“Sharing Economy” is Not Sharing the Wealth: Independent Contractor Misclassification a Growing Problem

An increasing number of workers are classified as freelancers and independent contractors in the new “sharing” economy, according to an article in today’s New York Times. Indeed, the Times reports that the number of part-time independent contractors and freelancers has increased by more than fifty percent since 2001. The abuse of independent contractor status is directly connected to the income gap and the shrinking middle class in America

The Times article describes that, in recent years, companies have increasingly relied on independent contractors, freelancers, temps, and outsourcing to complete work that at one time would have been done by full time employees. As a result, workers have gained more flexibility in setting their own schedule, but lose out on the steady income stream they could once depend on.

            The corporate motivation for these new models dates back to the 1970s when companies where encouraged to focus on their “core competencies.” This led to companies outsourcing more and more tasks to non-employees and cutting back heavily on their payroll expenditures.

As these practices have become more popular, wages have dropped. According to a study by Michael Greenstone and Adam Looney, men were making substantially less in 2009 than men of the same age and education level were making in 1969, adjusted for inflation.

With these changing practices come new legal challenges. The article cites to a California Labor Commissioner decision regarding Uber, the well-known tech company that employs nearly 200,000 drivers, labeling them “independent contractors.” The Labor Commissioner ruled that an Uber driver had been misclassified and was in fact Uber’s employee. It remains to be seen how this decision, which is under appeal, will affect other Uber drivers. Bryan Schwartz Law’s co-counsel, Goldstein Borgen Dardarian & Ho, has a class action along the same lines pending in the United States District Court for the Northern District of California (Gillette v. Uber Technologies Inc.) and a similar action is pending against Lyft in the same court (Cotter v. Lyft Inc.).

The distinction between being an independent contractor and being an employee can be vast for workers. For example, nonexempt employees are guaranteed meal and rest breaks and overtime pay, while independent contractors are not. Independent contractors are often paid by the task, rather than by the hour, which can lead to workers being compensated below the minimum wage for uncompensated work. Independent contractors receive no Social Security, Medicare, unemployment, and other benefit contributions from the places they work, while employees receive all these protections.

The end result is that when workers are misclassified as independent contractors rather than employees, their employers often illegally under compensate them. Bryan Schwartz Law has represented many workers in misclassification cases nationwide, negotiating millions of dollars in back wages and penalties for them.

            In you have concerns that you may have been misclassified in your job please contact Bryan Schwartz Law.