This NewsBreak originally appeared as the Legal Issues column in the November/December 2020 issue of Information Today.
I am both an employee and an independent contractor. I’m an employee of my university in the job of librarian and senior lecturer. While my education, experience, and skills (such as they are) led my employer to make the hiring decision, my employer plays an active role in directing what my day-today responsibilities are and when and where I do my job (currently remotely) and in return pays me a regular salary and provides benefits.
I am also an independent contractor, currently contracted by Information Today, Inc. (ITI) to write a monthly column on legal issues of interest to the information industry. Similarly, while my education, experience, and skills (such as they are) led an Information Today editor to reach out and engage me to write this column, ITI doesn’t play nearly as much of an active role in directing my writing. Other than broad guidelines for subject, word count, and style, the company doesn’t direct where and when I write for it, and it pays me by the column.
I thoroughly enjoy both roles, those of employee and independent contractor, but am aware of the differences. I have to pay my own Social Security and income taxes from my contractor earnings. I supply my own tools for my writing, but am also free to take similar writing gigs if I want to.
THE GIG ECONOMY
The so-called gig economy has changed the dynamics of employment and independent contracting. Traditional independent contractors were largely limited to skilled craftspeople, tradespeople, or professionals who did specific jobs—often on a case-by-case basis—such as plumbers and electricians or photographers and artists. They “worked for themselves,” but were also responsible for themselves. Employees worked consistently and regularly for a single company, earned a paycheck, and maybe received benefits.
In the gig economy, the lines have become blurred. Is an Uber or Lyft driver an employee of the company or an independent contractor? Is a coder working on a specific project for a software developer an employee or a contractor? What about the workers? Do they want the stability and benefits of employment or the flexibility that comes with being a contractor? Some employers are taking advantage of the gig economy by calling their workers contractors, but treating them as employees.
CONTROL, SKILLS, AND MISSION
There have been multiple legal tests in various legal contexts to determine whether a particular worker is an employer or a contractor, some of which date back to the 1940s. Most of them rely on overlapping and confusing factors in determining employment versus contract. These factors generally include the amount of control over the work, the skills of the worker, whether those skills are central to the employer’s primary mission, financial control, and training.
In late September, the U.S. Department of Labor proposed new regulations to clarify and simplify the test, boiling it down to two primary considerations: the nature and degree of the worker’s control of the work and the worker’s opportunity for profit or loss based on initiative and investment. Together, the considerations seek to focus on whether the worker is “economically dependent on someone else’s business or is in business for himself or herself.”
If further clarification is needed, the department’s regulations suggest looking at three additional “guideposts”: the amount of skill required, the degree of permanence of the working relationship, and whether the work is part of an “integrated unit of production.”
By focusing on workers’ control and opportunity for profit based on their own initiative, these regulations are being seen as favorable to the employer who wants to be able to classify more people as contractors rather than as employees. Contractors are generally considered to be less expensive and give employers more flexibility in managing their workforce.
From the worker’s perspective, it can be a double-edged sword. Secretary of Labor Eugene Scalia (son of the late Supreme Court Justice Antonin Scalia) wrote an article for FOX Business indicating that the proposed rules do not “slant the analysis toward classifying independent contractors as employees.” He goes on to cite a Bureau of Labor Statistics study showing that 79% of contractors “prefer their work arrangement to traditional jobs.”
Critics of the proposed rules, including labor groups and workers’ advocates, argue that some workers are doing the work of employees but are “misclassified” as contractors and lose the protections of wage and hour laws. Rep. Robert “Bobby” Scott (D-Va.), chairperson of the House Committee on Education and Labor, criticized the proposal, saying that the continuing misclassifying of employees as independent contractors “strips workers of basic wage and hour protections, leaves law-abiding businesses at a competitive disadvantage, and robs state and local government of billions in lost revenues.”
California’s recently enacted AB5 bill represents an opposite perspective, putting the burden on employers to prove that their workers are not employees by showing that the workers are free from the control or direction of the company, perform work outside of the usual course of the company’s business, and are engaged in an established trade, occupation, or business. Already, courts have held that Uber and Lyft drivers are employees under AB5, which has caused both companies to threaten to leave California.
FINAL REGULATIONS BY JANUARY
The Department of Labor’s proposed regulations will go through a public comment period, after which the department hopes to release final regulations in early January. The timing is very significant, in that if the regulations are not finalized, they could be dropped by a Biden administration after the inauguration. If they are finalized, it would take congressional action to change or eliminate them, which would likely only happen if the Democrats can retain the House and claim the Senate.
California’s AB5 is the subject of a ballot proposition in November to clarify the classification of Uber and Lyft drivers, and it has already been amended several times to clarify the rights of traditional gig workers such as musicians, videographers, freelance journalists and writers (like me, writing for ITI), artists, and editors. (On Oct. 22, “A California appeals court ... upheld an order requiring Uber and Lyft to treat their California drivers as employees instead of independent contractors, less than two weeks before voters will be asked to exempt the ride-hailing giants from the state’s gig economy law,” The Philadelphia Inquirer reports. “Uber and Lyft issued statements noting that the ruling doesn’t take immediate affect and urging voters to approve [the ballot proposition]. Lyft also said it also is considering appealing to the California Supreme Court.”)
Other states have proposed similar legislation, which would apply in their states even if the Department of Labor regulations are enacted. Given all of that, the lines are likely to remain blurred.