When Labor Groups and Silicon Valley Capitalists Join Forces to “Disrupt” Protections for Employees

Jay Youngdahl and Darwin BondGraham

A driver for Lyft, one of the "sharing economy" companies being sued by workers over allegedly improper classification as freelancers. (bootleggersson / Flickr)

At the recent­ly con­vened White House Sum­mit on Work­er Voice, Pres­i­dent Oba­ma argued that the cen­tral eco­nom­ic prob­lem of the day is mak­ing sure that every­one who works hard is get­ting paid a decent wage with decent ben­e­fits, [and] every­body has some basic eco­nom­ic secu­ri­ty.” To achieve these goals, Oba­ma said that the pow­er of work­ers to take col­lec­tive action must be strength­ened. But if a recent let­ter signed by a num­ber of union lead­ers, non­prof­it exec­u­tives and tech investors is any indi­ca­tion, advo­cates for col­lec­tive action by work­ers should be concerned.

Recent­ly, 39 Ser­vice Employ­ees Inter­na­tion­al Union (SEIU) staffers and lead­ers, a net­work of alt labor” groups and CEOs of and investors in some of the fastest grow­ing shar­ing econ­o­my” com­pa­nies signed an open let­ter titled Com­mon ground for inde­pen­dent work­ers.” The let­ter argues that the on-demand econ­o­my is fun­da­men­tal­ly chang­ing the eco­nom­ic land­scape across the coun­try, adding val­ue to con­sumers’ lives and bring­ing new oppor­tu­ni­ties for workers.”

But the authors of the let­ter also admit that many of the work­ers in this new econ­o­my — Uber dri­vers, Handy maids — face dif­fi­cul­ties obtain­ing insur­ance and oth­er ben­e­fits and pro­tec­tions. Why? Because they’re clas­si­fied as free­lancers, not employ­ees. As such, they’re not even pro­tect­ed by many fed­er­al, state and local min­i­mum wage laws and oth­er labor protections.

What is the solu­tion? The letter’s authors call for a dis­cus­sion to estab­lish a sys­tem of portable ben­e­fits” not tied to the com­pa­nies they work for. They state that pol­i­cy changes to cre­ate a sys­tem of such ben­e­fits is a bet­ter solu­tion than litigation.

But right now, many of the biggest on-demand com­pa­nies are being sued by their own work­ers who allege they have been mis­clas­si­fied as free­lancers in order for the com­pa­nies to earn big­ger prof­its. These work­ers want the on-demand com­pa­nies to treat them as tra­di­tion­al employ­ees and extend them the same kinds of ben­e­fits avail­able to most workers.

The letter’s authors write, solu­tions to these chal­lenges will devel­op from some of the same tech­no­log­i­cal advances and entre­pre­neur­ial cre­ativ­i­ty that are dri­ving new mod­els.” The sign­ers on the cor­po­rate side of this let­ter were pre­dictable. They are led by new shar­ing” com­pa­nies and the pri­vate equi­ty firms that finance them. Pay­ing their work­ers as employ­ees and pro­vid­ing insur­ance and ben­e­fits low­ers their prof­its. Two oth­er sign­ers were from the Bay Area Coun­cil Eco­nom­ic Insti­tute, a group that fero­cious­ly fought unions dur­ing the Bay Area Rapid Tran­sit strike of 2013. The Bay Area Council’s board includes senior exec­u­tives from com­pa­nies with a track record of try­ing to dis­man­tle unions and with­draw ben­e­fits from their employ­ees, as well as CEOs and investors in the new on-demand com­pa­nies who hope to avoid pay­ing for benefits.

Anoth­er sig­na­to­ry is Eli Lehrer of the R Street Insti­tute, a think tank that defines itself as being on the polit­i­cal right,” and inspired by neolib­er­als like Mil­ton Fried­man and Fred­er­ick Hayek. The R Street Insti­tute argues for leg­is­la­tion to undo the exist­ing sys­tem of employ­ee clas­si­fi­ca­tion in order to make it eas­i­er for com­pa­nies to treat their work­ers as free­lancers. The day after pub­lish­ing the open let­ter on portable ben­e­fits, the R Street Insti­tute pub­lished its own brief on the top­ic with vir­tu­al­ly iden­ti­cal lan­guage. Ian Adams of the R Street Insti­tute said his group’s par­tic­i­pa­tion in draft­ing the open let­ter was a direct response to law­suits by work­ers claim­ing mis­clas­si­fi­ca­tion. A pol­i­cy frame­work that pro­vides work­ers and firms with much greater flex­i­bil­i­ty is cru­cial in light of ongo­ing lit­i­ga­tion,” Adams said in a press release. Leg­is­la­tures, not courts, are the appro­pri­ate venues in which to write the next chap­ter in the future of work.” In their pol­i­cy brief on the issue, the R Street Insti­tute calls on the fed­er­al gov­ern­ment to cre­ate a safe har­bor that firms which meet cer­tain require­ments would not be sub­ject to reg­u­la­to­ry action or lit­i­ga­tion based on a mis­clas­si­fi­ca­tion argument.”

Join­ing up with this group of employ­ers, financiers and right-wing think tanks are labor advo­cates includ­ing Andy Stern, the for­mer pres­i­dent of SEIU, one of the nation’s largest labor unions, and Laphon­za But­ler and David Rolf, the pres­i­dents of SEIU locals 2015 and 775, two of SEIU’s biggest locals. Non­prof­it exec­u­tives who run foun­da­tion-fund­ed work­ers cen­ters like the Free­lancers Union, Cowork​er​.org, The Work­ers Lab, the Nation­al Domes­tic Work­ers Alliance, and the Nation­al Guest­work­er Alliance also signed onto the open let­ter. The pres­i­dent and a senior fel­low from the pro­gres­sive Roo­sevelt Insti­tute also added their names.

