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Uber and other companies in the on-demand economy soon may have more to worry about in their battle over worker classification than increased wages.
The Equal Employment Opportunity Commission has long maintained that some companies misclassify employees as independent contractors to evade their obligations under federal employment bias laws, and the agency recently stated its intent to look into whether gig companies may be doing the same. The agency’s chair in an interview with Bloomberg BNA reiterated the EEOC’s interest in these sort of “complex employment relationships.”
The agency’s reference to gig and other contingent workers in its October strategic enforcement plan for 2017-2021 surely has much to do with testing its jurisdictional bounds in an emerging area of the law, employment lawyers and a law professor told Bloomberg BNA.
But the agency’s interest also is in keeping with its mission to root out workplace bias in its many forms, including “customer preference” discrimination, some said.
That makes the EEOC’s decision to add its weight to the worker classification debate currently brewing in the wage and hour arena—including in headline-grabbing litigation against Uber—that much more intriguing. And the consequences are potentially sharp for on-demand companies doing business in the U.S.
Moreover, whether it’s an Obama or a Trump administration, the issue isn’t going away. The EEOC will face these issues and will have to set the parameters of its jurisdiction, Richard J. Reibstein, a partner with Pepper Hamilton LLP, told Bloomberg BNA.
The battle over whether on-demand workers are properly classified as independent contractors—as Uber and other gig companies typically define them—or employees entitled to certain statutory protections is being litigated under the federal Fair Labor Standards Act and similar state and local wage laws.
Rulings against the companies in the FLSA cases could affect the development of employment discrimination law on the classification of gig workers, plaintiffs’ attorney Tom Spiggle and others said.
There’s no precedent in the Fourth Circuit—which includes Maryland and Virginia—either recognizing or denying coverage of gig workers under Title VII of the 1964 Civil Rights Act, he said. That makes the EEOC’s statement in its strategic enforcement plan (SEP) “a big deal,” Spiggle said.
But management-side attorney Reibstein had a different take.
The SEP “means very little” for gig workers and companies because workplace bias isn’t the main issue facing workers misclassified as independent contractors, Reibstein told Bloomberg BNA. He heads the labor and employment law practice at Pepper Hamilton’s New York office.
The primary concern of Uber drivers and other on-demand workers who believe they’re being misclassified by their putative employers is recovering unpaid or underpaid wages and benefits, he said.
There might be instances of discrimination against individual on-demand workers, “but that won’t get the EEOC’s attention,” Reibstein said.
What could get its attention, he said, is if a company that’s misclassifying workers as independent contractors also engages in a business practice that has an unintentional discriminatory impact on the workers.
“I don’t think the EEOC is taking an aggressive posture” by stating its interest in “complex employment relationships” in its new SEP, Reibstein said. It’s just “getting out in front of the issue” to develop internal jurisdictional guidelines for regional and district offices, he said.
The EEOC’s newly stated focus on gig employment is likely spurred in part by a desire to participate in the “broad interest in this emerging sector” of the economy, agreed UCLA law professor Noah Zatz. However, he said he believes there’s more at play.
The EEOC has a long-standing concern with employers catering to the known biases of their customers or clients, he said. The rise in “customer preference” bias in the gig economy through customer feedback, such as the driver-rating system used by Uber, is something the EEOC is “going to have to grapple with” now that it’s decided to go in this direction, he said.
“That’s the most distinctive thing” to me, Zatz said. He teaches labor and employment law at the UCLA School of Law in Los Angeles and has written extensively about employment discrimination.
A more traditional example of customer preference bias, also referred to as “rational” discrimination, would be a restaurant directing only certain servers to a specific diner or group of diners, he said. If the restaurant acts based on a class characteristic such as race that is protected under federal and state law, “that’s still illegal,” Zatz said.
In the ride-sharing business, a customer’s preference for certain drivers based on a protected trait also shouldn’t be allowed, and the same is true for other on-demand platforms, Zatz said. But gig businesses—unlike restaurants—may not have direct knowledge of a customer’s bias if it’s based on feedback received through a driver-rating or similar system, he said.
In essence, the gig business is “sort of laundering out discrimination” through the rating system, he said.
A study of how racial and gender bias affects freelancing websites TaskRabbit and Fiverr by researchers at Boston’s Northeastern University seems to support Zatz’s concern.
The EEOC will be interested in litigating the issue of customer preference bias in the on-demand industry, management-side lawyer Caroline A. Hogan said. “It’s an emergent development.”
A focus on gig workers means increased scrutiny for companies regarding who’s an independent contractor and whether workers are properly classified, Hogan said. She is special counsel with Foley & Lardner LLP in Milwaukee, where she counsels and represents employers on a wide array of labor and employment issues.
Indeed, the EEOC already has a track record of cracking down on customer preference discrimination in the staffing industry, where it sometimes sues both the staffing company and its client as joint employers. For example, on Dec. 8 it was granted a trial on its claims that a mobile phone repair and testing facility in Texas illegally failed to hire or accommodate two deaf applicants for temporary work referred by a staffing company.
