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Why companies based on gig work are hurting more than their employees

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Imagine that one of two people will be responsible for your safety. The first receives health and dental benefits, earns more than minimum wage, has clear advancement options within their company, and may even belong to a union. The second has no insurance benefits, works wildly erratic hours, feels no allegiance to their company, and makes less money. Which person would you pick?

The ride-share and micromobility industry is under the microscope for worker violations and safety concerns. Major shared e-scooter companies are facing lawsuits from injured riders. Revel, a moped company operating in New York City, recently reopened operations after a shutdown earlier this year, as complaints about reckless driving and fatalities involving its vehicles mounted. Ride-sharing companies Uber and Lyft face a number of lawsuits related to allegations by passengers of injury, assault, and harassment. A California ballot measure asking voters whether gig workers should count as employees has shown that many Americans are understandably focused on legal and legislative methods to introduce more order and security to the gig economy.

Like most startup industries, the companies providing these new mobility options are scrappy, doing things on the fly, and, at times, operating shortsightedly. This needs to change. As these forms of transportation edge their way to being a supplementary public transportation in a pandemic and beyond, we need to take this responsibility seriously.  After all, when the public gets on a bus, they don’t imagine the bus’s tires were changed not at a company-designated station but in someone’s garage.

Companies themselves would be wise to consider moving away from the gig economy and choosing to play a greater role in ensuring the well-being of their workers because doing so is fundamentally linked to the safety of their consumers and the success of their business.

Outdoor apparel giant Patagonia is famous for taking this approach: With generous time off, on-site child care, and the doors locked on weekends, the company has doubled in size since 2008 and is currently expanding into new markets. Employee turnover is minimal. CEOs and business school professors are increasingly aware that giving workers better wages and benefits also tends to be a recipe for greater profitability and employee retention in the long run.

Of course, any business has to keep an eye on the bottom line, but the damage done from rider injuries and safety lawsuits gives pause—financial pause, especially with potential liabilities tied up. But also pause because if you are hurting your customers, it’s not great for your brand. Investing in worker safety and well-being is more expensive in the short term, certainly. But in the long term, it leads to a more profitable company.

In 2019, my company, Spin, chose to make more than 90% of its workers employees with benefits, as opposed to contractors. In all markets our lowest starting wage is $15 per hour, with incremental increases based on tenure. We did this in part because research has shown that companies with healthy employees have better business performance. Companies with excellent safety, environment, and health programs outperform the S&P 500 by 3%-5%. But also because gig workers are less likely to have been thoroughly trained, more likely to leave for another job, and are often incentivized to cut corners in order to keep a high number of scooters on the streets and boost their own apparent productivity. This is unacceptable. Carefully training and fairly compensating the employees who work to keep our scooters safe for riders ensures that employees face no perverse incentives to rush through their work.

Safety out there also begins with safety in the home base. Designating our workers as employees with benefits—as opposed to contractors—allowed us to put protocols in place in both operations and maintenance and high standards endorsed by the Occupational Safety and Health Administration (OSHA). This operation would have been much less achievable with an ad hoc staff.

In order for companies in the ride-share and shared mobility space to truly unleash their potential, we must first gain public trust by improving the job we do on safety. Part of this will require that city planners and urban voters reimagine the nature of transportation infrastructure away from cars and toward biking, walking, and scooter transportation. It’s also vital that companies themselves give their workers every reason to do careful, excellent work in maintaining their fleets. As private-public partnerships create another way for people to move around, we need to make sure our workers are as supported as the workers behind transit agencies.

As the pandemic continues to demonstrate, the choice between safety and economic growth is a false reality, and companies should not pose these options against one another. At the end of the day, treating workers well is ultimately the safest choice for both businesses and their customers.

This blog originally appeared at Fast Company on October 27, 2020. Reprinted with permission.

About the Author: Kyle Rowe is the global head of government partnerships at Spin, the micromobility unit of Ford Mobility.


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Prop 22 is Bad for Black Workers

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When the pandemic forced Cherri Murphy to stop driving for Lyft, she applied for unemployment benefits like millions of other workers. But because Lyft has refused to pay into California’s unemployment insurance fund, insisting that its workers are independent contractors rather than employees, Cherri received zero dollars in unemployment benefits.

By day, Ms. Murphy is a member of Gig Workers Rising and a volunteer social justice minister who helps people connect their faith to the fight for racial justice. By night, she is a Black working woman in America, completing more than 12,000 Lyft rides, forced to play by rules designed for her — and millions of Black workers — to lose.

“Uber and Lyft drivers are mostly folks who look like me,” said Ms. Murphy. “We’re African American and people of color. We’re on the frontlines and among the hardest hit financially. But our bosses have offered us no meaningful protections, treating us as expendable as ever.”

Now, in the midst of a pandemic that is disproportionately hurting Black Americans, Uber, Lyft and other gig companies like DoorDash and Instacart are trying to roll back labor rights for app-based workers through a ballot measure called Proposition 22. That’s bad news for Black workers.

Supporters of Proposition 22 talk about innovation and jobs of the future, but there is nothing new about bosses attacking labor rights. Don’t be fooled by the misinformation campaign these companies are running — saying drivers must choose between flexibility and employee rights. Flexibility has always been at the discretion of the employer.

