The Gig Is Up

I’ve sipped on the water in the People’s Republic of Cambridge, and it doesn’t taste any different than water anywhere else. But there has to be something in it to make people at Harvard lose all touch with reality.

What happened in California? Despite the state’s liberal reputation, voters there last week approved Proposition 22, a ballot initiative exempting many gig companies from state workplace laws and stripping their workers of basic, essential protections.

Uber, Instacart, Lyft, DoorDash and other on-demand providers of ride-shares and food and grocery deliveries spent $200 million pushing the proposal, an astounding sum that workers and their allies couldn’t remotely hope to match. Not surprisingly, Californians were misled by an avalanche of claims about the proposal’s impact on workers. The measure, which takes effect next month, was approved with 58 percent of the vote.

A 58% loss seems rather definitive. Was it the amount of money spent by these evil enterprises? What else could it have been, since California is where the woke go to vote and workers are wonderful and deserve to be protected. Harvard Law School’s Terri Gerstein can’t see any other possibility.

What was at stake with Proposition 22 was whether workers for app-based driver and delivery companies would be considered employees under California statutes, which like workplace laws nationwide, cover only employees, or whether they should be classified as independent contractors. Proponents argued that requiring gig companies to follow current laws would badly damage their on-demand business model and result in longer wait times, higher prices and the loss of countless jobs. These were the same bleak prognostications gig companies made about the minimum wage for drivers that New York City enacted two years ago — predictions that did not come to pass.

And she’s not wrong about New York’s imposition of a minimum wage for gig workers, except that has nothing to do with the problems California invented when it decided to try to micromanage the gig economy. Ironically, Prop 22 learned from New York, requiring gig workers to be paid 120% of minimum wage. But that wasn’t the point of Prop 22. The point was that as passionately as the wobbly doyennes of Harvard believe that every worker should be treated as if Jimmy Hoffa loves them, California’s AB5 was fundamentally screwed up.

The reclassification of independent contractors to employees wreaked havoc with actual independent contractors, but the law’s proponents saw that as an unfortunate unintended consequence that other people had to suffer lest they allow a loophole that companies would exploit. They wouldn’t let workers be exploited in California, even if it killed the workers. It was an option, whether to leave a gap in the law to allow actual independent contractors to work or sweep them up with the rest so that no one who was meant to be helped would be left out.

Good intentions don’t make bad law any better, and California has a tendency to be on the cutting edge of bad law. The desire to save workers from exploitation is a worthy goal, but this law made it impossible for workers who wanted to be independent contractors from doing so, and businesses that wanted to avail themselves of the services of independent contractors from doing so, and would have spelled the death of the concept of gig workers.

But all that is why 58% of the vote favored Prop 22. It wasn’t flashy TV commercials or threats that Uber was outa there. It was the cries of writers, drivers, people who wanted to take advantage of their independence but were now shut out by the best of intentions.

Now, workers for these gig companies in California will not have a right, as employees do under state law, to paid sick days, overtime pay, unemployment insurance or a workplace covered by occupational safety and health laws.

There are certainly real concerns here, not that Gerstein presents them honestly. The gap created here is that companies use workers as full time employees but treat them as independent contractors. The gap here is that companies that once had a full contingent of full time employees to staff its workspace will now game their hours, duties to eliminate employees and replace them with independent contractors, even though they will be the same people doing the same work exactly the same as they did before.

Is that wrong? You bet. Reimagining employees as independent contractors to deny them wages and benefits is the flip side of gaming the system, and now that gig workers are a “thing,” what’s to stop companies from taking advantage of it? The obvious answer is that if workers aren’t independent contractors as defined by law, then they have to be treated as workers. Except law doesn’t happen on its own, so if the companies are gaming the law, someone has to challenge it, pursue it and win.

And companies aren’t invariably stupid about it, making some cosmetic changes to their workforce to create the appearance of independence while keeping their thumb on workers’ heads. It won’t necessarily be easy to tell the difference with a little lipstick on that pig.

Can a workable law be crafted that can both allow independent contractors to exist and protect workers who are vulnerable to exploitation? That’s the question, and it’s not an easy one to answer. California’s AB5 was bad law, grossly overreaching and making it impossible for the array of workers who wanted to be independent from getting work. But if the effort was put into crafting a law that wasn’t so heavy handed, so myopic as to pass muster at Harvard Law School, maybe 58% of the voters in California would support it. Maybe even more.

