The Tech Industry’s Independent Contractor Rights Problem

Temps, contingent workers, and independent contractors in the tech industry are missing out on millions in overtime wages.

Genevieve Carlton, Ph.D

The gig economy isn’t new in Silicon Valley. In the tech industry, contingent labor accounts for up to 50% of employees, a number that has only grown over the past decade. But many employment laws haven’t caught up with the growth in contract and freelance tech employees. As a result, independent contractors miss out on millions in overtime wages and protections from wage theft, sexual harassment, and discrimination in the workplace.

A recent New York Times report on Google’s temps and independent contractors sheds lights on some of the problems. In March 2019, Google employed 121,000 temps and contractors, compared with 102,000 full-time employees. Google’s independent contractors work around the world, contributing to the tech giant by working on artificial intelligence projects, moderating content, and testing software.

Many of Google’s software developers, hired as independent contractors, earn over $100 an hour but do not benefit from the same employment protections as full-time employees.

Hiring independent contractors saves tech companies a significant amount. OnContracting estimates that hiring a contractor can save tech companies $100,000 per year compared with hiring a full-time employee. But that cost savings can come at the expense of workers’ rights.

For example, independent contractor laws govern when companies can classify a new hire as an independent contractor vs. employee. However, the process is complex. Companies that offer a salary, cover employee expenses, sign long term or permanent contracts, or provide benefits to independent contractors may be violating employment laws.

The result: millions of workers are misclassified as independent contractors rather than employees, according to IRS estimates.

Misclassification harms tech employees. Independent contractors who are misclassified miss out on millions in overtime pay each year. While federal overtime laws do not apply to independent contractors, misclassified independent contractors can sue for overtime and other employee benefits.

At Google, contract and temp workers told the New York Times that the line between independent contractors and employees was often blurry. Google dictates the hours and locations where their contingent employees work, sets job tasks, and for many, acts as their sole employer for long-term contracts.

In one Google contract project, dedicated to improving speech-recognition technology, contractors faced pressure to work longer hours without receiving overtime pay. When Google learned of the unpaid overtime problem, it opened an internal investigation. However, independent contractor overtime rights extend beyond those offered internally by tech companies. Misclassified independent contractors can sue their employer for back wages and lost benefits.

If even a fraction of tech independent contractors have been misclassified, it could cost the tech industry billions.

The distinction between an independent contractor and an employee may grow increasingly unclear in the future. But the cost is clear. In the tech industry, a growing number of temp and contingent workers may be losing out on workplace discrimination protections, sexual harassment protections, and overtime protections because of their classification.

While federal laws lag behind the changing economy, with its growing number of independent contractors, some local laws address independent contractor rights. For example, the New York City Freelance Isn’t Free Act provides strong protections for freelancers facing lost wages. Employment attorneys play a central role in protecting independent contractor rights. Temps, freelancers, and other independent contractors can contact an independent contractor lawyer to learn about misclassification protections.