The term is most commonly used to describe people recruited to perform specific tasks using smartphone apps created by tech startups such as drivers from Uber Technologies Inc. and delivery people. Mechanisms like these are at the core of what was formerly called the sharing economy before it became more skeptical. Politicians – and judges – are trying to fit such work into existing labor laws, and President Joe Biden has pledged to discuss the issue at the federal level. New ways of working in the short-term contract market will affect the lives of millions of Americans whose jobs are far from Silicon Valley.
1. How did the market for short-term contracts originate?
This is part of a broader trend sometimes referred to as “dispersal” of jobs: people make money for companies and obey their rules, but are not considered employees. Some are hired by recruiting agencies, such as companies that recruit content moderators for Facebook Inc., or franchise owners, such as McDonald’s restaurant owners, who hire cashiers. Other workers, in industries such as trucking and teaching, as well as working through apps, are classified as independent contractors by the companies that employ them. Technology is driving the proliferation of these kinds of contracts, but they have been around long before the Internet.
2. What was the subject of the dispute?
Under federal and US state laws, workers are divided into those who are more supervised by their superiors and have more rights to protection, as well as independent contractors who can work in freer conditions, but have fewer legal guarantees. Workers are protected by minimum wage, overtime, nondiscrimination and sexual harassment laws, and union laws that do not apply to contractors.
3. What do the parties to the dispute say?
Gig economy executives argue that the flexibility they offer to workers, for example, they can start or finish work whenever they want, would not have been possible if companies were burdened with the costs and constraints of labor laws. (Be that as it may, Uber lost $ 6.8 billion in 2020, while rival Lyft Inc. lost $ 1.8 billion.) They would just like to adjust the legislation to provide some fringe benefits without counting as employers. Employee representatives argue that this “freedom” is a scam, as companies that hire freelancers use well-tuned algorithms and incentives to get employees to complete tasks, according to the terms and conditions that management is satisfied with. They also point out that depriving such workers of the minimum standards and rights that are available to other workers will simply push other companies to replace employees with so-called contractors.
4. How did this happen?
The controversy has been going on for many years, but it culminated in California, when judges established a broader definition of an employee in 2018, and congressmen legislated it. It is based on the so-called ABC test. Under this standard, workers generally cannot be considered contractors unless, among other things, the work they do falls outside the “business as usual” of the company.
5. What did this lead to?
After implementing the ABC test, the state sued Uber and Lyft in 2020 for continuing to classify drivers as contractors. Uber, Lyft, DoorDash Inc. and Instacart, which tried unsuccessfully to find a compromise that would protect them from the new law, spent $ 200 million on an election campaign to promote Bill 22 (Prop 22). They won the victory in November after adopting an initiative exempting them from the ABC test. As a result, in-app drivers and carriers are considered contractors who are granted limited alternative benefits, such as minimum pay for travel time, but not for waiting time in between. Some drivers and union leaders are now trying to overturn the decision through the courts.
6. What will happen next?
On the campaign trail, Biden promised to push through a bill that would incorporate the California-like ABC test into federal workplace laws. Given Democratic control over the US House of Representatives and Senate, this idea is a real threat to companies, but even some Democrats question this approach. Freelance companies are urging the new administration to consider models more similar to the Prop 22, but this is strongly opposed by unions. Biden’s proxies in federal agencies could increase the rights of freelancers by broadening the definition of “worker” under existing laws and punishing companies that continue to classify workers as contractors, although such measures are likely to be challenged in court.
7. Is a compromise possible?
Uncertain prospects for all parties have prompted some executives and union leaders to discuss a potential deal – state legislation that would extend some of the new benefits to freelancers and create some form of union representation for them without making them permanent employees. But there are also serious obstacles. First, federal laws restrict collective bargaining with contractors, and also restrict the legislative power of states with regard to workers’ union rights. That being said, the results are of concern to both sides.
8. What causes concern?
Worker representatives fear that the creation of an intermediate category would allow companies that currently classify workers as permanent employees to move them into that category. After adopting Prop 22, grocery giant Albertsons Cos. announced that it would replace drivers who were classified as wage earners with freelancers, fueling union concerns about the proliferation of the contract model. A Connecticut-proposed compromise to create a system of “sectoral contracts” with workers in accordance with recommended industry rules without converting workers to wage earners has sparked resentment from some companies and workers’ unions. Uber opposed him in part because it did not identify workers as contractors, and then the project was shelved after the American Federation of Labor – CCP Congress assessed concerns about the potential impact on the group’s advocacy at the national level.
9. Is this just a US problem?
A similar gap between workers ‘and contractors’ rights exists in many countries. In Canada, companies that hire freelancers are trying to negotiate with trade unions and local governments about a possible compromise. After losing in the UK Supreme Court, Uber announced in March that it would re-qualify all drivers as “workers,” an intermediate category that entitles them to minimum wages and leave. Employee representatives said the company’s reforms are failing to meet the conditions that judges say should be created for workers, as drivers will not be paid for waiting time anyway.