A group of Fight for $15 protestors gather to support striking McDonald’s workers, Fort Lauderdale, Florida.
This continues our discussion about the future of decent jobs and gig work. See here for part one.
Standard employment. Non-standard employment. Alternative work arrangements. Independent contractors. Contract employees. These can be confusing terms, without clear lines, and we owe thanks to David Weil, Heidi Shierholz, and John Schmitt for doing such an excellent job dissecting these terms and clarifying what is happening in the nation’s labor force.
While there will be continued debate about how to measure the number of non-standard workers, what employers are doing is crystal clear. They are, as David Weil explained so brilliantly in The Fissured Workplace, employing myriad strategies—contracting out, misclassifying, hiring through apps, employing temps and freelancers, trimming health and retirement benefits—all to minimize labor costs as well as lasting ties to their workers.
Heidi Shierholz and John Schmitt point out that the major increase in non-standard work has come not in workers’ main jobs, but in workers taking second and third jobs because their principal job pays too little. David Weil explains that fissuring is a reason that many workers’ main jobs don’t pay enough. As primary employers use temp agencies or contract out, they often turn to the lowest bidders (who often skimp on wages and benefits), and that means workers get the short end of the compensation stick. It’s precariousness raised to the second power.
In my upcoming book, I explore what can be done to increase bargaining power and pay for all these fissured workers, whether hotel workers employed by subcontractors, workers at McDonald’s franchises, or Uber and Lyft drivers.
It’s not easy for precarious workers to join together and exert the leverage needed to raise their pay. Many Uber drivers told me they made just $4 or $6 per hour some days after factoring in expenses: car, insurance, gasoline. I often wondered why Uber drivers didn’t do more to unionize during the Obama administration when the National Labor Relations Board might have ruled that Uber drivers were employees with a right to unionize (whereas Peter Robb, whom Trump appointed NLRB general counsel, just issued an advisory memo declaring that Uber drivers are independent contractors). Some organizers explained the problem to me: Contemplate the prospect of getting 30 percent (18,000) of New York’s 60,000 Uber drivers to sign cards saying they back a union—that’s the minimum needed to petition the NLRB for a unionization vote. That’s a daunting prospect.
In recent years, we’ve seen several unorthodox but effective strategies to lift the pay of fissured, precarious workers. First and foremost was the Fight for $15, which set out to increase the pay of millions of fast-food workers. That effort has gotten seven states—California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York—to enact a $15 minimum wage.
Before New York enacted its $15 law, Governor Andrew Cuomo turned to an unusual tool to raise fast-food workers’ pay. He created a “wage board,” a Depression-era mechanism that some states used to set fair industrywide pay levels. Cuomo’s board held hearings across New York at which many fast-food workers testified they needed $15 an hour and couldn’t survive on the state’s $8.25 minimum wage. Restaurant industry executives pushed back, testifying that $15 was absurdly high. The wage board ruled that the state’s fast-food workers should receive $15 an hour, and Cuomo got the legislature to enact that recommendation. One union leader told me it resembled European-style sectoral bargaining. “It was like collective bargaining on steroids,” he said.
New York City’s Taxi and Limousine Commission embraced a variation of this strategy. Its chairman, Meera Joshi, saw how 85 percent of the city’s e-hail drivers were earning less than the state minimum wage, after expenses. Alarmed by this, the commission—with the city council’s blessing—voted last December to set a $17.22 minimum hourly wage, after expenses, for app-based drivers. Now many Uber and Lyft drivers in other cities are looking to this model as a quicker way to raise pay than unionizing.
In another variation, Seattle’s city council voted last summer to create a “standards board” to improve pay and conditions for Seattle’s 30,000 domestic workers. That 13-member board will make recommendations on minimum pay, overtime, paid time off, and health benefits for nannies and housekeepers, with the expectation that the city council will enact those proposals.
If cities can create such boards to help nannies and housekeepers, there is no reason why they can’t do so for other workers, whether temps, fast-food workers, nail salon employees or Uber drivers. Some labor strategists note that such boards might be used to mobilize and even unionize workers, perhaps getting Uber drivers to rally and form a union (outside the NLRB process) to press these boards to raise their pay, just as the Fight for $15 rallied workers to press New York’s wage board and Cuomo to raise their pay to $15.
Steven Greenhouse was a New York Times reporter for 31 years, including 19 as its labor and workplace reporter. He is author of Beaten Down, Worked Up: The Past, Present, and Future of American Labor, to be published by Knopf in August.
At a conference on “the future of work,” the two topics that now dominate discussion—robots and the gig economy—deserve workshops but not plenaries. The main plenary session should focus on the decades-long crisis of suppressed wages and deteriorating job quality created by policy changes on behalf of the rich and powerful to weaken labor standards, have excessive unemployment, expand corporate-driven globalization, spread fissured outsourcing/subcontracting, and dismantle collective-bargaining systems.