As a report co-authored by the Partnership for Working Families and NELP shows, Proposition 22 would lock app-based workers out of minimum wage and overtime protections, unemployment insurance, the right to form a union, and critical health and safety protections.

Proposition 22 would effectively cancel local COVID-19 emergency sick leave laws, passed in cities like San Francisco, Oakland, San Jose, and Los Angeles, that apply to app-based workers.

Bosses have always taken too much from Black workers. And U.S. labor laws have continuously failed Black workers, leaving them out of lifesaving labor protections. Economic inequality continues to this day, with Black women earning 62 cents on the dollar, and Black families having on average one-tenth of the wealth of white families. Union membership dramatically reduces that wealth gap.

The failed response to COVID-19 has only made life worse for Black people in the U.S. Racism in the labor market has forced Black workers onto the most dangerous frontlines of essential work. Yes, Trump is a threat to our safety. But Silicon Valley has done extensive damage as well, using sly legal moves and buying off politicians to steal the benefits workers have earned.

Proposition 22 is only the latest attempt by Silicon Valley bosses to rewrite state laws. It would roll back years of court rulings, agency policy, and statutory law in California, including Assembly Bill 5, which clarified that app-based workers are employees covered by the state’s wage-and-hour laws and eligible for unemployment insurance and workers’ compensation.

Proposition 22 is a step in the wrong direction that harkens back to a long and shameful history of denying Black workers their fundamental rights. The measure sets a dangerous precedent; one that the Trump administration and gig companies could use as fodder for their continued nationwide attack on workers’ rights.

Ms. Murphy was among hundreds of Black Uber and Lyft drivers who penned an open letter calling out gig employers for empty lip-service to the Black Lives Matter movement. The same companies running ad campaigns in support of Black Lives are bankrolling the most expensive ($184 million+) ballot measure in history to take protections away from Black workers.

California voters must vote no on Proposition 22, and say yes to a future with universal rights and good jobs for Black workers and for every worker in the state.

This blog originally appeared at National Employment Law Project on October 23, 2020. Reprinted with permission.

About the Author: Rashad Robinson is an American civil rights leader. He is the president of Color of Change, having joined the organization in May 2011. He has served as a board member of RaceForwardDemosState Voices, and currently sits on the board of the Hazen Foundation.

Rebecca Dixon is executive director of the National Employment Law Project (NELP).


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Seattle makes DoorDash and Postmates pay out COVID-19 hazard pay

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Seattle really pissed off gig economy companies by imposing $2.50 in hazard pay for each food delivery order during the pandemic. It’s no surprise that some of the big companies stiffed their workers—but there is a surprise here: Seattle’s Office of Labor Standards (OLS) successfully pressured DoorDash and Postmates to do internal audits and pay up.

“After receiving calls from gig workers, OLS contacted the companies, informing them that if the companies resolved issues regarding premium pay and paid workers back pay and interest by a certain date, OLS would forego a formal investigation,” OLS told Eater Seattle. In all, DoorDash paid $111,435 to 2,998 Seattle workers, and Postmates paid $250,515 to 2,975 workers.

”The city is making clear to these multi-billion dollar delivery companies that they’re not above the law,” Rachel Lauter, executive director of Working Washington and Fair Work Center, said in a statement. “Our worker protections are only as good as our ability to enforce them, and Seattle is demonstrating once again why we’re a national model for enforcing labor standards.”

This blog originally appeared at Daily Kos on September 26, 2020. Reprinted with permission.

About the Author: Laura Clawson is a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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Return of the Lockout: Uber and Lyft Try to Strong-Arm California

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In August a California court ordered Uber and Lyft to reclassify more than 100,000 drivers as regular employees. The two companies, which depend on a business model that defines drivers as independent contractors, got the decision lifted for at least a few months.

But in the meantime their threat to shut down operations in California—and thereby fire thousands of drivers while ending service to millions of customers—raises the question: What do we call this extraordinary corporate stratagem? A public relations gambit? A pressure tactic? Blackmail? A capital strike?

It’s all of the above, but the best historical analogy is the “lockout,” a disreputable, two-century-old employer weapon designed to force workers to knuckle under.

A WEAPON AGAINST SKILLED WORKERS

The Homestead strike of 1892 began as a stoppage by skilled workers who resisted demands by Andrew Carnegie and Henry Frick to slash wages and union power. Frick erected a fence around the entire mill, locked out all employees, and called in a barge full of Pinkerton private police to protect the scabs he hoped to recruit. When workers routed the Pinkertons in a bloody battle, it took the importation of National Guard troops from Philadelphia to put power back in capitalist hands.

Late 19th century lockouts were not uncommon because the status quo had tilted in favor of elite workers: skilled labor controlled the shop floor in many mills and mines and on construction sites, even as deflation was increasing the value of their nominal wages. Bosses responded with lockouts to force concessions and wage cuts.

Lockouts were far less frequent in the mid-20th century decades of union power and successful collective bargaining. That’s when workers went on strike themselves and almost always came out ahead.