Of course, you wouldn’t know any of this from Gerstein’s disingenuous rant, which is why workers in California can’t have nice things. And never will until we’re a lot more honest about both the real problems and real solutions needed to address them.

23 thoughts on “The Gig Is Up

  1. Kirk A Taylor

    Independent Contractor haters love to pretend Form SS-8 doesn’t exist. A simple and easy way to challenge your status as an independent contractor. Its only downside being the same as any challenge to your employer: they might not be thrilled with you filing it. BUT…you can file it even after you stop working somewhere, so you can fix it for the future.

  2. delurking

    Bonus! I get a two-fer!
    “Yes! This! Prop 16 passed in California only because of its 14:1 fundraising advantage. There outta be a law!”

  3. Erik H

    I represent a lot of employees in this area. I am always amazed how many people confidently assert this paternalistic BS.

    Look, lots of folks DO NOT WANT to be employees. In fact, a hell of a lot of them want to be ICs, because they like everything from the flexibility sometimes) to the all-important ability to avoid withholding and screw around with their taxes and expenses (this is a big one!)

    These folks would much rather have the higher hourly wage than the employee benefits. They would much rather work 60 hours/week for well-paid straight time than be limited to 40 (nobody wants to pay time and a half.) They would much rather be able to set their own hours; take time off when they want; etc.

    Of course, the law often does not allow it. In MA, we have some of the strictest IC/employee laws in the nation, and I have brought many a suit alleging the violation. But they certainly WANT it.

    And sometimes this is a dumb-ass choice–maybe more than “sometimes.” (No man possesses greater surety of success than one whose historical choices have all been bad.) In some/many cases these folks would probably be better off w/ a lower wage job that had some benefits or consistency.

    But I dno’t run their lives. And I do sometimes wonder: why is this choice so monitored and enforced when other choices are OK, that are equally bad in terms of life outcomes? Not that I support such restrictions, but hell, if we were going to go there we should probably ban smoking and let folks work as ICs, not the reverse.

    1. SHG Post author

      Can a law be written to thread the needle between protecting workers from exploitation while protecting those who prefer to be ICs? Beats me, but to deny that there are people who want to be independent is what got CA into this mess in the first place, and a repeating theme in progressive “solutions.”

      1. Erik H

        “Can a law be written to thread the needle between protecting workers from exploitation while protecting those who prefer to be ICs?”

        Honestly, no. There is a HUGE overlap between “people who need the protection of wage laws and who should not in any way be an IC” and “people who either want to be an IC, or who would agree to do it as a condition of employment.” They can’t self-select. And that doesn’t even count the exploiters, who, let me tell you, are certainly out there.

        It isn’t helped by the complexity of all this. There are few employees or employers who either do, or are necessarily capable of, understanding the full scope of state/federal employment laws and how they interact. There are lots of good-faith handshake deals out there which are strictly illegal.

        Lots of my fellow educated Massachusetts liberals have nannies. Very few of them keep payroll records for three years, give 8 weeks of job-protected leave, or follow the Domestic Worker’s Bill of Rights. I’m betting no more than 1% will, when the parents are away for a full weekend, arrange for another babysitter so that the nanny can have her statutory meal and rest time.

        If *they* don’t know/do this, how the heck is an average person supposed to deal with it?

    2. cthulhu

      …why is this choice so monitored and enforced when other choices are OK, that are equally bad in terms of life outcomes?

      In this case, former-union-lawyer-turned-state-Assemblywoman Lorena Gonzalez wanted to disrupt Uber and Lyft as a favor to her union buddies, because as she took such pains to say over and over to us inmates citizens of the People’s Republik of Kalifornia, those gig economy jobs weren’t real jobs, no sirree Bob! And those inmates citizens who thought they really wanted to be independent contractors…well, those ungrateful bastards folks need to just pipe down and get it good and hard trust their betters.

      California politics may be a shitshow most of the time, but I was pretty happy with my fellow citizens showing some backbone this year, especially with Prop 22 (this one) and Prop 16 (the soft-bigotry-of-low-expectations one). Maybe there’s hope on the Left Coast after all.