I am in agreement with David Weil’s conclusion:
In short, we need to go beyond debating the relative prevalence of “non-standard” versus “standard” jobs. Instead, we must examine how the transformation of business organization and the structure of the economy has changed the very nature of work in all its forms and then turn, laser-focused, to what to do about it.
I want to add some presumably friendly amendments. One is that the transformation of business organization (i.e., fissuring) was not a natural evolution but the result of a shift in management ideology, a push by capital markets, enabled by communications technology and a conscious exploitation of labor and employment law weaknesses. Second, fissuring is one of several management strategies/practices that undercut workers’ pay and security: Others include guest worker programs, exploitation of undocumented workers, worker misclassification, pervasive wage theft, forced arbitration, noncompetes, and so on. Third, economic policies such as excessive unemployment and disguised unemployment, weakened labor standards (such as feeble overtime and minimum-wage standards and enforcement), and the attack on unions have played a major role.
Last, I would propose substituting “terms of work” for the “nature of work” in David Weil’s characterization. The changing “nature of work,” in my view, describes changes in the tasks, occupations, skills, and processes at work that accompany automation or technological change. I don’t see fissuring in that context. Rather, fissuring changes the legal structures within which the same work takes place and consequently alters the “terms of work”—namely, what workers receive for the work they do.
David Weil is correct that fissuring goes well beyond what is captured in the Bureau of Labor Statistics’ measure of non-standard work (independent contractors, temporary work, on-call arrangements, and employment in contracted firms).
The biggest, and best-measured, category of non-standard work is independent contracting (i.e., freelancing or self-employment). The incessant hype around a recent explosion of freelancing that will lead to 30 percent to 40 percent of the U.S. workforce being freelancers was dealt a near-fatal blow when the Bureau of Labor Statistics (BLS) issued data for 2017: Independent contractors made up about 7 percent of employment in 2017, the same as in 1995 and 2005. The BLS data and tax data authoritatively demonstrate that independent contracting has not been wholesale replacing regular (W-2) employment, although an increasing number of people are pursuing part-time activities to supplement the income they earn on their main job.
These data, unfortunately, are not capable of capturing the scope of misclassification where employers deem workers to be independent contractors so as to avoid the provision of the safety net (unemployment and workers’ compensation), labor protections, and unions. Yet we know that a whole new sector of misclassified workers has grown—the so-called ridesharing by Uber and Lyft—and misclassification prevails in trucking, construction, and other sectors. Misclassification, abetted by forced-arbitration agreements, is one of the many strategies pursued by management to undercut workers’ ability to have decent wages and working conditions.
Another non-standard arrangement is temporary work, which BLS suggests has not grown much. I suspect that surveys of workers (or others in their household!) do not tell us much about this trend. But establishment data tell us one identifiable part of temporary work—temporary help and staffing firms—has increased about two percentage points since the late 1970s to between 2.5 percent and 3 percent of private-sector employment, though there was no expansion over the 2000s. Staffing firms have clearly undercut manufacturing workers, especially auto workers, and now supply over 11 percent of all manufacturing workers.
One component of fissuring not captured by BLS is franchising where franchisors have tight control (like McDonald’s, rather than a car dealership): These made up a bit over 5 percent of employment in 2012, the latest data. We do not know how extensive franchising was a few decades ago, but it’s reasonable to consider it to have grown a percentage point or two.
Employment in firms contracted by larger firms to provide outsourced work is the biggest component of fissuring and the one which probably grew the most. Unfortunately, it is not well measured in any surveys. Weil and co-author Tanya Goldman have identified that 29 million workers, or about 24 percent of private-sector employment, are in the ten leading industries “affected by the fissured workplace.” That’s how many workers have their labor standards undercut by fissuring. So, regardless of what we know or don’t know about the components, fissuring has a sizable impact.
Last, fissuring and self-employment have been frequently cited (not by David Weil!) as evidence that employment is fragmenting into smaller firms, leaving employment regulations and collective bargaining outmoded. In fact, self-employment has not grown. More importantly, the share of workers in firms with at least 500 employees is about 52 percent, up from 46 percent in 1979. A third of workers are employed in firms that have at least 5,000 employees. Many firms involved in fissuring are among these large firms (security, janitorial, food service), and those that are not are subject to the dictates of large firms. Our collective-bargaining and employment laws are definitely outmoded., but not because large firms are disappearing.
Lawrence Mishel is a distinguished fellow at the Economic Policy Institute after serving as president from 2002–2017.