But beginning in the 1980s, when just holding on to the contract provisions won in earlier bargaining rounds was often counted a union success, lockouts returned as an employer weapon. Managers locked out union workers in major battles at Caterpillar, the Detroit newspapers, and A.E. Staley in the 1990s. In more recent years, they used the same tactic at Honeywell and National Grid, a Massachusetts gas distribution utility.

Remarkably, the most high-profile lockouts have arisen in professional sports. Here players established strong unions that captured some of the enormous revenue generated by game broadcast rights. And free agency contracts enabled some stars to win enormous salaries. Owners struck back, precipitating lockouts that wrecked the training season: in 2011, the NFL locked out players for 136 days and the NBA did the same for 161 days. The following year, NHL owners locked out players for 119 days.

GIG WORKERS’ FUTURE AT STAKE

But what does all this have to do with Uber and Lyft? Their drivers are not unionized, after all. True, but they have won, in California courts and legislature, a considerable employment-rights victory that, if and when enforced, will transform the meaning of work in the gig economy, greatly enhancing income and security for many.

Last year California Governor Gavin Newsom signed a law that requires Uber, Lyft, DoorDash, and many other companies to reclassify as regular employees workers currently illegally treated as independent contractors. This means that in the future they will be paid a more predictable wage, earn sick leave and Social Security credits, and find themselves covered by worker compensation and unemployment benefit laws.

And they will be legally entitled to unionize, in which case workers and managers can negotiate a contact that gives drivers as much “flexibility” as Uber and Lyft now claim they want.

So, like the skilled workers of late 19th century America, gig economy drivers and DoorDash “shoppers” now find the status quo theoretically on their side. At least in California, they are on the verge of enjoying work rights that gig employers want to gut. To do so Uber, Lyft and DoorDash have amassed a $181 million war chest to pass Proposition 22 on the November California ballot. That proposition would once again legalize contract work for millions of workers who by any reasonable definition are regular employees.

Uber and Lyft are strong-arming Californians. They hope their threat will convince drivers to abandon their rights and persuade California riders to endorse the theft.

BLUSTER

In 1941 Henry Ford threatened to shut down his company if workers voted for the United Auto Workers. They did and yet Ford continues to this day. Management bluster is often just bluster, which is probably the case with Uber and Lyft.

But in the last month, they have proposed another way to keep employees from their rights: create a set of franchises to employ their drivers, if Proposition 22 passes. Franchising is an old trick, as any employee at McDonald’s, Days Inn, FedEx, or Jiffy Lube can attest. Workers are legally employees in a franchise, but the real employer, the one with the money and power, remains legally aloof. Workers get squeezed and unionization brings few benefits.

So the lockout, once thought a relic of Gilded Age America, has returned with a vengeance, ingenuity, and determination that would have made Henry Frick envious. We need an equally radical rededication to the concept of jobs with rights, and the rewards, monetary and moral, that are their just compensation.

This blog originally appeared at Labor Notes on September 23, 2020. Reprinted with permission.

About the Author: Nelson Lichtenstein is Research Professor in History at the University of California, Santa Barbara.


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Nationalize Payrolls Now; Gig Work is a Fancy Name for Exploitation; Domestic Workers in the Pandemic

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Calling people “gig” workers is a subtle trap. “Gig” can sound anywhere from upbeat to just a mundane description. The truth is the “gig” economy is just another way of exploiting people and it’s a dream for all capitalists to have a pool of workers who can be used and abused at the beckon call of a supply chain or a big tech company, at the lowest cost possible. And not a surprise—lots of gig workers are at great risk during the pandemic. I explore the lives of “gig” workers in a conversation with Bama Athreya, an economic policy fellow at the Open Society Foundation and a veteran social movement activist.

The pandemic has put domestic workers at risk. Think of it logically: you can be locked down in a home with your client, essentially enslaved, with nowhere to go and no social distancing space. You could easily be trapped in a home, forced to stay inside because of a curfew, without personal protection equipment. Elizabeth Tang, the General Secretary of the International Domestic Workers Federation, joins me from her perch in Hong Kong to talk about the pandemic threats facing domestic workers.

This blog originally appeared at Working Life on May 20, 2020. Reprinted with permission.

About the Author: Jonathan Tasini is a political / organizing / economic strategist. He is President of the Economic Future Group, a consultancy that has worked in a couple of dozen countries on five continents over the past 20 years.


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Why Many Uber Drivers Couldn’t Afford To Stay Home During Australia’s Fires

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Australia’s bushfire crisis has killed tens and incinerated an area two-thirds the size of Illinois. The resulting blanket of smog reduced air quality in the nation’s capital, Canberra, to third worst among all major cities. But the latest manifestation of the climate crisis has hurt an already hard-done by group: gig workers delivering food for Uber Eats. While state governments have advised people to stay home, for gig workers relying on Uber to survive that’s tantamount to asking them to starve, miss rent, or fall behind on loans. All Uber has done, according to these workers, is warn them that going outside hurts their health. Concerning itself as little as possible with its employees’ well-being is a central part of Uber’s business model, defining its workers as independent contractors so it can skimp on providing health care, benefits, or a minimum wage.

