Is the Contract Worker Golden Age Coming to an End?

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By Casey C. Sullivan, Esq. on September 02, 2015 12:59 PM

The ranks of America's independent contractors, freelancers, and temporary workers have swelled over the past years. Many companies have eagerly switched to a contract-based workforce. After all, using independent contractors allows corporations to avoid many of the costs and risks of employment -- by shifting them onto the worker.

But, if today is the golden age of contract work, two recent developments signal that the era could be coming to an end -- or at least facing major new obstacles. The first, a decision by the National Labor Relations Board removes a significant protection provided employers using contract work. The second, the granting of class action status to thousands of Uber drivers, risks exposing corporations to significant, costly litigation for potentially misclassifying workers.

NLRB Ruling Strengthens Contractor Unions

An NLRB ruling last week significantly strengthened the position of contract workers and franchise employees. The ruling essentially changes the definition of a "joint employer" in order to hold companies, staffing firms, and franchisees accountable for labor violations. No longer must a company have direct, pervasive control over a worker to be considered an employee. Instead, two companies, here a staffing agency and a recycling company, that "share or codetermine" essential employment terms and conditions, are both employers of the worker. The decision would also allow unionized contract employees to negotiate directly with the companies, as well as intermediary temp and staffing agencies.

The decision could drastically change the contract work relationship. "If this decision stands, the economic rationale for hiring a subcontractor vanishes," Beth Milito told The Wall Street Journal. Milito is senior legal counsel for the National Federation of Independent Businesses.

Uber Drivers Get Class Status

The second blow against contract work came yesterday, as a federal court in San Francisco granted class status to all eligible Uber drivers in California. Uber considers its drivers independent contractors, but the class action alleges that the company exerts such pervasive control over their work -- from setting fares to determining how they can be fired -- that the drivers are in fact employees, entitled to the employee benefits.

In June, the California Labor Commission ruled that a single Uber driver was an employee of the company, not an independent contractor, and entitled to unpaid wages, reimbursement for work expenditures, and waiting time penalties. That driver asserted facts essentially the same to those in the class action. If the class action is successful, it could greatly undermine Uber's business model and that of many similar companies.

Of course, both decisions could be overturned on appeal. In the meantime, the popularity of contract workers might already be waning. Several on-demand tech companies, the kind of businesses most closely associated with the contract economy, have given up on independent contractors, finding that hiring workers as full employees is necessary to ensure a qualified, committed workforce.

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