Uber drivers, TaskRabbits, Handy Helpers, and Postmates delivery people are not the only “gig workers” in today’s labor market. Over the past 20 years, many workers have seen their jobs transformed from stable, long-term relationships with a single employer to episodic projects or multiple serial or simultaneous jobs with multiple employers. And many others have had their employment status changed from “employee” to “independent contractor.” Even some workers who believed they had job security with a single employer lost it to a downsizing or business restructuring.
So while it is worthwhile to measure non-standard employment, all workers are in some sense “gig workers” or at risk of becoming gig workers. App-deployed platform workers are not so different from other types of non-standard workers—part-time workers, temporary workers, workers juggling multiple jobs at once, workers with no expectations of long-term jobs, independent contractors, and so on.
Currently our labor laws provide labor protections to “employees,” and none to “independent contractors.” However, the current bimodal categorization has become increasingly difficult to apply. Many workers, not just Uberers and TaskRabbits, share characteristics of both standard employees and conventional independent contractors. In part, this is because employers have deliberately reorganized work in order to transfer some discretion and a great amount of risk to employees. For example, many trucking companies no longer own trucks, but rather require their drivers to lease the trucks themselves, pay the maintenance, and shoulder the risk of damage or depreciation. Once they make these changes, the companies argue that their workers are no longer employees and are not entitled to overtime payments, meal breaks, anti-discrimination protection, or the right to join a union.
In the face of pervasive misclassification and the rise of platform work, some analysts claim that workers deployed by intermediaries do not fit within our existing labor law framework because of their self-directed hours, multiple-platform deployments, and ownership of their work tools. They propose a third category that is neither “employee” nor “independent contractor” in order to provide these workers with some labor protections.
One notable proposal comes from Seth Harris and Alan Krueger, who propose a third category, termed “independent workers,” that would apply to workers who get their task assignments from computer platforms. Harris and Krueger propose that “independent workers” be entitled to some of the rights but not all the protections available to employees. Among the benefits they would get is the right to form a union and employer contributions to some payroll taxes. They would not get the protections of the minimum-wage laws, overtime laws, or unemployment insurance.
But this proposal would not solve the problem of misclassification and uncertainty. Rather, proposals like this one could compound it by encouraging even more deceptive efforts by hiring entities to manipulate the categories. If there were three categories instead of the current two, there would be more disputes and litigation about which of the categories any individual working relationship fits. Indeed, several other countries have adopted a third category with mixed results. It has proven to be difficult to define a new category with sufficient precision to avoid manipulation or to achieve consensus about which employment rights to give independent workers.
Moreover, it’s not true that platform workers are a unique breed of worker that requires a separate regulatory package. Our labor protections have been applied to many types of atypical workers in the past, such as hiring-hall workers who work variable and uncertain hours, part-time workers who work for more than one employer at a time, retail workers whose hours vary from day to day, and skilled craftsmen who get project assignments, often even hiring their own crews. Lots of hiring-hall workers and temps also set their own hours, pick their jobs, and work when they want. But they are still “employees” when they are working. Unionized flight attendants also have substantial influence over their hours, but have all the protections of regular payroll employees.
Nonetheless, the problem of misclassification, platform work, and other changing employment arrangements does require us to revise the definition of “employee” and sharpen the line between employees and independent contractors. Until now, the test has been multi-factored and therefore unpredictable. Moreover, different labor statutes and different states utilize different tests, so that a worker could be an employee for some purposes but not for others.
A recent decision by the California Supreme Court adopted a test that could modernize the distinction. In Dynamex Operations v. Superior Court, a case involving drivers for a package delivery service, the court adopted what has been termed the “ABC test” that Massachusetts had articulated. Under the ABC test, for a hiring entity to successfully claim that a worker is an independent contractor, it must establish:
(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for performance of the work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Although Dynamex did not involve on-demand platform workers, the ABC test adopted by the California court has important implications for the gig economy. The California court itself gives, as an example of a situation that satisfies the second prong, a case in which a retail store hires a plumber to repair a leak in a bathroom on its premises. Clearly, in that case, the plumber is not part of the company’s usual course of business. But for Uber, drivers are the centerpiece of its business, so that, under the ABC test, the drivers would be classified as employees.
But under the Trump administration, the federal government has been moving in the opposite direction. The National Labor Relations Board rejected the ABC test in determining whether gig workers are employees for purposes of the right to organize. Last January, in a case involving SuperShuttle, the Labor Board reverted to a pre–Obama era multi-factor test, but added a new pro-employer twist.
In SuperShuttle DFW Inc., 367 NLRB No. 75 (2019), the company maintained that its drivers were franchisees, not employees. It required its drivers to buy a franchise from the company, provide their own vehicle, and pay their own business expenses. The company set the rules under which franchisees were required to operate and charged them fees to cover services the company provides, such as marketing, dispatch, and accounting. Drivers were otherwise free to set their own hours of work, accept or reject rides from dispatch, and even hire additional drivers to service their routes. The NLRB found that the SuperShuttle franchisees were independent contractors, largely because they had a large degree of discretion over decisions that bore on how much money they make. In doing so, it adopted an approach that had prevailed in the D.C. Circuit Court of Appeals three years earlier in a case involving FedEx, where the court gave overriding weight to the workers’ entrepreneurial opportunity for profit and loss.
In April, soon after the SuperShuttle decision, the U.S. Department of Labor issued an opinion letter to an unnamed on-demand company determining that its workers were not employees for purposes of the Fair Labor Standards Act. It termed the platform a referral service and the workers “service providers” to the end-consumer customers. Like the Board, the Labor Department emphasized the entrepreneurial opportunities available to the gig workers and their risk of profit and loss.
Not all federal agencies, nor all state labor departments, are bound by the SuperShuttle decision. Several continue to adhere to the ABC test or other, more employee-friendly tests for employee status determinations. For example, in a post-Dynamex case, a California district court ruled that a gig worker for an online food delivery company was likely to succeed on the merits in his claim that he is an employee, based on the ABC test adopted in Dynamex. The issue is currently on appeal to the Ninth Circuit Court of Appeals. At the same time, several state labor agencies have ruled that some gig workers are employees for purposes of state overtime, rest break, workers’ compensation, and other labor laws.
What is needed to protect all gig workers today is twofold. First, it is necessary to adopt something akin to the ABC test for all labor and employment laws so that platform workers, and others who work for intermediaries or are engaged in atypical work arrangements, get the protection of the labor laws. Second, it is important to extend some of the protections of the labor laws to independent contractors. Even if someone is truly an independent contractor—a plumber working for herself or a hairdresser who rents space in a salon—they should be entitled to protection for their health and safety, assistance during periods of unemployment, access to pooled retirement and health insurance, prohibitions on invidious discrimination, guarantee of a living wage, and the ability to take medical or family leave. And they should have the right to engage in concerted collective action to protect their economic interests. That is, all workers, whether they file 1099s or W-2s, should have the protections necessary to feel economically secure and achieve a decent way of life.
Katherine V.W. Stone is Arjay and Frances Miller Distinguished Professor of Law at UCLA School of Law. She specializes in labor and arbitration law.
In this round of stimulating dialogue, Larry Mishel provides further ways to think about the extent and impact of changes in employment on work. Steve Greenhouse delivers some needed optimism by highlighting several proactive efforts that are already responding to the fissured workplace. And Kathy Stone demonstrates both promising (e.g., the California Supreme Court’s Dynamex decision) and troubling (e.g., Handy laws at the state level and the Trump Labor Department’s recent attempt to deregulate via opinion letter) avenues to respond to the platform economy.
I would make three closing observations related to these informative essays. First, as noted by Larry Mishel, left unchecked, capital market pressures will continue to unravel worker protections and rights. With few exceptions, platform business models blossomed on assumptions by startups and venture funders that they were immune from employment responsibilities. The concerted state legislative and regulatory efforts by Uber, Handy, and others to legislatively reclassify anyone operating off of a platform as an independent contractor are attempts to cement what venture capital has been promoting for many years. As Thomas Piketty reminds us, the political economy of workplace laws has always and will always require determined countervailing efforts to protect workers in the face of such efforts.
Second, Justice Brandeis’s notion that states can “… serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country” should provide needed hope in the current era. The efforts described by Steve Greenhouse in his essay and forthcoming book highlight the importance of Brandeis’s notion. Passage of paid family leave legislation in ten states and legislation that sets boundaries around scheduling, expands overtime protections, and provides for enhanced pay transparency illustrate how states can advance worker protections and move the ball for eventual federal policy. Bold experiments by states and localities in “strategic enforcement” building on federal efforts during the Obama administration help workers now and further our knowledge of better ways to do so in the future.
Third, we need a broader lens for answering the question of “who is an employer” with respect to traditional and new forms of work, as laid out by Kathy Stone. In a forthcoming essay, Tanya Goldman and I argue for a “concentric circle” model of rights and protections that emanate from fundamental rights and protections related to work itself, irrespective of whether one is an employee or independent contractor: protections from harassment and discrimination; prohibition of retaliation for exercise of rights; and honoring basic principles like being compensated for work performed. Additional rights and protections should radiate outward from those in clear and enforceable ways.
These essays make clear that the need for and contours of policies regarding the “future of work” are both clear and readily apparent in the “present of work.”
David Weil is dean and professor at the Heller School for Social Policy and Management at Brandeis University. He served as the Wage and Hour Administrator at the U.S. Department of Labor during the Obama administration.