But viciously exploiting its drivers—or changing the ‘norms’ that led to a “culture of sexual harrasment” at the company—didn’t stop Uber from losing $1.2 billion between July and September of last year. Their balance sheet from the three months prior to that had them $5.2 billion in the red. Despite never fulfilling the capitalist imperative to turn a profit, ridesharing services like Uber have managed to remake urban life, destroying the licensed taxi industry at a substantial human cost and worsening traffic in major American cities. As the numbers show, the daily reality of Uber drivers is no more rational or fair than one would expect from a company that loses billions while awarding its CEO a $3 million salary.

  • 3,900,000 – Uber drivers worldwide in 2019
  • 36% – U.S. adults who say they used a ride-hailing service in 2018
  • 30% – Uber’s cut of each driver’s fares as of 2019
  • $9.73 – Estimated hourly net income (including tips) of Uber drivers in 2018, factoring in vehicle expenses and Uber’s cut
  • 13 – Major U.S. markets where Uber drivers’ hourly compensation (before taxes) was below the mandated minimum wage in 2018, including the three largest: Chicago, Los Angeles and New York
  • $20,000 – Estimated annual salary, after expenses but before taxes, for an Uber driver working 40 hours per week in 2018
  • $20 million – Amount the Federal Trade Commission fined Uber for falsely claiming its NYC drivers could make $90,000/year in 2017; the company couldn’t produce a single driver who made that much
  • $143 million – Total compensation for Uber’s top five executives in 2018
  • $90 million – Amount pledged by Uber, Lyft and DoorDash to fight a 2019 California law that would classify rideshare workers as employees rather than contractors
  • 0 – Latinx or Black employees who held Uber tech leadership roles in 2018

This article was originally published at In These Times on January 30, 2020 by the editors of In These Times. Reprinted with permission.


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Uber CEO Forgives Saudi Arabia for a Brutal Murder, But Punishes Drivers for Small Errors

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Image result for Audrey Winn"In an Axios interview that aired on HBO last Sunday, Uber CEO Dara Khosrowshahi made a troubling analogy. Discussing Uber’s ties to Saudi Arabia—whose sovereign fund is one of Uber’s largest shareholders—Khosrowshahi described the assassination of Washington Post columnist Jamal Khashoggi as a “mistake” comparable to the company’s own “mistakes” in reckless automation. This “mistake” was brushed off casually, with no mention of its place in the context of other Saudi “mistakes,” including an ongoing violent war against Yemen and a long history of brutally silencing domestic critics.

“It’s a serious mistake,” Khosrowshahi said, referring to the order from Saudi crown prince Mohammed bin Salman’s to kill and dismember Khashoggi at the Saudi consulate in Istanbul in October of 2018. “We’ve made mistakes too, right, with self-driving, and we stopped driving and we’re recovering from that mistake. I think that people make mistakes, it doesn’t mean that they can never be forgiven.”

The self-driving “mistake” Khosrowshahi alluded to was the death of pedestrian Elaine Herzberg, who was killed by an Uber self-driving car in 2018. According to documents released by the U.S. National Transportation Safety Board (NTSB) last week, there was “a cascade of poor design decisions that led to the car being unable to properly process and respond to Herzberg’s presence as she crossed the roadway with her bicycle.” She was thrown 75 feet in the air by the collision and died on site.

Though Khosrowshahi scrambled to backtrack his statement, his apology seems disingenuous given his previous record of emphasizing the importance of forgiving corporate wrongdoings. In a 2018 interview, Khosrowshahi defended Uber COO Barney Harford, who left the company after allegations of making racial slurs and sexist comments.

“I don’t think that a comment that might have been taken as insensitive and happened to report by large news organizations should mark a person,” Khosrowshahi said. “I don’t think that’s fair. And I’m sure I’ve said things that have been insensitive and you take that as a learning moment. And the question is, does a person want to change, does a person want to improve?”

This attitude reveals a larger issue at Uber—the jarring double standard for forgiving corporate “mistakes” while punishing driver errors, even though corporate leaders have far more power to perpetrate large-scale harm.

Since its inception, Uber has faced a steady stream of public controversies. In 2014, former Uber CEO Travis Kalanick joked that the company’s nickname was “Boober” because of the way it boosted employees’ sex appeal. That same year, it was also revealed that Uber’s self-named “God View” could be used to track riders’ locations, including the locations of journalists the company sought to intimidate. From spying on Beyoncé and competitors, to systemically underpaying drivers, to firing over 20 employees who filed sexual harassment claims, the company is quick to seek leniency for itself and drop its “mistakes happen” attitude the moment it turns its attention toward drivers.

In contrast to its internal corporate policies, Uber’s attitude toward drivers is unforgiving. Uber has a militantly single-minded emphasis on high ratings. Given this mindset, it is not surprising that Uber drivers are at risk of getting fired if they maintain a rating below 4.6. This policy remains unchanged, despite the fact that studies have shown that Uber’s rating system allows riders to express biases and evaluate drivers in ways that violate federal anti-discrimination laws.

