NEW YORK, N.Y.—Gig-economy companies like Uber and Handy have allied with corporate and far-right lobbyists to get their definition of “independent contractor” enshrined in law—and protect them from having to pay minimum wage or obey labor laws, says a report released March 26 by the National Employment Law Project.
Seven states—Arizona, Florida, Indiana, Iowa, Kentucky, Tennessee, and Utah—have passed laws that deem all app-dispatched workers independent contractors, says the report, “Rights at Risk: Gig Companies’ Campaign to Upend Employment as We Know It.” Bills to extend that possibility to all employers—written by the American Legislative Exchange Council, which has also developed “model” legislation to ban the union shop and force public-sector unions to be recertified regularly—have been introduced in Missouri and West Virginia this year.
“Tech-mediated gig work is the latest iteration of a 50-year-old pattern of workplace fissuring—the rise of ‘nonstandard’ or ‘contingent’ work that is subcontracted, franchised, temporary, on-demand, or freelance,” the report says. “In parts of the economy such as the taxi industry and the domestic work sector, the impact of the encroaching gig model reverberates far beyond those engaged by these companies, applying downward pressure on job quality for a much larger set of workers. And gig companies have been joined by more traditional companies to push polices designed to scale up their model across the U.S. economy.”
Classifying workers as independent contractors means the employer doesn’t have to pay overtime, minimum wage, and Social Security taxes, and makes workers ineligible for workers’ compensation and unemployment benefits. It also prohibits workers from forming labor unions, as they would legally be deemed a group of independent businesses banding together to fix prices.
Classifying workers as independent contractors means the employer doesn’t have to pay overtime, minimum wage, and Social Security taxes, and makes workers ineligible for workers’ compensation and unemployment benefits.
These measures replace the traditional test of whether a worker is an independent contractor and not an employee—that they are genuinely engaged in an independent business, doing work unrelated to the employer’s core business, and setting the terms of their job, such as price—with a standard that more or less says workers are independent contractors if they sign a contract that says they are.
With Uber and Lyft’s initial public stock offerings imminent, the companies would like to get legal protection for their “control without responsibility, reward without risk business model,” says Maya Pinto, the report’s author, a senior researcher and policy analyst at NELP.
The main lobbyist for independent-contractor bills, the report says, is Bradley Tusk, who was a top adviser and campaign manager for former New York mayor Michael Bloomberg. Larger companies supporting them include Amazon, Tusk wrote in his 2018 book, The Fixer: My Adventures Saving Startups from Death by Politics.
The Hilton and Marriott hotel chains, the NELP report says, both “lobbied for gig-company carve-outs at the federal level.” As Marriott had to give its employees significant raises and concessions after strikes by UNITE HERE members last fall, that raises “troubling implications,” says Pinto. “Are they seeking to convert their housekeeping staff into gig workers?”
The legislation has evolved in three stages, the report says. First, from 2014 to 2017, more than two dozen states passed laws declaring drivers for “transportation network companies”—app-based taxi services such as Uber and Lyft—to be independent contractors. The second stage was the bills passed in seven states since 2016, which made workers for “qualified marketplace platforms,” such as TaskRabbit and the Handy home-services app, independent contractors.
On the federal level, the New Economy Works to Guarantee Independence and Growth (NEW GIG) Act, written by a Handy lobbyist at Tusk’s firm, would define workers at “sharing economy” platforms as independent contractors. The Senate passed it in 2017 as an amendment to Donald Trump’s tax bill, but it was removed for violating congressional procedural rules. But according to the NELP report, federal lobbying records show that Handy, Uber, IKEA’s TaskRabbit, Lyft, Etsy, Airbnb, Marriott, and the TechNet coalition—which includes Facebook, Google, Apple, Microsoft, Verizon, and AT&T—have continued to advocate for it.
The third-stage legislation is the broadest, based on ALEC’s “Uniform Worker Classification Act.” It would allow employers to declare workers independent contractors if they signed a contract agreeing that they were, with minimal requirements such as the worker paying their own expenses and not always working at the employer’s place of business. These bills have been introduced in Missouri and West Virginia, both states with Republican-controlled legislatures that recently passed measures outlawing the union shop.
This would, for example, let office-building cleaners be classified as independent contractors if they paid for their own soap and mops and worked in different buildings. It would also make clearly legal practices such as SuperShuttle in Dallas-Fort Worth converting its airport-van drivers from employees to independent contractors in 2005. The drivers had to pay SuperShuttle to work, wear uniforms, and could not accept passengers from any other source, but the National Labor Relations Board ruled in January that they were independent entrepreneurs because they paid for their own vans and gas, could set their own schedules, and took the risk of losing money—and had signed a contract stating that they were franchisees. That made it illegal for them to form a union, the NLRB held.
In Texas, lobbyists are using what Pinto calls a “much stealthier” strategy: They got the state Workforce Commission to propose making gig-economy workers ineligible for unemployment benefits.
Juliet Barbara of the Austin-based Workers Defense Project says that proposal set off their suspicions because “it hurts Texas workers. It robs the unemployment-insurance fund.” When they filed a public-records request to see who was lobbying for it, she told LaborPress, they found that Handy and Tusk lobbyists had “coordinated for almost a year” with Ruth Hughs, the employer representative on the three-member commission, and that the proposal issued in December had “almost identical language” to the lobbyists’ draft.
The Workers’ Defense Project, Barbara says, is now urging the Texas Workforce Commission to withdraw the proposal because “it’s under such a cloud of corruption.”
Independent-contractor bills have been defeated in several states, including California, Colorado, North Carolina, and Georgia, the NELP report says. In Georgia, a bill to exempt app-based companies from safety regulations and workers’ compensation passed the state House in 2018, but died in the Senate after the Communications Workers of America, the Southeastern Carpenters Regional Council, and the International Association of Sheet Metal, Air, Rail and Transportation testified against it in committee hearings. The only witnesses for it were Handy and the state Chamber of Commerce.
In California, a 2018 court decision created a stronger standard to protect workers. Employers there now have to prove their workers are independent contractors, using what’s called the “ABC test.” It presumes that workers are employees unless they are (A) free from control by the employer they’re doing work for; (B) doing work that is outside that employer’s usual course of business; and (C) engaged in an independently established business.
New Jersey, Massachusetts, and Connecticut also use this standard, and Washington and Oregon are considering similar legislation.