Social Europe

politics, economy and employment & labour

  • Themes
    • Global cities
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter
  • Membership

Why We’re All Becoming Independent Contractors

Robert Reich 24th February 2015

Robert Reich, Independent Contractors

Robert Reich

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 racial or gender discrimination, and the right to bargain collectively. Not to forget Obamacare’s mandate of employer-provided healthcare. Uber workers don’t get any of these things. They’re outside the labor laws.

Uber workers aren’t alone. There are millions like just them, also outside the labor laws — and their ranks are growing. Most aren’t even part of the new Uberized “sharing” economy. They’re franchisees, consultants, and freelancers. They’re also construction workers, restaurant workers, truck drivers, office technicians, even workers in hair salons. What they all have in common is they’re not considered “employees” of the companies they work for. They’re “independent contractors” – which puts all of them outside the labor laws, too.

The rise of “independent contractors” is the most significant legal trend in the American workforce – contributing directly to low pay, irregular hours, and job insecurity. What makes them “independent contractors” is mainly that the companies they work for say they are. So those companies don’t have to pick up the costs of having full-time employees. But are they really “independent”? Companies can manipulate their hours and expenses to make them seem so.

A private car providing chauffeur services via several share-economy services. (photo: CC BY-SA 2.0 TheTruthAbout)

A private car providing chauffeur services via several share-economy platforms. (photo: CC BY-SA 2.0 TheTruthAbout)

It’s become a race to the bottom. Once one business cuts costs by making its workers “independent contractors,” every other business in that industry has to do the same – or face shrinking profits and a dwindling share of the market. Some workers prefer to be independent contractors because that way they get paid in cash. Or they like deciding what hours they’ll work. Mostly, though, they take these jobs because they can’t find better ones. And as the race to the bottom accelerates, they have fewer and fewer alternatives.

Fortunately, there are laws against this. Unfortunately, the laws are way too vague and not well-enforced. For example, FedEx calls its drivers independent contractors. Yet FedEx requires them to pay for the FedEx-branded trucks they drive, as well as the FedEx uniforms they wear, and FedEx scanners they use – along with insurance, fuel, tires, oil changes, meals on the road, maintenance, and workers compensation insurance. If they get sick or need a vacation, they have to hire their own replacements. They’re even required to groom themselves according to FedEx standards. FedEx doesn’t tell its drivers what hours to work, but it tells them what packages to deliver and organizes their workloads to ensure they work between 9.5 and 11 hours every working day. If this isn’t “employment,” I don’t know what the word means.

In 2005, thousands of FedEx drivers in California sued the company, alleging they were in fact employees and that FedEx owed them the money they shelled out, as well as wages for all the overtime work they put in. Last summer, a federal appeals court agreed, finding that under California law – which looks at whether a company “controls” how a job is done along with a variety of other criteria to determine the real employment relationship – the FedEx drivers were indeed employees, not independent contractors. Does that mean Uber drivers in California are also “employees”? That case is being considered right now.

What about FedEx drivers and Uber drivers in other states? Other truck drivers? Construction workers? Hair salon workers? The list goes on. The law is still up in the air. Which means the race to the bottom is still on. 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.”

Congress doesn’t have to pass a new law to make this the test of employment. Federal agencies such as the Labor Department and the IRS have the power to do this on their own, through their rule making authority.

They should do so. Now.

This column was first published on Robert Reich’s Blog

Robert Reich

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as Secretary of Labor under President Bill Clinton. His latest book is Saving Capitalism.

You are here: Home / Politics / Why We’re All Becoming Independent Contractors

Most Popular Posts

Russia,information war Russia is winning the information warAiste Merfeldaite
Nanterre,police Nanterre and the suburbs: the lid comes offJoseph Downing
Russia,nuclear Russia’s dangerous nuclear consensusAna Palacio
Belarus,Lithuania A tale of two countries: Belarus and LithuaniaThorvaldur Gylfason and Eduard Hochreiter
retirement,Finland,ageing,pension,reform Late retirement: possible for many, not for allKati Kuitto

Most Recent Posts

Russia,journalists,Ukraine,target Ukraine: journalists in Russia’s sightsKelly Bjorkland and Simon Smith
European Union,enlargement,Balkans EU enlargement—back to the futureEmilija Tudzarovska
European Health Data Space,EHDS,Big Tech Fostering public research or boosting Big Tech?Philip Freeman and Jan Willem Goudriaan
migrant workers,non-EU Non-EU migrant workers—the ties that bindLilana Keith
ECB,European Central Bank,deposit facility How the ECB’s ‘deposit facility’ subsidises banksDavid Hollanders

Other Social Europe Publications

strategic autonomy Strategic autonomy
Bildschirmfoto 2023 05 08 um 21.36.25 scaled 1 RE No. 13: Failed Market Approaches to Long-Term Care
front cover Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship

Eurofound advertisement

Eurofound Talks: housing

In this episode of the Eurofound Talks podcast, Mary McCaughey speaks with Eurofound’s senior research manager, Hans Dubois, about the issues that feed into housing insecurity in Europe and the actions that need to be taken to address them. Together, they analyse findings from Eurofound’s recent Unaffordable and inadequate housing in Europe report, which presents data from Eurofound’s Living, working and COVID-19 e-survey, European Union Statistics on Income and Living Conditions and input from the Network of Eurofound Correspondents on various indicators of housing security and living conditions.


LISTEN HERE

Foundation for European Progressive Studies Advertisement

The summer issue of the Progressive Post magazine by FEPS is out!

The Special Coverage of this new edition is dedicated to the importance of biodiversity, not only as a good in itself but also for the very existence of humankind. We need a paradigm change in the mostly utilitarian relation humans have with nature.

In this issue, we also look at the hazards of unregulated artificial intelligence, explore the shortcomings of the EU's approach to migration and asylum management, and analyse the social downside of the EU's current ethnically-focused Roma policy.


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

WSI European Collective Bargaining Report 2022 / 2023

With real wages falling by 4 per cent in 2022, workers in the European Union suffered an unprecedented loss in purchasing power. The reason for this was the rapid increase in consumer prices, behind which nominal wage growth fell significantly. Meanwhile, inflation is no longer driven by energy import prices, but by domestic factors. The increased profit margins of companies are a major reason for persistent inflation. In this difficult environment, trade unions are faced with the challenge of securing real wages—and companies have the responsibility of making their contribution to returning to the path of political stability by reducing excess profits.


DOWNLOAD HERE

ETUI advertisement

The future of remote work

The 12 chapters collected in this volume provide a multidisciplinary perspective on the impact and the future trajectories of remote work, from the nexus between the location from where work is performed and how it is performed to how remote locations may affect the way work is managed and organised, as well as the applicability of existing legislation. Additional questions concern remote work’s environmental and social impact and the rapidly changing nature of the relationship between work and life.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube