Driving Home the Point About Employees and Independent Contractors

A4E member Steve Piazza is a writer and poet living in Athens, Georgia with his wife and cat. He is a retired educator who advocates for education, workers’ rights and global welfare. Interested in writing for our blog? Get in touch!

One has to wonder if an Uber or Lyft rider would treat a driver differently if they knew whether the driver was an employee (one who is hired by the company) or an independent contractor (one who owns and operates their own business). Most likely, the kind of labor relations the driver has with the company is far from the customer’s mind. That may change, however, due to the amount of press coverage given to recent court cases and other legal rulings related to issues between ride-hailing companies like Lyft and Uber and the people working for them.

On the surface, it doesn’t seem that it should really be anybody else’s business. After all, the employer-employee relationship is personal. And though some consumers do choose to patronize businesses based on their level of commitment to social responsibility, that’s something often explored prior to the moment the service is being rendered.

There are many reasons that people care about how workers are treated. For starters, the basic concept behind the capitalistic economic system ― which relies heavily on the difference between the profit of the business owner and the compensation of the employee ― drives a major element of consumer decision-making: cost. The greater the amount employees are paid, the more likely the employer’s costs are passed on to the consumer, which comes into play for people shopping around for the best value.

But what about people who are willing to pay more for quality? Quality does tend to correlate with the money employees earn. These consumers may investigate the differences behind the employment costs of competing companies. Another reason some may care is that, if our society consists of increasingly dissatisfied workers, there could be a large amount of unexpected service disruption due to work stoppages, which would add to the instability of a company, the entire industry and even the economy as a whole. Finally, people might be concerned because what happens in one industry can have a negative impact on what happens with human resources in their own occupation. In other words, the more tenuous the relationship between select employers and employees becomes, the more the outcome can affect workers across the board. That’s why it’s important for people in general, and workers in particular, to pay attention to what happens in labor-related conflicts. Just because somebody is not in the transportation business does not mean that news stories involving Uber and Lyft and their workers should be ignored.

Lately, we have seen instances of litigation that do not directly apply to many workers, but because of potential consequences for workers in this country and around the world they shouldn’t be ignored. “Not my problem” is a weak stance to take in a world of economic interrelationships. This is not a new development. The conflict between management and workers has been around since the days before the Industrial Revolution. But it just seems new because of the rapid emergence of highly profitable companies like Uber and Lyft and the high-profile coverage of battles over the classification of their drivers as employees or independent contractors.

But the longevity of battle related to labor relations does not mean the legal landscape is clear. If only progress worked that way. Regarding transportation workers specifically, there have been a number of legal cases that have addressed the way workers were treated, and not always for the clear reasons and results one might think. That could also be why labor relations remain in a state of flux.

For example, in 1947, the U.S. Supreme Court ruled in United States v. Silk that drivers working for the Albert Silk Coal Co. were indeed employees and not independent contractors. Rather than a set of grievances brought up by disgruntled employees, the company initiated the case because it felt it had been unjustly forced to pay Social Security taxes based on newly established laws following the Great Depression. The company had sued on the grounds that because its workers worked whenever they pleased and were under contract, they should be considered independent contractors. However, the SCOTUS overturned a lower court ruling mostly because they determined that Silk provided most of the worker supervision and workers performed duties in line with the type of business services Silk mainly offered. It went further, asserting “that a contract is not conclusive evidence of independent contractor status.” This major ruling, then, brought on by a company for the sake of saving money, and not by angry employees, ironically ended up being a victory for workers.

United States v. Silk also included a look at another related case involving a company called Greyvan Lines, Inc. Greyvan, too, was attending to seek restitution of past paid social security taxes. The SCOTUS applied similar logic in this instance, namely “the degree of control exercised by the business and the independence of the worker over the operational details of the work product must be analyzed in each situation.However, in the end they ruled the exact opposite, calling the workers independent contractors because they owned their own trucks and provided much of their own management. And although the drivers did not get social security paid for them by the company, the independence to some had its advantages. 

In effect, the rulings were just the beginning of a strategy that favored case-by-case review over establishing a clear precedence to resolve disputes. This would go on to have a long-lasting effect, and, throughout the years, the courts have navigated their way through a myriad of cases evaluating each on its individual merits. The debate over setting clear guidelines has grown.

Both industry and labor leaders have called for guidelines to reduce confusion and nagging problems due to the arbitrary nature of complaints originating from either side of the argument. They’ve complained that this loose approach contributes to contradictory rulings causing unnecessary compliance issues. This leads to additional lawsuits ending in inconsistent rulings declaring some employees independent contractors and others employees, which gives way to more lawsuits, and so on. 