When drivers are deactivated for low ratings they are told they can rejoin the platform if they complete costly, time-consuming training courses run by Uber’s third-party partners. Many can’t afford these classes already, due to Uber’s dropping wages and vanishing bonuses. Instead of getting training course discounts from the tech giant, however, this requirement remains.

The lack of sympathy is unsurprising given Uber’s history of holding drivers’ poverty against them. Who can forget the now-viral six-minute exchange, where former-CEO Travis Kalanick responded to a driver’s complaints about plummeting rates by telling him that he wasn’t a hard worker—that “some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else.”

Even when drivers have “worked hard” and excelled in their ratings, however, Uber still has ways to punish them. Any number of offenses can lead to deactivation, including, according to Uber, “certain actions [drivers] may take outside of the app, if we determine that those actions threaten the safety of the Uber community, or cause harm to Uber’s brand, reputation, or business.” Though some attempt has been made to clarify these guidelines, confusion remains. Drivers have been allegedly deactivated for a punishing range of issues, including allegedly reporting when passengers called them anti-Muslim slurs and making private Facebook posts.

Uber has a new CEO, but it’s still business as usual. The company’s continued operation is premised on forgiveness for the rich and powerful, and punishment for workers. Khosrowshahi’s statement shows this injustice remains, without any evidence of corporate self-reflection.

This article was originally published at InTheseTimes on November 13, 2019. Reprinted with permission.

About the Author: Audrey Winn is a Skadden Fellowship Attorney working and writing in New York City. She is passionate about workers’ rights, algorithmic transparency, and the inclusion of gig workers in the future of the labor movement.

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How Does the Passage of AB 5 in California Affect Me and Others in the Gig Economy?

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Today Governor Gavin Newsom signed into law Assembly Bill 5.  The untitled new law will have a significant impact on the gig economy in California.  It will be increasingly difficult to lawfully classify California workers as independent contractors.  With the exception of several significant carveouts, which I discuss below, the definition of “to employ” announced by the California Supreme Court last year in Dynamex v. Superior Court (2018) 4 Cal.5th 903 will define the relationship between the hired and the hirer moving forward.  The core of the new law takes effect January 1, 2020.

Dynamex is Now the Law of the Land (Most of the Land, At Least)

Assembly Bill 5 codifies the ABC Test adopted in Dynamex for most California workers currently classified as independent contractors.  The ABC Test states that a hiring party “employs” a person (as an employee) unless it can prove each of the following:

  • The hired person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The hired person performs work that is outside the usual course of the hiring entity’s business.
  • The hired person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

This three-pronged definition of “to employ” describes the prototypical independent contractor relationship:  a plumber, for example.  First, when I hire a plumber to fix a leak in my office, I do not exert any control of the performance of their work.  The plumber does their job based on their best judgment using their own tools.  Second, the plumber is not performing tasks that are within the scope of my law firm’s work.  While my legal practice is broad in scope, plumbing repairs is not something Kitchin Legal offers to any client.  Third, when the plumber finishes their work at my office, they will drive away in their company truck to another plumbing job for another client.  They are engaged in an independent trade.

But there are significant exceptions under the new law.  For a wide range of professionals exempted under AB 5, an older test of the employer-independent contractor will apply.  However, even the exemptions themselves have multiple requirements.

The Existing Borello Test Will Still Apply to a Substantial Number of Workers in California

Prior to the passage of Dynamex last year, California courts relied on the “economic realities test” or “Borello Test” to determine whether someone was engaged as an independent contractor or as an employee.  This test was announced in 1989 by the California Supreme Court in a case called S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.  In Borello, the high court set out a multiple-factor test for evaluating the relationship between the hirer and the hired.  While the most important indications of an employer-employee relationship under Borello are the hirer’s right to control the work of the hired person and the hirer’s right to terminate the worker at will, other factors are relevant to the determination as well:

  1. Whether the person performing work is engaged in an occupation or business that is distinct from that of the company;
  2. Whether the work is part of the company’s regular business;
  3. Whether the company or the worker supplies the equipment, tools, and the place for the person doing the work;
  4. The worker’s financial investment in the equipment or materials required to perform the work;
  5. The skill required in the particular occupation;
  6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the company’s direction or by a specialist without supervision;
  7. The worker’s opportunity for profit or loss depending on his or her own managerial skill (a potential for profit does not include bonuses);
  8. How long the services are to be performed;
  9. The degree of permanence of the working relationship;
  10. The payment method, whether by time or by the job; and
  11. Whether the parties believe they are creating an employer/employee relationship.

Are You Excluded from the New Definition of “To Employ”?

Labor Code §2750.3 lays out the exceptions to the ABC Test for which the Borello Test will continue to apply.  Exempted from the new definition of “to employ” are insurance brokers, doctors, dentists, lawyers, architects, engineers, private investigators, accountants, human resource professionals, investment agents, marketing professionals, certain salespeople, commercial fishermen, repossession professionals, construction sub-contractors, referral agencies, motor clubs (think roadside assistance) and real estate professionals.  Freelance media-makers, including journalists, also are carved out of the ABC Test if they limit their contributions to any one media outlet to 35 pieces a year.  AB 5 directs the courts to use the Borello Test definition of “to employ” in cases involving these professionals, and not the ABC Test.

