Bans on Independent-Contractor Status Hurt Workers (Again)

In April of last year the California Supreme Court ruled that a large class of service workers historically categorized as independent contractors, those who are under contract with a host enterprise that performs the same kind of service they do, have to be treated as employees and brought under the full range of employment laws. Some labor advocates cheered, but many California workers did not. “I lost my entire staff,” said owner Anthony Giannotti of downtown Sacramento’s Bottle and Barlow barber shop. All seven of his barbers quit, he said. The ruling is expected to disrupt the marketplace for cosmetologists and tattoo artists, yoga and Pilates instructors, and even FedEx delivery personnel. [Angela Greenwood, CBS Sacramento in September]

22 Comments

  • To sum up: not everyone benefits from everything.

  • This is part of an overall push by the Left to MAKE employers pay more. They hate the marketplace. They believe employees are captives, slaves, with no ability to change jobs. They don’t like paying for performance. They think companies are owned by money-bags owners who rake in the dough, rather than the reality of 3 to 5% profit margins.

    • Related: As noted by commenters in other forums, in the Washington example, if the SEIU walks into Jane’s Hair Salon and tries to unionize a bunch of employees….er I mean independent contractors that are renting their chairs, that simply doesn’t work. If on the other hand, those same people aren’t ALLOWED to be independent contractors renting chairs but MUST be employees of Jane, then they can be targeted for unionization. Ka-Ching….more money for the union, and their tools in the legislature via bribes…er, I mean campaign contributions.

      • Agreed. If your strategy is to keep workers from gaining leverage to enhance their working status by joining together, this is a bad law. Of course, capitalists gaining leverage by pooling their money is fine.

        • Of course to qualify for independent contractor status, they have to get things like control over their working hours. Some people like that sort of thing and might be unhappy enough about losing that to take it out on any union reps that come knocking.

          I seriously doubt that the unions will make much headway among the former independent contractors unless they resort to legally questionable strong arm tactics.

          Of course a lot of unions have reputations for resorting to such tactics.

          Illinois had a program for home healthcare that included not just professional health care workers, but also provided some compensation for a significant group of people taking time off their regular jobs to provide home care only for a sick, elderly or disabled relative.

          One of the Illinois state workers unions got the state legislature to pass a law forcing all the home health care workers including the people just providing care to a relative into the union.

          The people providing part time home care to family members were annoyed to discover that they suddenly had union dues being deducted from their state home care checks.

          A number of them filed suit in federal court. IIRC, they won.

          • Why can’t employees have the same type of hour arrangements as independent contractors for working hours? My spouse is an employee and she basically works when she wants. There is nothing about an employer/employee relationship that prevents anything that being an independent contractor allows.

          • “Why can’t employees have the same type of hour arrangements as independent contractors for working hours?”

            With an employee, such arrangements are at the employer’s sole discretion. And if it’s not working for the employer, the employer can cancel the arrangement at any time.

            “There is nothing about an employer/employee relationship that prevents anything that being an independent contractor allows.”

            It’s not that independent contractor status allows self directed work hours, independent contractor status requires self directed work hours, the employer has no choice in the matter.

          • “There is nothing about an employer/employee relationship that prevents anything that being an independent contractor allows.”

            This is only half true. There are many things that may be allowed in an employer/employee relationship at the employer’s discretion that are required under Federal law for independent contractor status.

            The two big ones, are self directed work hours and the contractor being able to have multiple clients.

            An employer with part time employees might be fine with their part time employees working for another company in a different industry but may be unwilling to put up those same employees also working part-time for a direct competitor.

        • MattS,

          Let’s face it, public policy favors the employer-employee relationship over independent contractors. This is historical. Back in the day (let’s say the turn of the 20th century), having independent contractors was not really contemplated. Everyone who worked for a business was an employee. But employees started to get miffed because employers were unregulated and (in the opinion of employees) taking advantage of labor. So began rules regulating the employer-employee relationship. Employers eventually began to resent the change in the balance structure. So, they began outsourcing. They first outsourced to other companies to work that was not in their core-competency, like janitorial services. Then they outsourced core competencies to outside companies. That was not efficient enough for employers. So, instead of hiring outside companies, they cut out the middlemen and made their former employee jobs, former contracted out to other company jobs, into independent contractor jobs. In doing so, they avoided the rules that governed their employees and that governed their contractors’ employees. In sum, we are back to the pre-employer-employee relationship time. A full circle.

          Now, I am not saying that one way way is definitively better than the other. I am just saying that capitalists want to make more money and laborers want better working conditions (in terms of pay, benefits, and actual workplace conditions). There is always going to be a tension, especially at the margins.

          Was Lochner correctly decided? I don’t know. But since it is no longer being followed, we are left with a system where the government puts restrictions on capitalists. And, no, I am not a Marxist, I truly believe that a capitalist system is better than a socialist one.

