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Sharing Economy is Turning More and More Workers into “Independent Contractors”

Marco Rubio Speech On Innovation At Uber's DC OfficesIn a recent article warning about the trend to categorize an increasing number of Americans as “independent contractors,” economist Robert Reich offered the following comparison between Uber and General Motors:

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.

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 workplace discrimination, and the right to bargain collectively.

Not to forget Obamacare’s mandate of employer-provided health care.

Uber workers don’t get any of these things. They’re outside the labor laws.

Reich goes on to point out that Uber workers are hardly the exception any more. In fact, millions of us are joining their ranks in that unsteady territory outside traditional labor laws and protections. What’s more, the majority of aren’t even part of the newly emergent “Uberized” sharing economy.

These workers are consultants, franchisees, and freelance workers. Others do construction, restaurant work, driver delivery trucks, serve as office techs, and see clients in hair and nail salons.

What all of them have in common is they don’t count as “employees” with the companies they serve.   Instead, they are given an “independent contractor” status – putting them outside most U.S. labor laws.

Reich calls this rise of independent contractors “the most significant legal trend in the American workforce — contributing directly to low pay, irregular hours, and job insecurity.” And the reason for being “independent contractors” in the first place is simply because the companies these folks work for find it to their advantage to categorized them as such. This relieves them of obligations to cover traditional costs of a full-time employee.

Yet the trend raises the question: are they really “independent”? It’s easy enough for an employer to manipulate hours and expenses to make them seem so.

For example, FedEx labels its drivers as independent contractors. Yet those workers have to pay for the FedEx-branded trucks they drive, as well as their uniforms and FedEx scanners – not to mention insurance and fees, gas, car maintenance, meals on the road, and private workers compensation insurance. In the case of illness or a personal vacation, the worker has to find and hire his or her own replacement. They’re even required to observe personal grooming standards set by FedEx.

The one marker of being “independent” is that FedEx doesn’t tell its drivers what specific hours they need to work; however, it does decide which packages to deliver and sets workloads so that basically everyone puts in between 9 and 11 hours every working day.

As Reich responses: “If this isn’t “employment,” I don’t know what the word means.”

In 2005, thousands of FedEx drivers brought an employment lawsuit against the company, claiming that they were indeed employees and that FedEx owed them compensation for shouldering those expenses, plus unpaid wages for all the overtime hours they put in.

And a federal appeals court agreed with the workers, stating that under California law — which considers whether a company “controls” how a job is done, along with multiple other factors defining the worker/employer relationship — the FedEx drivers were in fact employees rather than independent contractors.

Does that mean Uber drivers count as “employees” as well? That case is under consideration in California courts right now.

But as Reich argues, “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.”

He goes on to clarify that we doesn’t even need to pass a new law in Congress to make this the standard for employment. Federal agencies like the Labor Department and the IRS have authority to do so on their own, through their labor rule making powers.

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