Who Will be Affected by AB 5?

The media are reporting that up to two million workers will be affected as they are reclassified under the law from independent contractor to employee.  While the media have focused primarily on the hundreds of thousands of Uber, Lyft and DoorDash workers who will affected, it is likely that the vast majority of affected workers currently work for small companies across the state.

Based on my experience representing misclassified workers in California, I have found that small companies, particularly tech start-ups, frequently classify workers as independent contractors because they believe it is easier and less expensive than hiring employees.  These employers fail to factor in the cost of the wage and hour lawsuit that may follow.

What Do Misclassified Workers Have in Common?

In all of my employee-side, misclassification cases, my clients were trained and controlled by the employers.  Their work hours were often scheduled by the employers.  They were subject to discipline if they failed to perform as expected.  They performed work directly related to the core business of the employers.  Many of them worked full time, had company business cards, company email addresses and in one case, a company credit card.  Almost all of them were paid by the hour.  One of them earned performance bonuses.  But, none of them was entitled to unemployment benefits based on their time working for these employers none was provided with workers compensation insurance coverage.

All of these workers ended their relationships with the employing parties because of a dispute over what and how they were paid, or over their opportunity to take meal and rest breaks.  While some of them had issues about how they were scheduled for work, most of them accepted fairly strict control over their work schedules in exchange for their earnings.  They all looked a lot like employees.

Finally, none of these clients fully understood the scope of the damages and penalties they were entitled to under California law until they spoke with an employment attorney.  Their hirers’ decisions to classify them as independent contractors led to a wide range of violations and valuable claims.

What Do Companies That Misclassify Employees Have in Common?

I also have represented a number of employers in several different industries who faced misclassification claims.  Based on my own experience, discussions with colleagues and the rich case law on the subject of the meaning of “to employ,” it is clear that companies that misclassify workers also share a number of characteristics.

First, most of these companies think they are saving money by avoiding the expenses of employing workers.  Second, many of these companies fail to put into place wage and hour policies that comply with California law.  Third, these companies typically do not have mandatory written sexual harassment and retaliation policies, and do not provide sexual harassment training to their workers as required by California law.  Fourth, most do not provide their workers with paid sick leave in compliance with state and/or local laws.  Fifth, these companies do not provide workers compensation insurance coverage.  Fifth, these companies fail to reimburse their workers for business expenses, including cell phone plans, internet costs and transportation costs.  Sixth, these companies do not comply with federal and state tax laws.  Seventh, all these companies are vulnerable to costly lawsuits and governmental audits.

What Do I think About the Law?

Subject to the section 2750.3 exceptions, classifying someone else as an independent contractor who performs work within your business establishment and within the usual course of your business operations still most likely violates the Borello TestIt certainly violates AB 5 and Dynamex.

Similarly, having someone perform work within the usual course of your business from a home office also likely creates an employer-employee relationship.  Under the ABC Test, it makes no difference whether the person signed an independent contractor agreement, sets their own hours, works relatively independently from direction or works from home.   The focus of the inquiry is much more limited.

As an employment attorney, I have always been suspicious of companies that have more independent contractors working for them than they have employees.  A disproportionate number of independent contractors might be evidence of an illegal scheme designed to avoid providing workers the benefits of employment: possible subterfuge.  Under the Borello Test (i.e., Economic Realities Test), the court should take into account what relationship the parties themselves were attempting to form when they entered into the working arrangement.  But the parties’ intentions do not matter under the ABC Test.  Even under Borello, however, the Supreme Court warned parties to classify workers with care. “The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”

Finally, I have found that the harder it is to justify a decision to classify someone as an independent contractor, the more likely it is that the person is actually an employee entitled to all of the benefits given to employees under the law.

What Should a Misclassified Worker Do Now?

Claims for unpaid wages are governed by a three-year statute of limitations.  Under certain circumstances, a worker can reach back four years to recover unpaid wages pursuant to a misclassification claim.  If a person has been working as a misclassified worker for more than one year and has not been paid for all work time, and/or has worked overtime hours without overtime pay, and/or has not been provided meal and rest periods, and/or has not been provided complete and accurate paystubs, and/or has terminated for complaining about any of these things, that person should speak with a lawyer.

If a person is currently working as an independent contractor and wishes to make a smooth transition to becoming an employee of the hirer, they should also speak with an attorney.  As we move through this transition in California’s workforce, some employers are going to make efforts to pressure workers to sign illegal waivers of their right to obtain unpaid wages and penalties for past violations.  At this moment in our history, workers in transition should reach out to a competent lawyer for advice.

What Should an Employer Do Now?

The first step every employer who regularly relies on independent contractors should do is to consult with an employment lawyer.  This is a critical juncture for employers in California where risks that were once delayed for all sorts of reasons are at the door.  Assembly Bill 5 did not radically alter the law.  If a worker is deemed to be an employee under AB 5, it is most likely they will be deemed to have been an employee last week and last year in a lawsuit.

