2017 EMMY NOMINEE: The 'Virtual' Employee in a 'Gig' Economy



this is the American Law Journal call it what you will the gig economy the sharing economy the freelance economy think uber lyft Airbnb to name a few employment in America is changing dramatically what are its implications and why is it spilling over into the courts welcome to program I'm Christopher not into gig or not to gig that is the question Gina Passarella with the legal intelligencer has this meanwhile many Americans are making extra money renting out a spare room designing websites or even driving their own car this on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation from the early days of the 20th century America prided itself on not only being an economic powerhouse among nations but also safeguarding its workers but the rise of technology cheap labor and the entrepreneurial spirit is birthing something new the gig economy and it's challenging everything we know about business and laws protecting workers I think both Democrats and Republicans want to embrace technology they want to embrace the growth in jobs the technology can bring it out but it's also raising hard questions about workplace protections and what a good job will look like in the future and there's the rub and why the gig economy is finding itself in court Shannon Lanier Dhin a Boston attorney has gone after uber the poster child for the new economy at sued uber for misclassifying its drivers as independent contractors and by doing that goober has basically pushed all the costs and expenses of its business on to the workers and the workers aren't getting the protections that they're owed under the wage laws and the employment laws two class-action lawsuits have been settled in California and Massachusetts giving drivers more legal protections but still allowing uber to classify them as independent contractors there are more class actions to another sector of the freelance economy under scrutiny is teaching growing trend at colleges and universities across the country which increasingly rely on part-time adjunct instructors the definition of an adjunct is a professional that has the same academic qualification as full-time faculty that's contracted to come work at the campus with no expectation of benefits but here's the problem they work without the safety net of what regular employees and other teachers get they don't have benefits they don't get paid appropriately there's no workers comp some people think Oh adjunct faculty that's quite an honorary stature well not in these cases it's really not that way but with globalization and a surge in technology the gig economy isn't going anywhere with uber there's no benefits but I think for me there is more benefits they no benefit the benefit is that I change my own time and it's a lot better than the minimum minimum wage work by 2020 40% of the US workforce will be freelancers how to balance the interest of entrepreneurs and create safe and fair working standards will challenge labor laws for years to come and no doubt continue to be fodder for political seasons for the American Law Journal I'm Gina Passarella all right five guests with us tonight for in the studio one will be joining us from Washington DC in just a few minutes Anthony Haller returns to our program he practices all aspects of labor law with the top 100 law firm blank Rome he's been advising us here on alj for over 13 years Robin bon heads-up transition strategies LLC the Employment Law Firm which dedicates itself to representing individuals during their times of career change and challenge Michael Salman said as over 25 years of experience representing primarily employees in employment matters the legal Intelligencer gave his law firm Selman sin gold Shah the employment litigation department of the Year award in 2014 and Jonathan younger is a human resources expert with agile talent collaborative and co-author of this book agile talent how to source and manage outside experts well Atlantic magazine I think some disapproval just about just a few months ago and it said in the sharing economy no one's an employee the jobs may offer flexibility and many other benefits but traditional legal protections for workers aren't part of the package what are they talking about Michael what we're talking about all the protections that you can get as a matter of law the anti-discrimination laws unemployment compensation workers compensation all those things that we put out there as public policy to protect workers in the workplace well the problem we have Christopher is that we have new innovative and disruptive technology and systems and companies that are providing consumers with something they really want and the laws have not kept up with today's economy and that's the trouble because the laws that we're talking about mostly were written a long time ago and some of them over a century ago and they really didn't anticipate the kind of economy we have today right we always say that the law is slow to catch up to technology so you're making the same argument here that I got our workforce now not just slow to catch up that old-fashioned there anachronistic and they simply cannot apply to the type of work relationships that we have in this new economy and Jonathan younger and whether you love or hate the gig economy let's say you're an employer if you're not getting on board you're getting behind the reality is that more and more organizations are interested in using gig stirs and freelancers for several reasons one is certainly the cost advantage of hiring people on a part-time consultant of or project basis but in addition to that the flexibility the speed and the innovation that these people provide is something that organizations want need and are buying