The current efforts by the Department of Labor to institute new regulations defining who counts as employees under the Fair Labor Standards Act are an opportunity to reflect broadly on the employee/independent contractor distinction. Originally developed in the context of vicarious tort liability, the concept was carried forward (somewhat thoughtlessly) into a host of labor statutes into the late nineteenth and early twentieth centuries. A desire to see the benefits of these statutes applied as broadly as possible has led to an array of vague multifactor employee classification tests, so amorphous as to offer little certainty in themselves, let alone taken all together; there are varying definitions across federal statutes, between the states, and even within some states, resulting in tangles of complicated litigation. See, e.g., Camargo’s Case, 479 Mass. 492, 500 (2018) (discussing Massachusetts statutes that set out four distinct definitions of “employee” for workers’ compensation, wage and hour laws, unemployment insurance, and tax withholding).
This observation is far from novel. See WHY THE LAW STILL CAN’T TELL AN EMPLOYEE WHEN IT SEES ONE AND HOW IT OUGHT TO STOP TRYING, 22 Berkeley J. Emp. & Lab. L. 295 (2001). But the experience of the past two decades has only underscored the problem. The rise of the gig economy has increased the number of independent contractors, the vast majority of whom are content with their status, according to a 2018 Bureau of Labor Statistics study (https://www.bls.gov/news.release/conemp.nr0.htm). California’s AB5 bill, a blunt attempt to substantially increase the number of people qualifying as employees, had large unintended consequences on many freelancers, forcing the state legislature to hastily add several exceptions.
Fortunately, recent events have also shown the potential of possible solutions that were once merely hypothetical. The CARES Act extended, however temporarily, unemployment insurance benefits to independent contractors, demonstrating the viability of portable benefits tied to individuals instead of employers. California and Washington have approved legislative programs providing a middle ground for app drivers, guaranteeing some benefits while allowing them to continue to be classified as independent contractors.
The path forward, both for businesses who want certainty and labor activists that want benefits to be guaranteed by law for as many as possible, is to untangle the knot of employee classification and decouple benefits from status.