If hiring an employment attorney is not feasible, then employers should read about the new law.  Check with industry groups about the effect of AB 5.  Visit the website of the Division of Labor Standards Enforcement (“DLSE”) at https://www.dir.ca.gov/dlse/ I expect the DSLE will be issuing advisories he help in this transition.

Will AB 5 Slow “the erosion of the middle class and the rise of income inequality,” as it Promises in the Preamble?

By passing AB 5 into law, California has taken a substantial step in addressing the burgeoning gig economy and its impact on workers’ rights.  The law is based on the assumption that most workers are better off as employees than independent contractors.  Guaranteed minimum wage, paid sick and family leave, workers compensation coverage, unemployment benefits will be seen by many as a fair trade for giving up a little, or a lot, of scheduling flexibility.

Major critics of the law dispute this assumption and argue that this new law will be a jobs killer and will undermine the flexibility and profitability of the on-demand economy.  In June, Uber CEO Dara Khosrowshahi and Lyft co-founders Logan Green and John Zimmer, co-wrote an op-ed piece for the San Francisco Chronical in which they stated, “…, most drivers prefer freedom and flexibility to the forced schedules and rigid hourly shifts of traditional employment; and second, many drivers are supplementing income from other work.”  The new law, they have argued will require them to undertake a fundamental change in their business model and they warn of adverse effects on their operations and profits.

I am not certain who will be proved right over time.  This is only day one, but I am leaning heavily in favor of any law that provides additional benefits to workers and helps to level the economic playing field.  What is certain is that AB 5 is now one of the most complicated labor laws on California’s books.  The core of the new law, Labor code § 2750.3, is nearly 4,000 words long, has a total of 109 separate paragraphs and makes reference to a host of other California codes and regulations.  AB 5 also defines two distinct employment tests by reference to two California Supreme Court decisions separated in time by 30 years.  Borello has a lengthy citation history as appellate courts have wrestled with its meaning and application.  Already, Dynamex has been cited in nearly a hundred court decisions.  Of course, no matter how clearly written, no appellate decision is immune from different interpretations by parties advocating from different positions over different interests.

The way these two pivotal cases and Assemble Bill 5 are applied to the thousands of employee misclassification claims that will be made in the coming years will define the nature and scope of the employment relationship in California with every-increasing clarity—at least many of us hope for that.

 

 

About the Author: Patrick R. Kitchin is the founder of Kitchin Legal APC, a San Francisco, California employment law firm. He has represented tens of thousands of employees in both individual and class action cases involving violations of California and federal labor laws since founding his firm in 1999. According to retail experts and the media, his wage and hour class actions against Polo Ralph Lauren, Gap, Banana Republic, and Chico’s led to substantial changes in the retail industry’s labor practices in California. Patrick is a graduate of The University of Michigan Law School and is personally and professionally committed to the protection of workers’ rights everywhere.

 


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Hey, Uber and Lyft: Gig Work Is Work. California Just Said So.

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The rideshare industry seems to have been on an unstoppable tear, running roughshod over regulations, filling the streets with cars, and making astronomical sums of Wall Street capital. But California just tripped up Uber and Lyft’s business model with pioneering legislation to rein in the freewheeling “gig economy.”

The law, Assembly Bill 5 (AB5), passed overwhelmingly in the California Senate this week and is expected to be signed by Governor Gavin Newsom soon. It lays out a clear standard, the so-called “ABC test,” to ensure employers are properly categorizing workers as independent contractors, taking into account how much control the company exerts over their working conditions. Under the law, an independent contractor is defined as a worker with real autonomy: a person who (a) is not directly controlled by the company, (b) does work in the same trade or field independent of that company, and (c) is “independently established” as a proprietor of a separate business in the same sector. Under AB5, if you’re a rideshare driver whose entire livelihood depends on the rides your app funnels into our smartphone every hour, you’re likely an employee under California law.

The ABC test will codify the decision made in a landmark California Supreme Court case last year, Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The Court ruled in favor of delivery service workers who argued they deserved to be classified as employees because they were forced to wear the company’s uniform and display its logo despite being legally deemed “independent.” A major goal of the AB5 legislation is to stop employers’ widespread abusive misclassification of workers as independent contractors, in order to deny them regular employment rights and protections, often by insisting that their workers are merely app users.

Once classified as employees under state law, gig workers—not just platform-based workers, but also nail technicians, home-repair workers and dog walkers—would have access to California’s minimum wage, overtime pay, paid rest break, parental leave and workers’ compensation.

Yet Uber and Lyft both continue to resist AB5, and Uber has even indicated that it does not plan to follow the law once it goes into effect at the start of 2020. The company argues that neither the companies, nor many of their drivers, want to be bound by state labor laws and prefer to drive Uber as a casual side hustle.

But thousands of drivers are already organizing in California for more power over their working conditions. According to Brian Dolber, an organizer with the California-based Rideshare Drivers United, a fledgling union of 5,000 drivers, AB5 paves the way to formal unionization. But Rideshare Drivers United has not yet decided on what form the union will take. For now, he said, “We’re really putting drivers’ voices first.” Dolber added, “We want to continue organizing drivers and have drivers decide how they want their union to be structured.’

