The misclassification of employees as independent contractors predates the emergence of the gig economy and has been a method of skirting the cost of standard worker protections.
In the midst of all the presidential transition drama, one of the most overlooked but consequential outcomes of the November election was the victory of Proposition 22 in California. Funded by Uber, Lyft, DoorDash, Instacart, and Postmates to the tune of a record-breaking $200 million, the ballot measure exempted ride-hailing and delivery drivers from a 2019 law, Assembly Bill 5, which brings California’s gig economy into compliance with conventional employment laws.
The misclassification of employees as independent contractors has been the focus of recent attention as a result of the implementation of that employment model by ride-share and other gig employers. But the practice long predates the emergence of the gig economy, particularly in the construction industry. This article traces the history of misclassification in construction and the subsequent emergence of a cash-based underground system of compensation, which have lowered standards and been among the major causes of the decline of union density in the industry. In addition, the author examines the regulatory environment at the federal level, which has largely enabled misclassification as well as attempts by state agencies to adopt more aggressive enforcement policies. Downloand Article
The problem of independent contracting as a business model is more important than ever. While the CARES Act fortunately included independent contractors as recipients of unemployment benefits, food delivery and other gig workers still face unprecedented challenges in the absence of protections from unions or employment laws. There will be life after the pandemic and employers across all industries that suffered financial losses will be looking to cut costs. One of the obvious tactics may well be an uptick in the misclassification of employees as independent contractors. Hopefully an alternate vision will emerge, one in which unprotected but indispensable workers will seek a voice through a fight against misclassification, and the growth of unions and other forms of organization.
Massachusetts Atorney General Maura Healey held a press conference at the State House to highlight the LWP report “Confronting Misclassification and Payroll Fraud,” by Mark Erlich and Terri Gerstein. The report details the increasing role of state agencies in enforcing misclassification laws and providing worker protections, crucial in an era of lax federal enforcement.
Report details increasing role of state agencies in enforcing misclassification laws and providing worker protections, crucial in era of lax federal enforcement
by Mark Erlich and Terri Gerstein
BOSTON, MA – Researchers from the Harvard Labor & Worklife Program, a program of Harvard Law School, released on Wednesday a report detailing the expanding and increasingly inventive role of state-level agencies regarding enforcement of worker misclassification laws and upholding workers protections. The report, “Confronting Misclassification and Payroll Fraud: A Survey of State Labor Standards Enforcement Agencies” is published in the midst of a decades-long trend of employers increasingly misclassifying workers as independent contractors. More urgently, within the past two years, the federal government, through the United States Department of Labor and the National Labor Relations Board, has been increasingly rolling back worker protections and enforcement.
Thanks to a web of loopholes and limits, the federal government has been green-lighting hourly pay of just $7.25 for some construction workers laboring on taxpayer-funded projects, despite decades-old laws that promise them the “prevailing wage.”
The failure of government to keep up with what’s going on in the labor market, [Erlich] said “is a large piece” of why construction has faded as “a pathway to the middle class.”
For the past 40 years, employers have pursued a strategy of shedding obligations to their employees as part of a broader outlook that views labor as one more risky liability to move off a balance sheet. For some, this has meant the purposeful misclassification of employees as independent contractors, a tactic adopted by Beldi’s disreputable construction contractors as well as more high-profile and celebrated firms such as FedEx and Uber.
"Mark Erlich was a familiar figure at construction sites as executive secretary of the state’s carpenters union. Now Erlich is hitting the hallowed halls of Harvard.
He’s joining the Labor and Worklife Program at Harvard Law School as a fellow. He’ll be working with professors and researchers at Harvard and other universities on issues of wages and the underground economy."