Employee or Independent Contractor?

Employee vs. Independent Contractor 

Image by Gordon Johnson from Pixabay

From Law.com/Texas Lawyer, Michael P. Maslanka discusses the ongoing struggle between protecting workers and allowing individual freedom as it plays out in the classification of workers as independent contractors. Michael writes:

The stakes could not be higher. If an independent contractor, then the worker is not covered by  well over a half century of remedial legislation: the Fair Labor Standards Act and the National Labor Relations Act from the 1930s; Title VII of the Civil Rights Act and the Age Discrimination in Employment Act from the 1960s; and the Employee Retirement Security Act and the Pregnancy Discrimination Act from the 1970s. In short, good luck independent contractor, you are on your own. And once upon a time that was fine because the demarcation between employee and independent contractor was bright and well defined.

For instance, say an independent contractor had her own business, a business in which she would remodel the kitchen of a home or one in which she would build a tool shed for a factory. The one doing the hiring set out the objectives (“ I want a kitchen that looks just like  this photo”) and the contractor decided upon the means to make the wish into a reality. Everyone gained and was satisfied.

But then enter stage right: the Gig Economy. The service industry  mushroomed, new business models sprung up (Uber and Grubhub to name two) and old law adapted to new circumstances. Corporate America realized that it could rid themselves of pesky employees by making employees into independent contractors by permitting the worker to control the details of a job. Look at Lawson v. Grubhub Inc., 302 F. Supp. 3d 1071 ( N.D. Calif. 2018) In Grubhub ( a restaurant delivery service), the delivery drivers decide on how ( car, bike, scooter) delivery is made, their appearance when making it , and  their schedule if they decide to work. Thus, no overtime need be paid. Or examine FedEx Home Delivery v NLRB, 563 F. 3d 492 ( D.C. Cir. 2009 )  where, in a 2-1 vote, the appeals court  held that a worker was an independent contractor because they furnished their own vehicle, which had to be decked out in FedEx logos and colors (as did the driver uniforms), the workers still worked when they wanted as long as all your assigned packages were delivered on time. But this case added a kicker, namely “entrepreneurial opportunity” for gain or loss. Yes, you too, can be a business owner and buy and sell your assigned route and hire your own employees to service the route. And as independent  contractors, the NLRA is inapplicable and a union cannot be formed. Oh, and best yet, the worker need not take advantage of these opportunities; it is sufficient for independent contractor status if the opportunities are available even though never accessed — as turned out to be the case. Entrepreneurs in potential only. A far cry from the days of Joan’s Kitchen Remodeling.

But here is how far the concept of an independent contractor has really come and its true threat to workers. Grubhub exists solely to deliver food and FedEx Ground to deliver packages. But the very purpose for their  existence is performed solely by independent contractors, not by employees. These workers are integral to the very existence of these entities and come in not to perform a skilled job  and a discrete task and leave ( Joan’s Kitchen Remodeling) but rather to come in and perform a fungible job and a repetitive task and  stay.

On January 1, 2020, though a counter-punch landed on this emerging trend when AB-5 became law in California. Patterned after similar laws in Massachusetts and New Jersey, the law adopted the “ABC” test in which a worker is presumed to be an employee and is only deemed an independent contractor if (a) the entity urging contractor status establishes that (a) the worker is free of control from the hiring entity; (b) the worker performs work that is outside the usual course of the hiring entity’s business; and (c) the worker is customarily engaged in an independently established trade or occupation as that involved in the work performed. Just like the good old days before the Gig economy. And guess what? The Fifth Circuit on  January 10, 2020, in Hobbs et al v. Petroplex Pipe and Construction announced it would now consider  whether a worker is an integral part of the hiring entity’s business; if the answer is “yes,” the worker, according to the court, is more likely an employee.

Of course there is lots of money at stake. Big money. In November 2019, the state of New Jersey sent a tax bill to Uber of $649,000,000 for back taxes owed for workers who should have been treated as employees but were not. ( Somehow, I do not think a payment plan is possible.)

Employment law is a never-ending struggle between the power of Capital and Labor with the Public Good hovering nearby and taking sides only when appropriate. There are no winners in the fight, only combatants. And, when you think about, this is exactly as it should be.

Source: Employee vs. Independent Contractor | Texas Lawyer

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