at an increasing rate so Rob I guess in some ways this is something that's coming it's here everyone better get on board but the whole notion is do we do it legally do we do it ethically do we do it fairly well absolutely because one of the biggest things for all people who work is they want benefits they want retirement they want pension matches and things that of course you don't get if you're in a pool I you know for the past 15 20 years I've represented well over 3,000 executives in the negotiation of employment and severance agreements and I have really noticed the over 50 over 55 segment of the population is turning into a lot of independent contractors employers want their expertise they want it when they need it but they don't want it 24/7 and all the FMLA medical benefits costs and things that come with older workers and I very much see this as a downside of the disruptive technology Christopher it's really important to understand this isn't just about the new companies like uber and lyft I mean some of the most well respected biggest fortune 100 companies in the country are relying on what's often called the contingent workforce and that's a combination of employees but of people who are in some other kind of relationship like independent contractors outsourcing arrangements there's a whole slew of techniques that these companies are using and a lot of it is to do with agility flexibility and innovation you know that's true up to a point but let's be realistic here I think a lot of companies are also doing this to avoid paying unemployment taxes paying workers compensation you know the state of Pennsylvania a couple years ago estimated that they were losing six million dollars a year in unemployment comp revenue in the unemployment bank is basically broke in Pennsylvania if you multiply that over all the years and this was based on people who are intentionally misclassified just to avoid the payroll taxes and just to avoid you know getting that coverage that they would otherwise have to pay agility is great but you know some of these folks have been working five six seven years as independent contractors that's not a Jill T in my mind that's taxibro there's Jonathan then Robin go ahead there's a fact of the matter that some jobs aren't going to be full-time in these organizations but in fact they're absolutely critical players we need a legal system that in franchises those differences not everybody's a Newbridge drivers stealing work from a full-time driver well when we were talking about the mist classification I was thinking back to the original Microsoft case where you had independent contractors employees working right next to each other essentially performing the same functions but the Microsoft employees were getting those very lucrative stock options and the independent contractors were not so I mean I think this is a really critical factor and there hasn't been that much true true growth in companies recently they grow by merging or by cutting workforces or seeking economies that way and I do think that there could be something along the lines of the equity packages that I see anyway that inspires companies to not want to classify people properly as employees well the big losers according to some are the workers despite the fact they're getting some flexibility they're losing benefits and protections the government because they're certainly losing taxes and although there may not be much empathy out there for lawyers or insurance companies the insurance companies are also losing work and by way of that segue let me introduce to the program tonight from Washington DC this evening Jim quickl who's the director of communications with the coalition against insurance fraud and gemmed in this gig economy it's independent contractors and it's employers who are gaming the system know well we often see it depends on which we're talking about this classification is a big word for simply a dishonest employer who dodges paying state required workers compensation insurance in order to fatten up their profits at the expense of workers there are many dodges Andrews's that they can do but ultimately this cost the insurers and workers and taxpayers literally billions of dollars a year and stolen money and on the other side of the equation and again this uber class-action was just settled in California although it's still being litigated across the country you can't tell me that there aren't thousands of drivers who are driving uber cars and going back to their insurance companies and not telling them that they're actually driving commercially that's another big suck on the insurance industry that's another sense of deception or fraud well it's also dishonest competition you will find you go into some of the little chat rooms that the various ride-sharing companies drivers lounge on and you'll see them advising each other back and forth how to lie to their insurance companies so that they can go ahead and continue driving commercially while telling their personal insurance company that they're still using the car only to go to the store and drive to work and take the family on Sunday outings I think there's this issue of there really is unfair competition for the more established companies that play by the rules that really have their employees be employees you know people it means that their payrolls are higher their costs are going to be higher and you know I'm all for entrepreneurship I'm an entrepreneur I have my own law firm I pay unemployment I pay workers comp all those things have I ever had an independent contractor shirt on short-term projects but you know this idea that there are there are companies out there that consistently do this to compete unfairly now this is a really an employer-employee