          • “laborers want better working conditions (in terms of pay, benefits, and actual workplace conditions). There is always going to be a tension, especially at the margins. ”

            You have no idea what laborers that aren’t you and you haven’t even talked to do or do not want.

            The big problem is you can’t objectively define “better working conditions” in a way that every worker would agree on.

            Any one-size fits all set you pick, a significant percentage of the labor force is gong to think it’s worse, not better.

            Some will prefer more direct compensation and less benefits, some will prefer to exchange higher pay for more flexibility in hours.

            As to “workplace conditions” beyond actual safety issues, there is absolutely nothing that you can say is objectively better for everyone.

            Do you even know where “benefits” (indirect compensation) comes from in the first place? During WWII, the US government enacted wage caps, during the tightest labor market the US has ever seen. To compete for the the very small available pool of labor, companies started offering various forms of indirect compensation.

            In my opinion, giving both companies an labor more options on how to define their relationships for themselves is orders of magnitude better than fixing everything to a strictly defined employer/employee relationship.

    • Loonie in Washington gives up (thankfully). https://komonews.com/news/local/booth-renting-bill-affecting-hair-stylists-is-dead

      Allan claims “There is nothing about an employer/employee relationship that prevents anything that being an independent contractor allows.”

      Allan, I believe you are incorrect. Why? Because in places like California, you simply can’t ask employees to work hours like an independent contractor might choose to. Example – any hours over 8 in a day is considered OT. So, as a result, there are no alternative work schedules like 4×10 or “9-80” (80 hours in 9 working days, 4×9 hour days plus an 8 hour day one week, 4×9 hour days the next week, Friday off.)

      An independent contractor may wish to schedule their hair clients on only 3 or 4 days a week (to get a longer weekend, reduce child care costs, etc), but still put in a full week’s worth of work. In places like California, no sane owner of a small business hair shop is going to agree to such a schedule since it’ll cost them extra for the same number of hours.

      To add to that, if I’m independent, I’m paid, more or less, on piece work. The more cut and color I do, the more I get paid, period. 100% worker pay capture of the increased production. If I want to earn more, I can take more clients and work longer hours (or become more efficient and service more clients in the same amount of time). If I’m an employee….well, I have that “employer” between me and taking more clients…and that owner doesn’t get to charge 1.5 times extra for that same cut and color, so you can bet there won’t be an hour over 40 in a week. Or the employer is likely to capture a larger share of my increased efficiency if I work more clients in the same amount of time.

      • NNG,

        You must be kidding. California allows alternative work schedules. My first google result: https://californiaemploymentlaw.foxrothschild.com/2018/02/articles/wageandhour/qa-regarding-alternative-workweek-schedules/

        As for getting paid more for working more, what about this thing called commissions? How about a base pay of minimum wage, plus, say 50% of all earnings that exceeds the cost of employment?

        Don’t like that? Make the “employees” or “independent contractors” equity partners.

        Don’t like that? Have the employees rent the space under their own company name and charge under their own company name.

        There are a ton of legal arrangements out there.

        What you can’t do is hire independent contractors when they are really employees.

  • “The big problem is you can’t objectively define “better working conditions” in a way that every worker would agree on.”

    This is all too true. I think, however, that many workers can agree on what “worse working conditions” are. If employers would do away with those, then we would not need to worry about defining “better working condition” and letting employers and employees negotiate how they want.

    So, in a vacuum, your position has a lot to say for it. We are not, however, in a vacuum. The employer-employee relationship is inherently a power struggle. Historically, in a capitalist society, the employer has the power, especially at the margins. Society (read government) has attempted to tilt the balance. Unfortunately, the only way we have figured out to do so is to use laws as a hammer where every perceived inequity is a nail.

    Of course, I know where “indirect compensation” came from. It was a WWII scheme to protect higher earning folks from very high marginal income tax rates.

    So, I propose to you this: Come up with a scheme that balances the power between capitalists (who can pool their power into a company) and labor (other than unions, which you seem to despise). While you are at it, could you also come up with a way to balance the power between the capitalists (who work with efficiencies of scale) and consumers (who stand alone when purchasing products)?

    If that can be done in a way that satisfies you, I will stand with you.

  • “The employer-employee relationship is inherently a power struggle. Historically, in a capitalist society, the employer has the power, especially at the margins.”

    This is not strictly true. The employer has the power when there are more people seeking work than there are job openings. However, potential employees hold the power (if they have the guts / foresight to use it) when there are more job openings than there are workers looking for jobs.

    ” Come up with a scheme that balances the power between capitalists (who can pool their power into a company) and labor (other than unions, which you seem to despise).”

    Unions don’t balance the power between capitalists and labor, under current labor law, they largely reverse what imbalance exists.

    “While you are at it, could you also come up with a way to balance the power between the capitalists (who work with efficiencies of scale) and consumers (who stand alone when purchasing products)?”

