EXAM 3 DISCUSSION COMPONENT OPENING ROUND APPENDICES

APPENDIX A: The Sharing Economy: Fueled by Independent Contractors

EFFECTIVE PROMPT BACKGROUND:

Recall that I assigned as “general reading” in the Week of December 1’s Chapter 8 Outline the “Ethical Issues in Human Resources” feature regarding “The Sharing Economy: Fueled by Independent Contractors” that starts on page 238 of our textbook. That feature will provide your primary explanation of how “independent contractors” differ from traditional employees in certain key respects, which is the basis for your response to the Effective prompt.

I reminded you of “The Sharing Economy” assignment on slide 2 of my Chapter 8 Lecture and then on its slide 3 I asked the following question:

	What are “independent contractors” (sometimes called “gig workers”) and how do they differ from “employees”?

I also remind you of the following language from my concluding bullet on that slide 3 and note that I provided some commentary responsive to that broad question as we progressed through the Chapter 8 Lecture in class:

	“As we work through the Chapter’s four levels of ‘Responsibilities to Employees’, let’s ask if / how these responsibilities may differ for “independent contractors” / “gig workers” from what the textbook describes for ‘employees’.”

That last quoted sentence is basically the focus of the Effective Prompt.

P.S. I also encourage you to read the Forbes article provided in Appendix B before responding to the Effective Prompt, as that article also provides additional descriptions of “independent contractors” / “gig workers” that may provide additional content and particularly context to the above-referenced feature’s explanation of “independent contractors”.

APPENDIX B: Forbes Article

Gig Workers As Employees: Why America Won’t Follow The U.K. Anytime Soon

Forbes.com, Feb 26, 2021, Tom Spiggle

[STRONG PROMPT BACKGROUND:]

On February 19, 2021, the U.K. Supreme Court ruled that Uber drivers in the U.K. were “workers” and not independent contractors. This meant the drivers were eligible for a variety of employment protections, such as minimum wage, paid annual leave and whistleblower protections from retaliation. In the U.K., the term “worker” can have a comparable legal meaning as the term “employee” does here in the U.S.

The U.K. Supreme Court reached this conclusion largely based on the level of control Uber had over its drivers. Examples of control included:

Uber setting the fare

Uber unilaterally setting the terms of the working arrangement

Uber punishing drivers if they did not comply with Uber’s policies, such as maintaining a certain rider acceptance rate

Uber dictating what drivers could talk about with passengers

This decision does not bind American courts. Yet it brings up the hotly contested question of whether independent contractors working on behalf of companies like Uber and Lyft are employees or independent contractors.

Why does this worker classification distinction matter? The short answer is money. Independent contractors are far cheaper for companies to hire than employees. Independent contractors do not require companies to pay for:

Health insurance benefits

Overtime

Minimum wage

Payroll or other employment taxes, such as Social Security, unemployment insurance and Medicare

Paid leave

[EXCELLENT PROMPT BACKGROUND:]

Worker Reclassification Efforts in California

In 2018, the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Dynamex). This was a landmark case that established a three-part “ABC” test for determining if a worker was an independent contractor or employee.

The Dynamex court stated that a California worker would be presumed to be an employee unless the employer could prove that:

A) The worker was free from employer control as to the performance of the work;

B) The worker performed tasks that were outside the usual course of the employer’s business; and

C) The worker was normally engaged in a line of work that was the same as the work being done for the employer.

This was a worker-friendly test, and many gig companies like Uber, Lyft, Instacart and DoorDash would be unable to pass it. Therefore, many of their gig workers would be considered employees under California law.

Then in 2019, the California legislature passed Assembly Bill 5 (AB5), which essentially codified the ABC test from the Dynamex case into California law. Companies like Uber and Lyft ignored AB5, which resulted in lawsuits that weren’t going their way. It seemed as if companies that employed gig workers were going to have to figure out how to run their businesses with employees and not independent contractors.

But then there was Proposition 22. This was a California ballot initiative that would make app-based delivery and transportation companies, such as DoorDash and Uber, exempt from AB5. But Proposition 22 did more than just ask for an exemption. Proposition 22 also provided several benefits to workers, including:

Guaranteed minimum earnings

A stipend to help pay for health insurance

Medical coverage for on-the-job injuries

Protections against discrimination and sexual harassment

Reimbursement for vehicle expenses provided on a per-mile basis

These were notable benefits for gig workers, but they weren’t quite as good as what workers might get if they were classified as employees. For example, the minimum wage guarantee only applied when a worker was actively working. It did not apply when the worker was signed into the app, but only waiting for a customer. And the anti-discrimination protections offered fewer protections than what a typical California employee could enjoy. For instance, it did not include immigration status as a protected class.

During the 2020 election cycle, gig companies spent more than $200 million in support of Proposition 22. In addition to touting the benefits workers were to receive under Proposition 22, many companies argued that without an exemption to AB5, costs for food deliveries and ridesharing would increase.

California voters took up Proposition 22 in November 2020 and with more than 57% of the vote, chose to accept it. In other words, AB5 could no longer stop companies like Lyft from classifying their workers as independent contractors. After its passage, Uber and DoorDash raised prices anyways, claiming it was needed to pay for the benefits now required under Proposition 22.

While Proposition 22 appears to create some sort of compromise with certain gig workers getting some benefits, companies like Uber still get to reap most of the benefits of classifying their workers as independent contractors and not employees. And gig economy companies are passing a lot of their added costs onto consumers.

The question then becomes, can the U.S. replicate what happened in the U.K.? Probably not in the near future, although it’s not all doom and gloom for gig workers.

…

[LINK TO FULL ARTICLE FYE:]

https://www.forbes.com/sites/tomspiggle/2021/02/26/gig-workers-as-employees-why-america-wont-follow-the-uk-anytime-soon/?sh=65d73b011db8