issues this is a there's an unfair competition that even the the good employers who really treat their people as employees as opposed to I was once on a plane with a guy who told me he worked for the same pharmaceutical company for 15 years as an independent contractor Michael that's a really good point because it's the short-term nature that I think is really important to keep in mind for independent contractors and how many of us don't know of interns or people in our own family that have been involved in these so-called independent Condors situations and they're really just kids doing an internship for which they should be paid as a w-2 may I give you a contrary point of view by all means that is a recent study was just completed by field nation and workforce trends 74% of the people responding look forward to some form of freelancing in addition to a full-time role as a freelancer some 35 percent of 50 million people classify themselves as freelancers are in fact moonlighting they have a full-time job but they're doing contract work in addition I'm sure that there are many organizations that are acting dishonestly but there are many people that are looking for a different kind of employment experience than full-time employment and these folks need also to be met no doubt Anthony well I'm sure abuse is part of the problem and I'm sure there is abuse but we are missing the point here the point is that we have a new economy and it at the conversation I'm hearing is a little reminds me of the Luddite movement you know smashing some stocking machines to stop the Industrial Revolution we're not going to do it right alright and and what we're talking about are companies like uber like lyft that are making a very substantial contribution to the economy and wouldn't be able to exist in a system where everybody is an employee so I think that what we're really talking about here is that we have laws that did not anticipate the kind of economy and the kind of jobs that are available today and tapping in to what John said there are many people that really like this concept of being in charge of their own business I mean the FedEx cases are a good example of that FedEx drivers many of them now they've now been deemed by the Ninth Circuit not to be independent contracts but many of them light owning their own vehicles many of them liked the ability to go in and and own other vehicles and have other people drive for them and have their own little business regarding the gig economy absolutely the genies out of the bottle this is a big part of America's employment future however the issue is not stuffing the genie back into the bottle the issue is whether or not you can prevent people from illegally and dishonestly gaining the system to their advantage and to the disadvantage of others the underground economy is very much underground it's got America in its grips this has been going on for many years it's an old concept that's been around we're seeing employers illegally stashing their workers into shell companies hiding them too having them of benefits and using that to underbid honest employees for contracts this is a tax payer ripoff employees or for all practical purposes full-time employees are being treated and denied legitimate state required benefits the gig economy is very similar in many ways however it's also being exploited dishonestly we need to support the gig economy encourage it but we also have to manage it so the dis fairness across the board because this is the future of America and it's something we need to nurture but also manage carefully against fraud and dishonesty and deceit Jim quickl with the coalition against insurance fraud in Washington DC Jim thanks a lot for joining us and we'll be talking with you again in the future it makes a lot of sense well circling back to our original points so let's assume that we want the flexibility of people being independent contractors that doesn't necessarily mean that they shouldn't be covered by for example the anti-discrimination laws should uber if we circle back to what we were originally talking about should uber be allowed not to hire an African American driver simply because he's african-american now the law says absolutely they're independent contractors are not generally covered by state law I would say you know we need to look at that and say is that really appropriate why shouldn't you bir be held to the same anti-discrimination standards as that's not an employer wouldn't a plaintiff have a difficult time going against an uber based on the fact that they are independent contractors if there is sex discrimination or gender discrimination or race discrimination it's a much tougher road to hoe as a plaintiff note well if they're independent contractors then they're excluded from the statute and they can claim right I think though that there's a growing school of thought and there's there's a paper that's been written called the Hamilton project where a number of scholars are advocating the creation of something called an independent worker category that's in between employee and independent contractor where there would be protection for instance for under the discrimination read it as a rap model right well that's right but one piece to this which is when we're talking about freelancers the gig economy gangsters we're doing something extraordinary fifty million people in the United States alone have identified themselves as freelancers that means 50 million entrepreneurs 50 million people learning to manage their own business figure out how to grow it serve customers build our economy the payoff of that is so much greater than we can currently imagine I'm so excited about what's happening here and around the world are there ways that the laws