The Independent Worker: Finding a Middle Ground Between Employee and Independent Contractor

Transcription

1 The Independent Worker: Finding a Middle Ground Between Employee and Independent Contractor

2 Presented By Stephen Dellinger Shareholder Littler Charlotte Julie Adams Of Counsel Littler Charlotte

3 Agenda Introduction: Setting the Stage The Hamilton Project s Proposal for Modernizing Labor Laws for Twenty-First Century Work: The Independent Worker Initial Response and Industry Perspective Questions

4 The Future of Work and the Social Compact The employment relationship remains a keystone to the enforcement of public policy But can traditional employment accommodate changes in the way that work is organized, structured and compensated?

5 Multiple Factors Driving the Discussion Pressure on labor supply: better, faster, cheaper Social change impacting relationships to work Impact of technology The rise of the Gig Economy and new relationships between workers, customers, and intermediaries

6 Employee v. Independent Contractor Too many results-oriented legal tests create compliance challenges The results often do not conform to the expectation of either party

7 Increased Government and Private Enforcement Actions Recession-driven concerns of loss in tax revenue Expansive view of employment under federal labor laws Expanding wage and hour litigation

8 Private Wage & Hour Litigation $1.25 million to NFL cheerleaders $1.75 million to financial services reps $2 million to oil field workers $4.5 million to real estate agents $6 million to exotic dancers $22 million to newspaper carriers Millions and millions to drivers

9 DOL Misclassification Initiative Directed investigations in industries DOL views as frequently misclassifying employees as ICs. In FY 2014: 44% of investigations were directed (as opposed to responding to a complaint) DOL collected $79 million in back wages for 109,000 misclassified ICs Child Care Construction Home Health Care Janitorial Landscaping Poultry and Meat Processing Professional and Personnel Services Transportation and Warehousing

10 DOL MOUs with IRS & 29 States

11 New DOL Guidance on IC In sum, most workers are employees under the FLSA s broad definitions. The very broad definition of employment under the FLSA as to suffer or permit to work and the Act s intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor.

12 The Independent Worker: A Proposal to Modernize Labor Laws for the 21 st Century

13 Independent Workers are in a Triangular Relationship with Intermediary and Customers Intermediary Independent Worker Customers

14 Employee vs. Independent Contractor Employee Social compact = exchanging economic dependence on employer, manifest through employer control of work, for legally mandated/ encouraged modicum of economic security and legal protections. Independent Contractor Individual compact = Independent businesses with arms-length business relationships and bargaining power. Independent Worker or freelancer Some employer control, but not over means, methods, or hours of work, and some worker independence = What s their compact? 14

15 The Future Of Work 83% of executives report their companies increasing the use of contingent workers. Today approximately 30 million independent works. One report - expected to increase by 40 million by 2019, another by 2020 freelancers will comprise 40% of workforce.

16 Independent Workers Fall in Grey Area of Labor and Employment Law Independent Workers: control whether they work, when they work, how long they work, where they work, and (for the most part) the manner in which they provide a customer with service and the duration of that service; able to work for multiple intermediaries simultaneously, or engage in personal tasks while working ( waiting to engage vs. engaged to wait ); hours easy to measure with technology, but often conceptually impossible to assign to an employer. Intermediary exerts some control over independent workers, such as fees or elements of work. Independent workers can work with online or offline intermediaries. 16

17 The Problem and A Different Approach Current employee vs. independent contractor legal dichotomy = inefficient, creates legal uncertainty for workers and intermediaries Classifying independent workers as employees jeopardizes benefits of flexibility and innovation, but classifying independent workers as independent contractors could jeopardize the social compact. A possible different approach: A new legal classification of independent workers, with requirements on intermediaries that are: 1) appropriate for independent workers; 2) economically efficient; 3) neutral with respect to choosing independent worker over employee status. 17

18 Uber Drivers Have Flexibility in Choosing When, Whether and How Much to Work 43% of drivers work 50% more or 50% less from one week to the next 61% have another full-time or parttime job 51% work only 15 hours or less a week for Uber

19 Number of Uber Drivers Has Grown Exponentially and Uber is Largest Online Intermediary in U.S. 450, ,000 Active Uber Drivers Google Searches for "Uber" , , , , , ,000 Google Searches for "Uber" (Six-month moving average, right scale) 50,000 Drivers on the Uber Platform 0 (left scale) Jun-12 Jun-13 Jun-14 Jun Source: Cramer (2015), Hall and Krueger (2015),

20 Google Searches for Intermediaries

21 Our Guiding Principles for Proposed Benefits and Protections for Independent Workers Maintain and Expand Social Compact Appropriate for workers whose hours cannot be assigned to an employer Efficient Neutral with respect to employment status 21

22 Benefits and Protections for Independent Workers Required Right to Organize Civil Rights Protection Tax Withholding Contribute half of FICA tax Contribution to ACA based on earnings Intermediaries could pool workers for provision of benefits (e.g., insurance, retirement accounts) Not Required Overtime Minimum Wage Unemployment Insurance Workers Compensation is not required but intermediary could opt in and be exempted from tort suits 22

23 Organizing and Bargaining Collectively Core: Workers aggregate individual bargaining power into collective power to bargain with intermediaries over fees/commissions, time, and other terms. Means: Remove antitrust law as a barrier, Workers free to organize using every-day info tech without an overarching legal structure; or National Labor Relations Act. 23

24 Civil Rights Protections Core: No illicit discrimination in independent worker relationships inefficient, wrong Means: Include independent workers in existing workplace anti-discrimination laws (e.g., Title VII, ADA, Equal Pay Act, ADEA) 24

25 Minimum Wage, Overtime, and Unemployment Insurance Core: Distinguishing work from non-work, and assigning responsibility for time, impossible or too conceptually difficult. Means: No legal minimum wage or overtime obligation; no government UI system, but pooling permitted. Independent workers, through their organizations, bargain over these issues. 25

26 Workers Compensation Core: Workers should be compensated for work-related injury, illness, or fatality. Means: Tort system Pooling to provide Workers Comp insurance Texas/Oklahoma schemes not possible 26

27 Industry Perspective Upwork is the world s largest freelancing website 17M+ cumulative registered users in 180+ countries B2B, 2-sided marketplace Licensed escrow service for payments 2,900+ skills advertised, including web development, graphic design, marketing, writing and translation Upwork not involved in pricing, assigning work, or any other engagement terms Users are free to work when, where, how, and with whom they choose

28 Industry Perspective 2015 annual Freelancing in America Study showed: More people are freelancing by choice 60% said they started more by choice, up 7 percentage points from last year 75% of full-time freelancers report that schedule flexibility and being their own boss are key reasons 60% of freelance professionals who left traditional employment now earn more 78% earned more within a year or less 73% of freelancers say that technology makes it easier to find work

29 Counter Arguments Assertion that the work hours of independent worker are immeasurable suggests that the case for a third work category is flawed. Harris-Krueger paper failed to include voices of current or former Uber drivers. Independence is impossible. Low chance of federal regulatory action and its affect.

30 Conclusions The number of jobs in the online gig economy is small but growing fast. This concept is applicable outside the gig economy. Careful thought needs to go into reforming labor laws to support innovation and maintain the social compact. A better solution to tailoring benefits and employment protections to independent workers in a way that is: 1) appropriate for workers who can choose their own hours or whether to work; 2) efficient; 3) neutral with respect employment status. 30

31 Questions?

32 Stephen Dellinger Shareholder Littler Charlotte Julie Adams Of Counsel Littler Charlotte