Opinion: We’re all becoming independent contractors
By Robert Reich
GM is worth around $60 billion, and has over 200,000 employees. Its front-line workers earn from $19 to $28.50 an hour, with benefits.
Uber is estimated to be worth some $40 billion, and has 850 employees. Uber also has over 163,000 drivers (as of December – the number is expected to double by June), who average $17 an hour in Los Angeles and Washington, D.C., and $23 an hour in San Francisco and New York.
Robert Reich
But Uber doesn’t count these drivers as employees. Uber says they’re “independent contractors.”
What difference does it make?
For one thing, GM workers don’t have to pay for the machines they use. But Uber drivers pay for their cars – not just buying them but also their maintenance, insurance, gas, oil changes, tires, and cleaning. Subtract these costs and Uber drivers’ hourly pay drops considerably.
For another, GM’s employees get all the nation’s labor protections.
These include Social Security, a 40-hour workweek with time-and-a-half for overtime, worker health and safety, worker’s compensation if injured on the job, family and medical leave, minimum wage, pension protection, unemployment insurance, protection against racial or gender discrimination, and the right to bargain collectively.
Not to forget Obamacare’s mandate of employer-provided healthcare.
Uber workers don’t get any of these things. They’re outside the labor laws.
Uber workers aren’t alone. There are millions like just them, also outside the labor laws — and their ranks are growing. Most aren’t even part of the new Uberized “sharing” economy.
They’re franchisees, consultants, and free lancers.
They’re also construction workers, restaurant workers, truck drivers, office technicians, even workers in hair salons.
What they all have in common is they’re not considered “employees” of the companies they work for. They’re “independent contractors” – which puts all of them outside the labor laws, too.
The rise of “independent contractors” Is the most significant legal trend in the American workforce – contributing directly to low pay, irregular hours, and job insecurity.
What makes them “independent contractors” is the mainly that the companies they work for say they are. So those companies don’t have to pick up the costs of having full-time employees.
But are they really “independent”? Companies can manipulate their hours and expenses to make them seem so.
It’s become a race to the bottom. Once one business cuts costs by making its workers “independent contractors,” every other business in that industry has to do the same – or face shrinking profits and a dwindling share of the market
Some workers prefer to be independent contractors because that way they get paid in cash. Or they like deciding what hours they’ll work.
Mostly, though, they take these jobs because they can’t find better ones. And as the race to the bottom accelerates, they have fewer and fewer alternatives.
Fortunately, there are laws against this. Unfortunately, the laws are way too vague and not well-enforced.
For example, FedEx calls its drivers independent contractors.
Yet FedEx requires them to pay for the FedEx-branded trucks they drive, as well as the FedEx uniforms they wear, and FedEx scanners they use – along with insurance, fuel, tires, oil changes, meals on the road, maintenance, and workers compensation insurance. If they get sick or need a vacation, they have to hire their own replacements. They’re even required to groom themselves according to FedEx standards.
FedEx doesn’t tell its drivers what hours to work, but it tells them what packages to deliver and organizes their workloads to ensure they work between 9.5 and 11 hours every working day.
If this isn’t “employment,” I don’t know what the word means.
In 2005, thousands of FedEx drivers in California sued the company, alleging they were in fact employees and that FedEx owed them the money they shelled out, as well as wages for all the overtime work they put in.
Last summer, a federal appeals court agreed, finding that under California law – which looks at whether a company “controls” how a job is done along with a variety of other criteria to determine the real employment relationship – the FedEx drivers were indeed employees, not independent contractors.
Does that mean Uber drivers in California are also “employees”? That case is being considered right now.
What about FedEx drivers and Uber drivers in other states? Other truck drivers? Construction workers? Hair salon workers? The list goes on.
The law is still up in the air. Which means the race to the bottom is still on.
It’s absurd to wait for the courts to decide all this case-by-case. We need a simpler test for determining who’s an employer and employee.
I suggest this one: Any corporation that accounts for at least 80 percent or more of the pay someone gets, or receives from that worker at least 20 percent of his or her earnings, should be presumed to be that person’s “employer.”