Critics of AB5 point to the potential loss of “flexibility” once gig workers are regarded as  employees. However, labor advocates dismiss the flexibility question as concern trolling by the bill’s corporate foes. Nayantara Mehta of the National Employment Law Project argues that current labor laws do not automatically exclude jobs with irregular hours, such as union nurses and construction workers, from being employees. Besides, AB5 deals with the degree of control a company exerts over a worker, not how the schedule is set. “Courts have found that just because a worker has a flexible schedule doesn’t mean she is somehow transformed into the operator of her own business—the true benchmark of independent contractor status,” writes Mehta.

Moreover, the fixation on flexibility elides the reality of many gig jobs. Workers’ schedules may be unstable, but not by choice: Often workers are glued to their phones so they can scramble for whatever rides pop up on their phone, or get paid for each manicure they do or each burger they deliver. Their pay could be so dismal that workers “flex” themselves into exhaustion.

“We drive and we drive and we drive,” said Nicole Moore of Rideshare Drivers United, who helped coordinate a rideshare strike in May. “We don’t have dinner with our kids, we don’t do all the things that we’re supposed to be doing in life. Yet we’re expected to pay the rent, we’re expected to put food on the table, and try to make a better life for our kids.”

This is not the first time Uber’s independent contractor system has been challenged. Various lawsuits in recent months have sought to establish workers’ formal employment rights, with mixed results. Uber managed to wriggle out of two lawsuits in March, which together settled for $20 million with 13,600 drivers—but did not address their status as non-employees. Meanwhile, growing efforts to organize rideshare drivers, particularly the New York Taxi Workers Alliance, have helped win increased labor protections at the state and local level, including a minimum wage for drivers in New York City.

Facing the prospect of their payrolls becoming saddled with thousands of brand new workers, gig-company executives are panicking. Uber and Lyft spent a total of about $750,000 lobbying the California legislature, alongside other professional and industry associations that sought exemptions from the law. In the end, Uber and Lyft were not granted the carve-out they were hoping for in the bill, but other trades—including real estate and insurance agents, doctors, engineers, architects and lawyers—were exempted.

Now Uber, Lyft and DoorDash are reportedly joining forces to fight AB5 using a time-honored California political strategy: investing $90 million on a ballot initiative asking voters to overturn the law and erect a different legal regime for gig workers, which might include some weaker benefits and pay standards.

So the gig economy’s leading lights are bent on fighting the law until the bitter end. But in this next round of legal battles, California’s new law, which is based on a Supreme Court ruling and reflects growing public disillusionment with the gig economy titans, might finally put the brakes on the platform economy’s regulatory rollbacks.

Moore is hopeful that the law can help narrow the gulf between Uber executives and drivers. “There’s no difference between my humanity and their humanity, sha says, adding: “The basic American agreement is that yes, be innovative, become a millionaire, build your own business, but the American compromise is that you will need to share some of those millions with the people who do the work in your company, so that they can also afford to take a Lyft.”

This article was originally published at In These Times on September 13, 2019. Reprinted with permission.

About the Author: Michelle Chen is a contributing writer at In These Times and The Nation, a contributing editor at Dissent and a co-producer of the “Belabored” podcast. She studies history at the CUNY Graduate Center. She tweets at @meeshellchen.


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Uber claims California gig economy law won’t apply because drivers aren’t central to Uber’s business

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The California Senate passed a bill reining in gig economy abuses on Tuesday night, and by Wednesday afternoon, before Gov. Gavin Newsom had a chance to sign it, Uber had already come out to say that it was confident the new law wouldn’t apply to Uber drivers, and also Uber had already allocated tens of millions of dollars for a ballot initiative overturning it.

Uber chief legal officer Tony West insisted that the company would pass the test for counting its drivers as independent contractors rather than employees because “drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.” As Jamison Foser tweeted in response to this insult to our collective intelligence, “Just last week as my wife and I were leaving a bar, I turned to her and asked ‘are you getting a technology platform for several different types of digital marketplaces or should I?’”

Uber’s position boils down to “we will pour all our resources into fighting this and we bet we can buy a win by some means or other.” But the company is on the record that its drivers are a key part of its business model. Like, really on the record about that. And AB5 won’t leave the court battles to drivers—San Francisco’s city attorney has said that his office may take action to enforce the law.

For its part, Lyft sent drivers a threatening letter saying that drivers “may soon be required to drive specific shifts, stick to specific areas, and drive for only a single platform (such as Lyft, Uber, Doordash, or others).” While Lyft and other app-based services might decide that their best move was to limit the number of drivers at one time and the number of hours they could work, that’s not required by the law, and Assemblywoman Lorena Gonzalez, the author of AB5, questioned the legality of the threat that people might be required to “drive for only a single platform.”

In short, AB5 is a big step forward—but companies that got rich and powerful by exploiting workers and sidestepping labor laws are going to use their money and power to continue exploiting workers and sidestepping labor laws for as long as they can get away with it.

This article was originally published at Daily Kos on September 12, 2019. Reprinted with permission.

About the Author: Laura Clawson is a Daily Kos contributor editor since December 2006. Full-time staff since 2011, currently assistant managing editor.. Laura at Daily Kos

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