A Blog by Jonathan Low


Feb 6, 2015

Dependent Contractors: What If There Were a New Type of Worker?

It's always the gray areas that get us. We understand employees: they have a responsibility to deliver certain types of performance in return for which they are entitled to specified benefits and protections, which is exactly why employers are trying to limit their numbers.

Then there are independent contractors, the once-proud avatars of the Free Agent Nation. The ones who are ostensibly at liberty to choose where they work, for whom, at what and why but who, in reality, are mostly doing so now because they can't find something steadier.

In one of the ways technology has impacted work life most dramatically, there is emerging a third category: people who work somewhat independently in that they are not employees by traditional legal definitions, but who do almost all their work for one employer. They do this primarily because the employer is trying to shed the costs associated with employment, usually in the name of  'competitiveness,' but the reality of their situation and the contributions they make to value creation demand a more equitable solution.

That approach, as the following article explains, may be the creation of a 'dependent contractor' status which provides some protection and benefits, but which helps obviate the fiscal and regulatory burden full employment creates.

There is no perfect solution as long as costs are such a significant driver of the worklife equation. But as talent continues to command both competitive compensation and attraction, this 'third way' may be a good compromise in a world offering few alternatives. JL

Lauren Weber reports in the Wall Street Journal:

Nearly all workers fall into one of two buckets: employees, or independent contractors.Labor policy should expand to include a third category, one that extends some protections to those who take on project-based work but have little leverage or power in their work arrangements.
Nearly all U.S. workers fall into one of two buckets: employees, who are covered by labor laws such as minimum-wage and antidiscrimination statutes, or independent contractors, who get flexibility in their work but few protections.
Those categories, written into New Deal legislation, are out of step with the realities of work in the digital age, say some legal experts. That may be particularly true for on-demand workers who find job assignments via apps like the ones made by Uber Technologies Inc., crowdsourcing marketplace CrowdFlower Inc., and cleaning service Handybook Inc., now known as Handy.
A handful of legal scholars have argued that labor policy should expand to include a third category, one that extends some protections to those who take on project-based work but have little leverage or power in their work arrangements.
Workers like Uber drivers or Handy cleaners, for example, can choose when and where they work, but lack control over their payment and wage rates, and they can’t negotiate their work contracts.
People seeking work on apps often have no choice but to accept the platform’s terms electronically or they cannot access assignments.
“Some people are clearly independent contractors and some are clearly employees, but a third category becomes necessary when you have people who are borderline” and economically dependent on one employer, says Wilma Liebman, a former chairwoman of the National Labor Relations Board and an adjunct professor at New York University School of Law.
She suggested the dependent contractor classification in a dissenting opinion she wrote in 2005 in a case about newspaper carriers. In that opinion, she noted that Canada and Germany have statutes protecting such workers.
Yet that idea has never caught on because regulators have been more focused on “low-hanging fruit” issues such as wage theft and more egregious labor-law violations, says Jeffrey Hirsch, a professor at the University of North Carolina School of Law.
Adding a dependent-contractor status to current labor regulations would have wide-ranging effects, involving agencies such as the Department of Labor and the Internal Revenue Service, Mr. Hirsch adds.
Employers would need explicit guidance about which protections would be extended from the patchwork of laws that currently govern employment—from the right to unionize, to minimum-wage and overtime eligibility under the Fair Labor Standards Act, to Occupational Safety and Health Administration rules and antidiscrimination statutes.
Fabio Rosati, CEO of Elance-oDesk Inc., an online platform mainly for professional freelancers, noted that U.K. Prime Minister David Cameron recently appointed a “freelance czar” to help the country determine how best to support workers in nontraditional work arrangements.
“The message was, this is a new reality that needs to be embraced,” says Mr. Rosati. “In many cases, the law catches up with very strong innovations and adapts to it, but it may take a few years.”


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