Congress doesn’t have to pass a new law to make this the test of employment. Federal agencies such as the Labor Department and the IRS have the power to do this on their own, through their rule making authority.
They should do so. Now.
Robert Reich, chancellor’s professor of Public Policy at UC Berkeley and senior fellow at the Blum Center for Developing Economies, was secretary of Labor in the Clinton administration.
Main Test
Does the principal (you) have the right to direct and control the manner and means in which the worker carries out the job? The right of direction and control, whether or not exercised, is the most important factor in determining an employment relationship. The right to discharge a worker at will and without cause is strong evidence for the right of direction and control. When it is not clear whether you have the right to direct and control the worker, you must look further into the actual working relationship by weighing the ten secondary factors.
Now then – If you put this before the California EDD they will interpret their own CUIC codes entirely at will to suit their own needs for a case. They literally “twist” the language of their codes to derive an intended result. The law is worsened by Superior Court Judge’s decisions with bias and prejudice.
After spending 5 years battling the State in court – I fully agree “employment” codes need to be amended to be much more specific as to who is an “Employee” !
PS: (I won my case pro-per with much determination and persistence )
Holy cow, I agree with Robert Reich. This country sure is in a race to the bottom and it starts at the very top. A large segment, if not the majority, of the political class believes that a diminished America is good for the world.
This problem is weakening the fabric of our society. Our taxes don’t seem to ever go to prosecuting white collar crime, and this is criminal. SLT and El Dorado County are suffering in many ways because of this all- too- common pattern. I hear non-profits are now paying their employees as contract workers. Really???
I wonder if a contractor who subs out to another- who then pays cash, is liable for this law-breaking. Anyone on the city council recognize their behavior here? Time for everyone to start reporting this to LE, so they can work on this crime.
Locally the problem is with second homeowners and residents alike. They both want a value for their money spent but neither want to pay for it. After having been in the construction trades for over 30 years I can tell you the first thing out of everyone’s mouth is ” I don’t have any money or I want this done cheap as possible” yet we all expect perfect results. Most contractors have comp, pl & pd insurance, employees and most important a Ca contractors lic as well as overhead for all the equipment we must have to do that perfect job for you. Times are tight, I get that, they are tight for us as well. So far all of our expenses have gone through the roof like gas, insurance, wc and a slew of items that keep our business afloat to work for you in an efficient manner. I live here as well and my home owner taxes have gone up as well along with a host of extra taxes that government agencys need because they can’t get by with a $65,000.00 a year job. We, contractors, cannot cry no milk for the kids or no toilet paper for the parks and just raise our rates. Go around town and see how many of us local contractors are out and about spending money. Ask the local charities if the contractors are giving as much money like we used to help our community. What’s the solution? Don’t know other than to tell everyone you get what you pay for and if there is a problem you can find us and we are not off the hill.
“To permit every lawless capitalist, every law-defying corporation, to take any action, no matter how iniquitous, in the effort to secure an improper profit and to build up privilege, would be ruinous to the Republic and would mark the abandonment of the effort to secure in the industrial world the spirit of democratic fair dealing.”
Teddy Roosevelt(R), 1908
It seems to me that many legislators who have voted to allow the abuse of law to favor corporations and this sort of behavior have lost their understanding of what the spirit of democratic fair dealing means. In my opinion, we need another Teddy Roosevelt.
TR loved America and it shows in his many quotes such as above.
Another excellent one is to paraphrase: There is no room for hyphenated Americans. We are all Americans period.
Thanks Michael Clark for the eloquent quote from T.R.
The former Labor Secretary doesn’t talk about it in the article but the burden on our society has been placed squarely on the backs of regular wage-earners. All income needs to be taxed at the same rate and the over burdensome taxes and regulations on small business owners need to be turned around by our elected representatives. Too bad they are in the pocket of the ultra-wealthy. This is a top- down problem. That’s why it’s a race to the bottom- there is no choice for most people. Watch how you vote- that’s where the fix has to come from.