can support that entrepreneurship rather than diminish it let's take a look at a video here and this is a woman over 50 approaching retirement wants to do some work on the side let's watch so I had a dream and it said to me I can make a lot of money so I went down picked up my phone and started driving right away Gordon now drives as much as 50 hours a week calling uber her pastime she says she can make up to eight hundred and fifty dollars a week as a driver partner so the question I have watching that video is is she aware of the insurance rates she's going to have to pay is she aware of her own liability is she aware of the cost of driving that car safeguarding that car safeguarding her passengers and and look I agree with Jonathan you know ginning up entrepreneurship in America great idea but how many of these people going into this economy are really aware of the pitfalls and the costs there may be skipping out an insurance as Jim Quigley was just saying a moment ago and they're probably not aware spending 50 hours a week in their car that $800 isn't all theirs yeah that's exactly right I mean I have advised a lot of clients who basically have left corporate America maybe not voluntarily and would love to get another full-time job but it's not forthcoming so if they start their own businesses I always say if you do nothing else get professional liability insurance for heaven's sakes you've got to do that people say really why do I do that but there's a lot of things you know Anthony has made a comment earlier you know about maybe everything is new again in a lot of ways this this kind of reminds me of we're going back to colonial times when everybody had to you know have their own businesses in essence and that seems to be the way of the future here for many people but I know a lot of people who would much rather just have a full-time job that pays the mortgage or enables them to at least get a mortgage because if you're driving you know fifty hours a week to make $800 you might have trouble getting a mortgage if you need Robin you're right and kids these days the Millennials don't trust big companies they saw their parents laid off they saw offers off the table they're not excited about working in these companies they feel safer more secure building their own business freelancing than they do working for a company and being at the risk of that employer they don't want to sell their soul to the company store and in addition to that they don't want to lose their job on the whim of a manager as they saw their mother or father or aunt but what they do want is a level playing field yeah I think this is part of the transition and in some ways there's not really a whole lot of you know sometimes between plaintiffs and defense attorneys we have great Duke outs it's a wonderful thing but in some ways there's not a whole lot of disagreement here I think Anthony's right this this train has left the station yeah we're going there we get is one of the problem so you said that people might be doing these things without really understanding the full implications so here's here's the irony and the contradiction in sort of the application of old stale traditional legal principles so if you BIR Wert us to establish a detailed set of principles that sets out for every uber driver the kind of insurance that they need to take all of the implications right which is exactly what Federal Express did for its drivers the courts are going to say they're employing their employees they're not independent contractors so the companies are sort of caught in the middle that they're in this phase where they can do neither right nor wrong and I think one of the issues is you know there's intentional missed class and then there's the problem of the the statute and the regulations are decades old they were trying to put round holes into square pegs or vice versa and they have to be updated and they're vague and so companies can look and say you know it's all supposed to be about how much control you have well control for an uber driver looks very different than control of an office worker and the regs just are not keeping up we really need I think Anthony and I would both agree we need to look at these we need to stop applying 20th century rules to do a 21st century economy it just doesn't work there are probably 42 different government definitions of how to decide if somebody is an independent contractor the IRS has one set of rules the Department of Labor has another set of rules they recently came out with guidance which essentially says we're going to go back to the very original definition which is to suffer or to permit to work which was a standard used for child labor to deal with middlemen that used to provide child labor so it's very difficult for a company even those that try and use the best judgment to be certain that you got it right I'm completely in support of what both Michael and Anthony has said the laws need to be a change to fit the 21st century in the work that we did in the book agile talent that we recently published one of the things that was awfully important was in addition to the law how well are organizations using these folks and how productively have they managed these folks and there are clearly some ways in which organizations can do a better job of building a positive win-win relationship with every one of those independent workers every one of those freelancers in addition to the legal protections there are good practices of management that need to be added need to be formed and need to be put in place yeah because at the end of the day Jonathan maybe people say yeah I'd love to be an entrepreneur well a lot of people get involved in multi-level marketing and poor the knock on the gig economy has been