Contract Labor and Workers’ Rights

Will the Changing Economy Leave Employment Rights Behind?

By Wesley B. Hazen

Law Students on Workers’ Rights Series

The Law Students on Workers’ Rights series publishes essays from current and incoming students at some of the top law schools in the country. These essays, submitted for the Charles E. Joseph Employment Law Scholarship, address the question “What are the biggest challenges facing workers’ rights in the future?”

Technological innovations are not only playing a perpetual role in the lives of consumers and everyday citizens, they are also profoundly affecting the rights of workers. From the average employee working in a supermarket or restaurant to doctors, legal professionals, and engineers on into the self-employment sector, the changing economy threatens employment rights.

I see two tremendous challenges facing workers’ rights in the future: the rate of job creation or replacement in comparison to positions that are becoming obsolete and the recent trend to classify more individuals being paid to perform work on behalf of a company as “contractors” instead of “employees.” In particular, the increase in contract or contingent labor, which offers numerous advantages to a company and their profit margins, undermines worker protections.

The rate at which replacement jobs or new jobs are being created is failing to keep pace with technological advances, which cause many positions to become obsolete. Although there is a concrete desire for balance when it comes to cost and revenue, businesses seem to be ramping up processes for improving efficiency through technological means. In doing so, they deplete their labor force to only what is necessary to ensure the continuation of business.

This is evident in the fast food industry, where companies such as McDonalds have implemented touch screen technology in recent years, allowing customers to place orders themselves. In addition, several customer service industries let customers pay using a card reader. This includes supermarkets that offer “self-checkout” cashiering stations, which require one or two employees to monitor multiple stations where customers scan, bag, and pay for their items, as well as cashierless stores courtesy of Amazon.

Low level positions are not the only ones affected by this shift, however. The transportation industry is on the verge of transformation with self-driving vehicles and semi-trucks as well as various transformations being developed for the medical, legal, and other upper tier occupations. This decrease in newly created traditional positions may contribute to the benefit of the second worker’s rights challenge through an influx in the “gig economy.”

Second, classifying an individual as a contractor and not as an employee provides ample benefits to companies including not having to follow minimum wage guidelines, contribute to social security taxes, and provide physical accommodations for the contractors to carry out their work. Although there are some short-term perks to the contractor such as having access to pre-tax income immediately and schedule flexibility, the cons outnumber the pros.

The “gig economy” encompasses one-third of workers in the United States, totaling 57 million individuals according to an August 2018 Forbes article. Many of these positions allow new companies to edge their way into larger markets. The prospect of sharing has plowed ahead by way of home sharing through companies such as AirBNB, ground transportation through Lyft and Uber, and even into delivery services ranging from grocery delivery by companies like Instacart and Amazon Now and delivery of prepared foods through Grubhub, DoorDash, and UberEats.

Convenience is a key aspect in each of these services. No longer does one need to call for hotel reservations, contact a taxi cab company, maneuver public transportation in a city, or even leave the comforts of their own home to retrieve groceries or dinner. All that one needs is an application on their smartphone. With this convenience and the high usage by everyday Americans ranging from college students and families to the elderly, there is a clear need for individuals to operate personal vehicles as Uber or Lyft drivers, own or rent a home or apartment to rent out a room or the entire location through AirBNB, or utilize a personal car or bicycle to complete delivery orders.

These individuals are often initially classified as contract labor by the companies. However, there have been calls for them to be properly classified as employees. Very recently, a development backing the corporate standing of “contract labor” was announced through a memo released by the Department of Labor defining an unidentified companies’ operatives as “contractors” and not “employees.” Although it is one unidentified company, it has implications to support the standing of other companies which utilize individuals they classify as “contract workers” in future developments and is a redirection of the ideals surrounding these practices during the Obama Administration.

Although there are other numerous challenges which will undoubtedly influence workers’ rights in the future, I see these two as significant to many workers and their rights regarding their ability to make a livable income. The advancement of technology coinciding with the recent tendency to classify labor forces as “contract labor” are serious threats to workers and their rights in the near and distant future.

Reflections from Charles Joseph

In his discussion of the changing economy, Wesley Hazen aptly predicts that these trends will likely only increase in the future. As more employers rely on independent contractors, workers lose their federal protections under sexual harassment laws and workplace discrimination laws. However, as Hazen notes, misclassification of independent contractors does provide a legal remedy: independent contractors can sue their employer for back pay and lost wages. Local laws offer another remedy. In New York City, for example, the Freelance Isn’t Free Act offers wage protections for freelancers, including double damages for underpayment, nonpayment, and late payment. Unfortunately, without significant legal action, millions of independent contractors will face wage theft in the future.

Wesley Hazen holds a master’s in criminology from the University of Cambridge and a bachelor’s in criminal justice from New Mexico State University. The recipient of a Gates Cambridge Scholarship, Hazen joins the University of Oklahoma College of Law as part of the class of 2022.

Charles Joseph has over two decades of experience in employment law. He is the founder of Working Now and Then and the founding partner of Joseph and Kirschenbaum, a firm that has recovered over $120 million for clients.