    No such imbalance exists (nor can it exist). No one is holding a gun to people’s heads forcing them to buy products that cost more then the value they perceive that they get from said products.

    • re: power.

      If there are more jobs than workers, employers have two choices: offer better incentives for people to work or go out of business. In this case, workers and employers have essentially a level playing field.

      If there are more workers than jobs, workers (assuming they do not want to become employers) have two choices: take whatever the employer offers or be unemployed. In this case, employers have an incredible upper hand.

      So, worst case for capitalists is that they cannot capitalize their capital because it is not profitable. Worst case for workers is that they cannot support themselves. Hence, an inherent advantage in the system for capitalists.

      As for consumers v. sellers, are you really serious? The market does work on the small level. If I want to pay less for milk, I shop around. It does not work well on a larger level, where companies mass produce things. At the risk of dating myself, I would venture that Navin N. Johnson would never have had a problem in your utopia.

      “Unions don’t balance the power between capitalists and labor, under current labor law, they largely reverse what imbalance exists.” Ok. How would you structure a system to balance the imbalance?

  • I think, however, that many workers can agree on what “worse working conditions” are.

    Sorry, but no. I have seen “worse working conditions” defined as “no free coffee” or “the need to wear a name badge.” If there is, by your own admission no broad agreement on what is “better working conditions,” then the opposite is true as well.

    The problem is that “worse” and “better” are terms that compare and not objective standards.

    So a company that offered in house child care might be seen as “better” to some, but in that same company the single person who would rather have the dollars in their pocket that go to support that care. They will view the child care as “worse” as it cost them money.

    Society (read government) has attempted to tilt the balance.

    “Society” is not “the government.”

    In fact, it can be argued that as governments are established to protect the rights of individual people, and “society” is a group of people, governments are not “society.”

    So, I propose to you this: Come up with a scheme that balances the power between capitalists (who can pool their power into a company) and labor

    That’s easy. Let people negotiate for their salaries, benefits and other compensation. The employer needs employees and workers want jobs. If an employer wants to ask an employee to work more than an agreed upon number of hours, that is between the worker and the employee and not a concern of the government. In interjecting themselves into that relationship, the government restricts the economic freedom of both parties.

    The problem is that workers feel that the company exists to provide them with a job. It doesn’t.

    While you are at it, could you also come up with a way to balance the power between the capitalists (who work with efficiencies of scale) and consumers (who stand alone when purchasing products)?

    You mean like banning together with others to boycott or support a product or company?

    While you talk about “schemes,” it appears that to implement those “schemes” would reduce the freedoms of people even more.

    • “Society” is not “the government.”

      “That’s easy. Let people negotiate for their salaries, benefits and other compensation.”

      “In interjecting themselves into that relationship, the government restricts the economic freedom of both parties.”

      Sorry I did not respond earlier, I was too busy laughing.

      Society is “the aggregate of people living together in a more or less ordered community.” An ordered community on a larger scale is another way to say government.

      The problem is not that workers do not want to negotiate, the problem is that employers will not let them. Companies have policies. Employees have to follow those policies. Only by taking collective action can employees group together to try to get those policies changed. I am not saying they have to do so by joining unions, but they have to do it somehow.

      If you think that government restrictions are bad, fine. I would point out that, until the turn of the 20th century, with NO exception that I can think of, there was never a government restriction on employees. All restrictions were on employers. For example, the feudal system, slavery, serfdom. It seems to me that, at least in the US, all of the laws that were changed were done in order to ameliorate the historical imbalance.

      • I won’t respond to your insult but will just let it go.

        Society is “the aggregate of people living together in a more or less ordered community.” An ordered community on a larger scale is another way to say government.

        Nope.

        A “society” is a voluntary association. In other words, if you don’t want to live in a community, you don’t have to. If you don’t want to take part in “societal events,” you don’t have to.

        That is not the same thing as government.

        Companies have policies. Employees have to follow those policies.

        They have to? Someone is holding a gun to their head?

        Employees have no other options than to follow the “policies” of a company?

        Only by taking collective action can employees group together to try to get those policies changed.

        Once again, that is false. If an employee can make a good case that a policy should be changed, employers may change it.

        It seems to me that, at least in the US, all of the laws that were changed were done in order to ameliorate the historical imbalance.

        You may want to read that whole paragraph again as it really is an argument against what you are saying.

        • Sorry. Historically, all restrictions were on employees (not employers, as I mistakenly wrote).

  • Setting aside how many of those policies are result of the “community” (government, or lawyers backed by the courts” dictating that it be so…

    Neither employer nor employee is free. While there is room for debate on which is less the slave, neither can claim any significant measure of freedom. At most, the employer can choose not to go into business, and the employee can choose to seek other employer (subject to State licensing schemes, of course).

    • agreed

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