman pointed to the findings of Harvard economist Lawrence Katz and Princeton economist Alan Krueger: even their more moderate numbers show a rise from 10.1 percent to 15.8 percent in contract workers from 2005 to 2015.

The lack of benefits is one of the most stressful aspects of contract work.

Dan Maass and the company he co-founded, i2i Benefits, provide SurveyMonkey employees with their benefits.

"This is what it means to be in this business and impact people in a big way," Maass said. "This is going to be a great impact on people that we know. We see them every day and how they're working with the SurveyMonkey team."

SurveyMonkey isn't perfect. Only the San Mateo office provides contractor benefits, and the company has six total offices (SurveyMonkey is working to roll the program out in Portland as well). An important reason these contract workers were able to start getting benefits is because i2i saved SurveyMonkey 5 percent on its total benefits cost, freeing up surplus funds for the effort, and employees went to bat for their contract counterparts.

Although Fernandez applauds the initiative from SurveyMonkey, she worries about the power tech companies hold over employees. Companies can revoke benefits just as quickly as they give them out. Until contract workers organize, Silicon Valley can continue to overlook them. "It's about benefits, but it's also about making a democracy in the workplace," she said.

Still, the move, which cost SurveyMonkey $200,000, represents a step in the right direction in an industry that relies heavily on contractors.

"What we see in the Valley here is there's so much pressure on companies to bring in more perks, more benefits, more unique types of offerings to retain and recruit employees," Maass said. But that's a labor market pressure most companies overlook when it comes to their contractors. "This doesn't exist anywhere. ... Those conversations don't happen with other companies. No one else that I've worked with has even approached that as being an idea or any type of motivation for them."

i2i has 100 clients, and almost half of them are tech companies. Maass has worked as a benefits broker in the Bay Area for almost 14 years, giving him extensive experience with Silicon Valley's treatment of contractors.

He said Vargas was brought to tears when she heard what the company was doing for her.

Before SurveyMonkey and i2i started helping her company with benefits, Vargas hadn't even heard of a 401(k). With her new benefits, she has more motivation than ever when she comes to work.

"We jumped from one small level to something that I feel proud to have now," Vargas, holding back tears, told CNBC.

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