GOP-Majority Labor Board Books Independent Contractor Dodge

The Trump-named GOP National Labor Relations Board majority has given a boost to employers’ “independent contractor” dodge – and that’s bad news for millions of workers, union and non-union.

By a 3-1 party-line vote in a case involving 89 Dallas-Fort Worth Airport SuperShuttle drivers who wanted to unionize with Amalgamated Transit Local 1338, board Republicans upheld and expanded employers’ rights to misclassify workers as independent contractors.

The board’s Jan. 25 decision reversed a 2015 Obama-era NLRB decision curbing the abuses. Independent contractors have no worker rights, including no right to organize, under U.S. labor law.

Their employers also escape paying the company’s share of Social Security and Medicare withholding taxes, workers comp and unemployment insurance, with the workers having to pay those sums plus their own shares of those taxes.

That gives venal, vicious and cost-cutting employers, seeking to undercut their competitors – including their union competitors -- an edge, too. By forcing workers to be “independent contractors,” they can drive down their labor costs.

That especially hurts minorities, the poor and women, the National Employment Law Project says.

“Contracted work is an often-overlooked driver of eroding labor standards, rising income and wealth inequality, persistent structural racism and occupational segregation, and the shifting of power away from workers and toward corporations,” it explains.

“Many industries in which people of color are overrepresented — sectors like janitorial, landscaping, security guards, home care, and others — are characterized by the widespread use of independent contractors. These contracted jobs offer no social insurance protections or even a minimum wage.”

The Economic Policy Institute (EPI) has pointed out in papers and reports over the last several years that the “independent contractor” dodge drives down pay and benefits for other workers, even “employees” who can unionize under labor law. That’s because bosses can force those workers to take lower pay and fewer benefits, or else become independent contractors, too.

None of this was in the NLRB’s GOP majority ruling, written by new board chairman John Ring. His decision instead followed a goal, set by the NLRB’s new General Counsel – its top enforcement officer – to reverse every pro-worker ruling of the Obama-era NLRB.

“The shared ride industry is an extension of the taxicab industry and this factor should be afforded significant weight,” Ring wrote. “SuperShuttle franchisees are free from control by SuperShuttle in most significant respects in day-to-day performance of their work.”

Overlooking obvious facts about independent contractors, Ring said SuperShuttle drivers “have total autonomy to set their own work schedule. They merely turn on their Nextel device and wait for the next bid offer. Once a trip is offered, franchisees (drivers), except in very limited circumstances, can decide whether to accept the trip or not.” That “total autonomy,” in name only, is also a feature of much of the so-called “gig economy,” EPI notes.

“Further, when a franchisee wishes to take a break or end the work day, he merely turns off his Nextel device,” Ring continued. “Other than receipt of data from the Nextel device, there is little record evidence of communication between a franchisee and SuperShuttle during day-to-day operations. Franchisees’ discretion in deciding when to work and which trips to accept weighs in favor of independent-contractor status.”

EPI noted the Labor Department keeps no national data on how many workers are subject to the firms’ independent contractor dodge. Democratic President Barack Obama’s DOL actively pursued and battled misclassification of workers as independent contractors. Trump’s DOL isn’t.

Independent contractors are particularly pervasive in trucking, warehousing and child care. The most comprehensive study, across all industries, was in Michigan. It found 8.4 percent of workers there – one of every 12 -- were misclassified as independent contractors.

“In companies that violate the law, misclassification is severe,” EPI, which dug out the Michigan numbers, added. “For example, in Massachusetts, from 2001-2003, 13 percent to 19 percent of employers overall misclassified at least one worker but, among these employers, 25 percent to 39 percent of the workforce was misclassified.”

“In construction, the situation was worse: 14 percent-24 percent of employers misclassified, and among these, 40 percent-48 percent of workers were misclassified. An analysis of Michigan audit data for 2003–2004” among construction firms, trucking companies and security guard employers alone “found 30 percent of employers misclassified and 24 percent of workers in these employers’ workforces were misclassified.”

“Among (truck) drivers, those who operate with little autonomy and yet are classified as self-employed have become more common, and their problems have become visible in recent years,” EPI reported in a recent paper.

“According to one study, based on 10 surveys of drivers at seven ports, 82 percent of workers in the part of the industry that hauls containers from ports to warehouses are misclassified as independent contractors.” That rises to 90 percent in the port of Los Angeles-Long Beach, the nation’s busiest, where the Teamsters have waged a years-long drive to get those misclassified drivers reclassified as “employees” organizable under labor law, and then to organize them.

“A study of truckers at the ports of New York and New Jersey provided indications of the ways in which drivers who were being classified as independent contractors were operating with limited autonomy from the transport company,” EPI continued. “Drivers were prohibited from making deliveries for other companies and, in effect, could work for only one, which is indicative of company control. Many were assisted in leasing their trucks by the trucking companies, which took possession of the leases. The trucking companies obtained insurance for the drivers and billed them for it, then took that amount out of their weekly pay.”

And the L.A. port trucking firms also force their “independent contractor” drivers to pay for gas, tires and maintenance. The result – at least until cases where the California Labor Department reclassified the trackers as “employees” – is truckers who often took home miniscule paychecks, or nothing at all.

While the NLRB is boosting independent contractors, Washington state is going in the other direction. It’s on the way to joining a growing list of states, led by California, New York and Illinois, who have put curbs on misclassification of workers as independent contractors.

The now-solidly pro-worker Democratic-controlled state legislature’s Labor Committees held hearings on Jan. 30 on “bills to address the issues raised by contract work,” the National Employment Law Project reported.

Washington state’s legislation, HB1515 and SB5513, would enact a broad “ABC test” that presumes workers are “employees” – not independent contractors – unless “they are free from control” by the company, do work “outside the usual course of business” of the firm that’s hiring them and “are engaged in an independent business” of their own.

If their “employer” breaks the proposed law and misclassifies the worker as an independent contractor, the worker would have the “right of action” before state agencies and in court to challenge the misclassification, and the state Labor Department could investigate and enforce the law.