And though some argue that the employment matters have improved over time, others see the exact opposite. It also doesn’t help when there seems to be numerous instances of conflict between state and federal law. A look at what is happening just between these two levels illustrates how complex it all has become. 

At the federal level, the National Labor Relations Act refers to an Internal Revenue Service based multi-factor common-law agency test that attempts to make a distinction between independent contractors and employers to help simplify the matter. This test relies on three categories: 1) Behavioral, what degree the employee controls what the employee does, 2) Financial, how the employer compensates the worker, and 3) Type of Relations, what, if any, written contracts or benefits exist. If, after applying the test, the status is still unclear, there is a form (IRS SS-8) that then can be completed by either party and may take up to six months to get a decision. 

Meanwhile, the U.S. Department of Labor’s Wage and Hour Division and the Fair Labor Standards Act also weigh in on the relationship, and, in the end, stress economic independence, in part because it cannot keep up with growing trends on the new gig economy.

And then the state level gets even more undetermined. The latest arguments in California stem from Dynamex Operations West, Inc. v. Superior Court (2018). The California Supreme Court sidestepped the federal efforts and developed a standard of its own, known as the ABC test. In order to be considered an independent contractor this test requires that the employee be completely outside of the control of a company, that the work performed is not a usual course of business for the company and that the worker is associated with a trade or other specific type of work. Though it’s the ABC test, there is the fourth criterion, which states that the worker has to be in business for themselves.  

But that’s not it. Once the ABC test is applied and compliance is determined, employers must also have to apply standards from another California case, S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, (1989). And to add to the already weighty mix, there are two sets of factors from Borello that must be applied. 

To help clarify the scope of the Dynamex case, a law calling for Uber, Lyft, and drivers for other companies such as Door Dash to be classified as employees has passed in California State Legislature and is waiting for Governor Gavin Newsome to sign it into law. Perhaps that law, AB5, will shore things up a bit. Uber thinks otherwise, though, and has, unsurprisingly, taken the matter to court.

Keep in mind that these measures apply to issues related to workers’ compensation and not to federal tax laws or criteria describing contractors. However, implications can only be down the road as new situations appear.

Nonetheless, rather than moving closer to actual, effective criteria, it seems that past attempts serve more to dissuade challenges to begin with. That’s not so astonishing seeing that we seem to be in an era where litigation guides policy.

And, as is often the case, what happens in California affects the rest of the country. California labor groups have inspired ride hailing driver protests and strikes around the country. Many drivers from all over have filed lawsuits. Even Democratic presidential candidates call out specifically for AB5’s passage. Other lawsuits and arbitration have become commonplace, and state legislatures have made moves one way or the other to deal with the dilemma.

Last year, the Georgia State House of Representatives passed HP 789, which in effect would have secured an environment “for marketplace contractors to be treated as independent contractors under state and local laws; to provide for definitions; to provide for conditions and exceptions; to specifically provide that as independent contractors of a marketplace platform marketplace contractors are not engaged in employment for purposes of the ‘Employment Security Law’ and are not employees for purposes of workers’ compensation; to provide for related matters; to provide an effective date; to repeal conflicting laws; and for other purposes.” This however, was never passed by Georgia Gov. Brian Kemp because the Senate tabled it last March.

It doesn’t help that SCOTUS has not made a decision yet and is not likely to in the near future. This debate will go on, and will unfortunately affect everybody, from the consumer to the worker. 

So an answer to the question of why anyone should care must be included in order to change the disturbing status of a discussion that seems all over the place. It’s no different from other major issues, such as those involving guns, climate change, and healthcare, which leaders either refuse to discuss, get tired of shouting about if they do, and/or it ends up in court where nothing definitive ever comes of it.

In an age of political inertia, caring is not enough. Calls for basic rights of workers, like many other societal concerns, somehow move away from being considered legitimate expressions of humanitarianism to ideas that are somehow unpatriotic, and thus end up tossed into the cynical heap of indecision. That is certainly not effective leadership.

Meanwhile, the answer is probably somewhere closer to the will of the workers, no  matter how they want to consider themselves. Workers’ voices must be heard and workers must be part of the solution. The worker’s perspective is not necessarily the company’s perspective. Those who want to be considered employees will eventually see the value in working alongside those who want to be independent contractors. They will come to see that they are actually in solidarity with each other because when it comes to the company’s bottom line, where workers stand now will be forgotten.

Next time you’re in an Uber or Lyft, you might be compelled to ask where they stand on this issue. Maybe you won’t. Either way, just be sure to thank them for the good work they do, and leave a good tip with that positive review. 

Facebooktwitterby feather