October 26, 2016

Redefining Employment for the Modern Economy

Brishen Rogers

*Read more on this topic in the ACS Issue Brief: Redefining Employment for the Modern Economy

by Brishen Rogers, Associate Professor of Law at Temple University Beasley School of Law

The explosive growth of Uber and other on-demand labor platforms has brought public attention to a longstanding issue facing workers in this country: the fissuring of employment. Fissuring comes in many forms, including misclassification of employees as independent contractors, subcontracting and franchising arrangements.

Such strategies can deprive workers of their rights under our employment laws, most of which define employment per the common law “right to control test.” That definition is narrow, failing to reflect the economic realities of modern work relationships. It is also notoriously difficult to apply in practice, which increases litigation costs and disempowers low-wage workers.

This is not a small problem. Wage and Hour Administrator David Weil estimates that there are “over 29 million workers in just five industries affected …  including in the construction, hospitality, janitorial, personal care and home health care industries.”

Unfortunately, some prominent reform proposals—such as to create a new legal category of worker that would slot between “employee” and “independent contractor,” with limited employment rights—would move us backwards rather than forwards. Ethically speaking, workers in fissured relationships are no less deserving of basic protections than standard employees. Creating a third category of worker would also make employment status litigation even more complicated and more expensive.

In a new issue brief for ACS, I propose an omnibus employment status bill to address such challenges. The central reform would redefine employment under the core federal labor/employment statutes per the broad “suffer or permit” test from the federal Fair Labor Standards Act. In misclassification cases under that test, courts’ and agencies’ task is not to determine whether the putative employer enjoys a right to control the performance of the work, but rather “to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).”

As worker advocates know, the “suffer or permit” test can still be challenging to apply. So such an omnibus bill could also take various practical steps to make employment status cases easier. For example, following many states’ lead, such a bill could place the burden of proof on the party seeking to avoid employment status.

Such a bill could also define workers in certain highly fissured industries as the per se legal employees of firms who contract with them individually for labor and/or the joint employees of firms who obtain their labor through subcontracting or franchising arrangements. A sensible list would include the industries noted by Administrator Weil, as well as on-demand labor platforms. Again, this approach would build on successful reforms in various states.

Finally, such a bill could simplify cases in other industries by identifying key factors to determine whether the worker is truly in business for him or herself. Those could include:

· Whether the putative employer could carry out its business without the work at issue;

· Whether the worker exerts the sort of managerial skill characteristic of an independent business or trade, such as advertising his or her services, negotiating contracts with terms specific to each job and deciding which jobs to perform and when to perform them, all free from any direction from the putative employer;

· How the worker’s investment in capital goods or other business resources compares to the putative employer’s investment;

· Whether the putative employer dictates regularized contract terms to workers, contractors or franchisees.

Such a set of reforms would have important social benefits. It would help ensure that all workers enjoy reasonable hours, decent pay, rights against discrimination and rights to join together and bargain collectively. Doing so can reduce economic inequality. It can also ensure that emerging business models truly enhance our welfare rather than simply sweating workers.