If that’s not enough to get the attention of on-demand platforms that base assignment, staffing or disciplinary decisions on customer feedback, EEOC Chair Jenny Yang (D) recently signaled that gig businesses that operate in ways similar to such staffing companies and their clients are likely to receive agency scrutiny.
Yang also emphasized that the agency has seen a real increase in the number of temporary workers in the U.S. workforce and that its intention under the SEP is to protect the rights of all contingent workers, not just those working in the on-demand economy.
Reibstein said there’s an abundance of workers in the U.S. who are misclassified as independent contractors when they ought to be classified as employees. Such misclassification “cuts across all industry lines.”
As to those workers, the EEOC will have no problem showing they are covered by anti-bias laws. Gig workers, however, present more of a gray area, Reibstein said.
But even without the EEOC playing an active role, gig workers may secure protections against job bias.
Protections could evolve out of court rulings in the FLSA area, where litigation has been much more substantial and is further along than the limited number of cases brought by gig workers claiming workplace discrimination, those interviewed by Bloomberg BNA said.
Favorable rulings for gig workers under the FLSA wouldn’t automatically mean the workers are covered under Title VII and other federal job bias laws, Spiggle said. “But you can bet the EEOC” would cite those cases to its advantage, he said.
Reibstein noted that for decades there have been separate bodies of law for determining who’s an employee under each labor and employment statute. The tests vary and don’t always fit easily into on-demand scenarios, he warned.
Classification of a worker also can vary based on the circumstances presented, he said. That’s because the business structure may differ from one gig company to the next.
That’s why it’s so important for a company to structure, and document the structure of, its business in a way that makes clear that its independent contractor relationships comply with all of the various laws, Reibstein said.
Suggesting a different approach, Zatz said on-demand companies’ customer feedback systems can be designed to detect illegal bias. A company could use its rating system to compare different customers’ ratings to see whether a particular customer exhibits a pattern of racial or other bias.
It might also evaluate multiple customer ratings to detect a pattern of discrimination against workers of a specific protected group, Zatz said. Under either approach, a company could discount the biased ratings when making disciplinary, assignment and other decisions about a worker.
“But that’s not the whole ballgame,” because gig workers also may be able to seek protection from job-related bias under other laws, Zatz added. The Civil Rights Act of 1866 (42 U.S.C. § 1981), which bars discrimination based on race or immigration status, is the “clearest example,” he said.
There also are state and federal laws prohibiting discrimination in public accommodations that arguably may apply to the relationship between companies and workers in the on-demand industry, he said.
Whether, how or how quickly on-demand workers obtain protections against on-the-job bias, everyone Bloomberg BNA spoke with agreed that the issue isn’t going away, even with the looming changes in the federal government.
The EEOC and private plaintiffs may be able to draw on FLSA and National Labor Relations Act case law, because that’s where the litigation activity has been and will likely remain given the paramount importance of wage issues to gig workers, Reibstein said.
And state workforce agencies are likely to remain at least as active in enforcing independent contractor misclassification, Reibstein said, despite any efforts by President-elect Donald J. Trump to depart from the broad definition of employee announced by the Labor Department in July 2015.
Half the states that signed on to the DOL’s initiative on independent contractor classification have Republican governors, he said. That indicates that “states will continue to take misclassification issues seriously” no matter who’s in the White House. Federal law doesn’t usurp state law on wage issues, Reibstein said.
Spiggle, too, said he thinks “the horse is already out of the barn” on the question of gig worker classification under job bias laws. He and Hogan both say the EEOC will begin to see more bias charges filed by gig workers as a result of the agency’s SEP.
“As a private lawyer, I still might be reluctant to take this sort of claim to court,” Spiggle said. “But I might file a charge with the EEOC to see if they’ll take a swing at it,” he said.
Hogan predicts a broad “philosophical shift in enforcement efforts” across the federal government under Trump and anticipates that the Trump administration “will be sympathetic and supportive of the gig economy and gig companies.” Regardless, she said, what on-demand and other companies really crave, whether under wage or anti-bias laws, is more certainty.
A definitive approach by the government one way or the other on the issue under all of the various laws would be much better for the business community, Hogan said. The constant uncertainty regarding whether workers are independent contractors or employees “is going to affect the bottom-line of the gig industry and individual companies” if it continues, she said.
The lack of clarity, Hogan said, raises the question, “Is the gig economy going to be litigated to death?”
— Kevin McGowan contributed to this article
To contact the reporter on this story: Patrick Dorrian in Washington at email@example.com
Various groups have studied the size and/or rate of growth of the on-demand economy, including Intuit, the Brookings Institute, and JPMorgan Chase & Co. In addition, the Labor Department in September opened a notice and comment period on its plan to add an amended version of its old contingent worker supplement—which hasn’t been used since 2005—to the current population survey compiled by the Bureau of Labor Statistics in an effort to better track the size and growth of the gig workforce.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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