the guys at the top are doing really nice the guys in the middle of their working are the working hard they're working hard and there's a ceiling of sorts they're never going to get anywhere close to those people that start of that MLM and you know Anthony maybe I can get you get a little sympathy for the DOL hear from you perhaps because you're saying look we need new definitions this train has left the station we know it's coming it's here it's been here it's only going to grow so the Department of Labor is struggling with these definitions as well a little sympathy for the devil here well I wouldn't call them the devil just a phrase I had to pull out of my hat but someone that you but I thought you and I you quit I do get out but I do think that they create law in a very bureaucratic way and they don't really understand sort of the tectonic changes that are occurring within the economy and so but there have been abuses with miss classification in this country there's no so it's a yeoman's effort is is going to be what it's going to take for the DOL to prevail and what I mean by prevail is to really make it good for both the employer and the independent contractor in this country so both of those entities can be happy well I think a lot of it's about you know the fact that if you're misclassified then you're exempt from a number of the laws in particular DOL is concerned about the Fair Labor Standards Act which means if you're an independent contractor and you're working 60 hours a week you're not getting time and a half for that 20 hours more than 40 that you're working so those are the issues and the trouble for employers is if you get it wrong and these are close calls often that are being made the liability is huge and there all sorts of class actions going on across the country I mean this has become one of the great plaintiff litigation mills of the 21st century right out of Forbes magazine bottom now that you have the higher threshold where everybody who's making up to fifty thousand four hundred dollars is automatically eligible for overtime I think that should help but what we need to remember is that's just a floor it's not a ceiling because you could be a nurse practitioner or a physician assistant nurse anesthetist which is a six-figure job but you could still be eligible for overtime based on your duties and the scope of your licensure but only if you're an employee Robin right if you're an independent contractor the dollar amount doesn't fit and you know it's interesting because what Robin is talking about is they're going to raise the minimum standard for you to become an exempt employee which means that you're not entitled to overtime be very interesting to see with with those changes whether people who are going that 23000 which is the old level to the new 50 thousand all of a sudden are going to all become independent contractors on hiring so that you know you're not going to have to pay them overtime and make those other things at the end of the day we all agree this economy is moving forward we need new definitions where do those definitions come from who comes up with them well it's an interesting point Christopher I was about to say this which is that actually there's a little-known category under the tax law called statutory employee and a statutory employee is a employee who's not really in he's not really an independent contractor you're she and is not really an employee but there are somebody and it's useful insurance agents by way of example it's it's used for people who drive trucks around the city to deliver you know bread or groceries they don't own the truck but they sort of work their own routine so we already have a basic concept that there is something sort of in between normal employee and independent contractor and on a statutory employee the the person to whom they provide services or the company to whom they provide services has to pay federal tax and has to pay into Medicare and there's no reason that you couldn't create a system which is what I mentioned the Hamilton project is suggesting that you create something that is like an it like that but is it called an independent worker and where you could build in a number of these protections we may see the independent worker in our lexicon soon I want to thank my guest this issue is not going away Anthony Haller joining us once again from blank Rome Robin bond with transition strategies in Greater Philadelphia Michael Samuelson with Salman s'en and goal shaw and jonathan younger HR expert with agile talent collaborative one and all for joining us for all of us here at ALJ thanks for joining us this week until next Monday night case closed this week's American Law Journal has been made possible in part by the legal Intelligencer an American Lawyer media company and the oldest daily legal newspaper in the United States




Comments
  1. Just make a separate classification of gig workers. They aren't employees, but aren't really self employed either. They are "Dependant contractors" that rely on a small handful of companies to supply their income opportunities. The biggest difference needs to be the self employment tax – companies like Uber / Grubhub should not be allowed to shift the burden of this double taxation onto the gig worker.

  2. I think this is a great story! I only wish there was a shorter vid that separates out the 'news' portion explaining the gig economy into a totally separate video. You know, for those who don't have time, or want to digest, the entire conversation. Link that short video to the "full report" if you want to make sure attention is drawn to both… I'm just saying it would also make it easier for sharing purposes on social media too.

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