  4. Pedantic Grammar Police

    The problem with liberal utopias in which low-skilled workers get excellent pay and benefits is that they only exist in the fantasies of woke idiots. The actual workers are happy to be making money and recognize that the alternative is not excellent pay and benefits; it is no pay and no benefits.

    It’s no surprise that Uber and Lyft spent tons of money fighting this one. Their companies would fail if they had to operate on the business model that they obsoleted.

    1. SHG Post author

      The gig economy businesses were conceived on the basis of filling dead time and space. It was so cool when it first appeared on the scene, but then the point was forgotten.

      1. Pedantic Grammar Police

        I thought they were based on the idea that cartels like the taxi industry were totally corrupt and ripe for disruption.

        1. SHG Post author

          That was what flaming nutjobs attributed as an excuse for the gig economy, but who could possibly be so stupid as to believe or repeat such utter idiocy?

      2. Jake

        Huh. I feel much better now. I always thought the point of a publicly-traded company was to generate profit for its shareholders without regard for how it exploits any other stakeholders in its ecosystem.

    2. Erik H

      I don’t think there is any setting in which low skilled workers get excellent pay & benefits. That’s just the marketing.

      It would be nice, though, if even low-aid unskilled non-English-speaking workers could not keep getting wages *literally stolen* from them, which, ya know, is not really part of the “fair bargaining” part and is nearly impossible to enforce through IC laws.

  5. Et Cetera

    As someone who used to work in a field where independent contractors are heavily used, I can assure any companies thinking of “exploiting” workers by reclassifying them as ICs isn’t all it’s cracked up to be from the company’s perspective. Sure, you no longer have to pay Social Security or Unemployment taxes for the employee, but in return you lose virtually all control over how they conduct their work. So if they don’t want to come into the office, you can’t make them. If they do want to come in, you can’t enforce your dress code. If you need them to come in for a particular reason like a meeting, then you’d better be prepared to pay for their commute time (not an insignificant thing if you’re in the Bay Area and the IC lives in some exurb 90 minutes away). If they decide they’re going to work from 9pm to 5 am then that’s their prerogative provided it doesn’t interfere with a necessary function of the job (like if they had business at an office that was only open during normal hours). In other words, if you make an employee a contractor, you’d better be prepared to simply assign out work and wait for it to be completed unsupervised. There will always, of course, be contractors who show up to the office regularly and work closely with management, but you can’t require it, and any appearance of treating contractors like employees puts you at grave risk of sanctions. A few contractors at a company I was associated with were asked to come into the office regularly because their performance was unsatisfactory and management hoped that it would improve if they could work more closely together. The contractors went to the state DOL and won a settlement not only for themselves, but for every contractor who worked out of that office during the period in question, regardless of whether they had actually been compelled to work out of the office or for that matter worked out of the office at all.

    With work from home becoming more universally accepted in the age of COVID, attitudes about micromanaging employees may be changing, especially if companies don’t see any productivity loss from the new arrangements. So we may see more companies trying to do this in the future. But it’s worth noting that hiring workers as ICs isn’t some novel strategy that ridesharing apps invented to circumvent employment law. It’s an option that’s been available for decades, but hasn’t really caught on outside of certain areas. If companies didn’t see any benefit to reclassifying employees before, I doubt that they’re going to see much of one in the future.

    1. SHG Post author

      Was there a reason why you assumed lawyers and judges were clueless idiots as to what an IC is and needed you, random person, to explain it to them?

  6. The Real Kurt

    Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. – C. S. Lewis

    The Real Kurt

  7. Dov Lazarus

    Maybe Uber et al should be forced to call it what it is – A payday loan with a massive interest rate attached.

    1. SHG Post author

      Or they could call it a pineapple. Perhaps there’s a reason why you think payday loan is more appropriate that you neglected to include?

      1. Dov Lazarus

        If this was a business enterprise, presumably there would be something left after the consumption of the asset. This is an example (actual) of the economics of a typical Uber driver. Gross receipts from driving totaled approximately $17,500. Direct expenses, including mileage, platform fees, service fees, phone etc, came to $15,500. That doesn’t really leave a lot to replace your asset. In the process, you have not contributed to any of the funds that keep you alive when catastrophe strikes. On the face of it, the transaction appears to predatory. Just like a payday loan.

        1. SHG Post author

          Some businesses provide goods. Some provide services. And if it’s a lousy deal for any particular driver, just say no.

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