It may sound arcane, but it’s a raging battle of the new economy: whether workers should be classified as “independent contractors” instead of regular employees.
It makes a big difference. Independent contractors don’t get employee benefits and protections such as minimum wage, overtime pay, family and medical leave, unemployment insurance or workers’ compensation coverage.
That’s why many Uber and Lyft drivers and other “gig economy” workers are fighting for employee status.
Uber recently settled class-action lawsuits from drivers in California and Massachusetts, though the issue wasn’t settled at all. The company agreed to pay as much as $100 million – amounting to about $8,000 for an individual driver – but Uber won by keeping drivers as independent contractors.
Uber says that’s what most drivers want, too.
“Drivers value their independence – the freedom to push a button rather than punch a clock,” the company said in a statement. “That’s why we are so pleased that this settlement recognizes that drivers should remain as independent contractors, not employees.”
Lyft is in a similar spot. Uber’s competitor agreed to a $12 million settlement with drivers that also wouldn’t address their desire to be employees instead of independent contractors. A judge recently rejected the Lyft settlement as shortchanging the drivers.
California lawmakers waded into the “war of independence,” but then backed out. Assemblywoman Lorena Gonzalez introduced a bill in March that would give groups of independent contractors the right to organize and bargain contracts like unions do. Business groups came out strongly against it. Gonzalez pulled the bill last week but vowed to keep pushing the issue.
I achieved my goal of forcing a conversation on gig economy… This bill will continue outside the confines of these legislative deadlines.
— Lorena Gonzalez (@LorenaSGonzalez) April 21, 2016
The feds are on it, too. The National Labor Relations Board is arguing that misclassification is a labor law violation because it deprives workers of organizing rights, reports Politico’s Morning Shift, a source of daily labor news.
Taxpayers can lose out when workers are misclassified as independent contractors, because employers don’t withhold payroll taxes. A McClatchy and ProPublica investigation found that in the construction industry alone, misclassification leads to billions of dollars in lost tax revenues each year.
Some gig economy companies, such as Munchery, are reversing course, making their workers actual employees. And a pair of former Obama administration officials are arguing for a new category of independent worker, which would qualify for some benefits, such as the right to organize, but not others, such as overtime and minimum wage.
Either way, this fight is not going away any time soon.