Why did these labor lead­ers and pro­gres­sives sign on? The labor and pro­gres­sive lead­ers who signed the open let­ter with whom we spoke were proud of the strange bed­fel­lows” nature of the state­ment. Feli­cia Wong, Pres­i­dent of the Roo­sevelt Insti­tute, says that she wants to begin a con­ver­sa­tion about a 21st Cen­tu­ry social con­tract, in which ben­e­fits are flex­i­ble, uni­ver­sal and sta­ble. Michelle Miller of Cowork​er​.org says she signed on as an indi­vid­ual con­cerned about on demand econ­o­my work­ers who cur­rent­ly don’t have ben­e­fits. I think that most­ly what they sug­gest is that we need a sys­tem that works for all work­ers,” she said of the letter.

Obvi­ous­ly an expand­ed sys­tem of uni­ver­sal and flex­i­ble ben­e­fits pro­vid­ed by the fed­er­al gov­ern­ment would be a great thing for work­ers and employ­ers. Even the Afford­able Care Act, which was an expan­sion of the pri­vate health insur­ance sys­tem, has been a net ben­e­fit for mil­lions of Amer­i­cans who pre­vi­ous­ly couldn’t afford med­ical insurance.

But what is the like­li­hood that the U.S. Con­gress will estab­lish Medicare for all in the near future? Or bol­ster unem­ploy­ment and social secu­ri­ty? Or estab­lish new uni­ver­sal, portable ben­e­fits” com­pa­ra­ble to what Euro­pean social democ­ra­cies offer? The major­i­ty in Con­gress have spent the past five years try­ing to dis­man­tle the Afford­able Care Act. Numer­ous states have open­ly reject­ed imple­ment­ing the law. There is vir­tu­al­ly no con­ver­sa­tion in the fed­er­al gov­ern­ment today about cre­at­ing or strength­en­ing any uni­ver­sal ben­e­fits pro­grams, but there is plen­ty of polit­i­cal mus­cle aimed at fur­ther erod­ing work­ers benefits.

The letter’s call that on-demand econ­o­my work­ers forego lit­i­ga­tion to gain wages and ben­e­fits owed to them appears to allude to attor­neys like Shan­non Liss-Rior­dan. Liss-Rior­dan is help­ing work­ers sue Handy and Lyft, two of the com­pa­nies whose CEOs signed the letter. 

These are good words, obvi­ous­ly,” she said about the letter’s focus on ben­e­fits, but I’m con­cerned see­ing labor groups on there. … I’m won­der­ing whether they’re ful­ly informed as to what they’re putting their names on.” Liss-Rior­dan said labor advo­cates should be try­ing first and fore­most to ensure that exist­ing laws are enforced, and that com­pa­nies aren’t allowed to mis­clas­si­fy work­ers as free­lancers. While the two can cer­tain­ly be done simul­ta­ne­ous­ly, giv­en ram­pant mis­clas­si­fi­ca­tion, the empha­sis on cre­at­ing a new portable safe­ty net and a put-down of wage and hour lit­i­ga­tion is at the very least tone deaf to work­ers who are cur­rent­ly engaged in bat­tle with employ­ers who are avoid­ing pro­vid­ing ben­e­fits through misclassification.

The let­ter comes just as the Oba­ma Admin­is­tra­tion has final­ly tak­en action against work­er mis­clas­si­fi­ca­tion and made it eas­i­er for work­ers for­mer­ly clas­si­fied as inde­pen­dent con­trac­tors to join with fel­low work­ers to advance their own inter­ests. In the south­ern con­struc­tion indus­try, for exam­ple, work­ers, espe­cial­ly His­pan­ic immi­grants, have rou­tine­ly been cheat­ed and tax pay­ers fleeced by misclassification.

Pay­roll fraud mis­clas­si­fi­ca­tion is pret­ty much the busi­ness plan on every job site in the state of Louisiana,” said Jason Engels, Exec­u­tive Sec­re­tary-Trea­sur­er of the Cen­tral South Region­al Coun­cil of Carpenters.

Accord­ing to a recent inves­ti­ga­tion by a New Orleans tele­vi­sion sta­tion, the busi­ness mod­el is called mis­clas­si­fi­ca­tion of employ­ees and, accord­ing to our research in Louisiana, it costs tax­pay­ers annu­al­ly at least $250 mil­lion.” Because if an employ­ee con­sid­ers that car­pen­ter or painter an inde­pen­dent con­trac­tor, they’re not deduct­ing state or fed­er­al tax­es, Medicare or Social Secu­ri­ty or unem­ploy­ment insur­ance.” And, giv­en the rela­tion­ships in this method, immi­grant work­ers are sub­ject to repeat­ed exploita­tion with no avenue for recourse.

Portable ben­e­fits sound great, but the ram­i­fi­ca­tions of the pro­pos­als in the let­ter are extra­or­di­nary. Who pays for these portable ben­e­fits? The let­ter states that all work­ers should have access to a basic set of ben­e­fits regard­less of employ­ment sta­tus,” but does not go so far as to say that these ben­e­fits should be pro­vid­ed by local, state or fed­er­al gov­ern­ments. Leg­is­la­tures are increas­ing­ly resis­tant to the idea of cre­at­ing a work­er friend­ly ben­e­fit sys­tems in these days of Amer­i­can Leg­isla­tive Exchange Coun­cil con­trol at the state lev­el and a busi­ness-dom­i­nat­ed U.S. Congress. 

If the shar­ing econ­o­my” com­pa­nies are will­ing to pay for portable ben­e­fits, they can already do so by treat­ing their work­ers as employ­ees. We already have a portable pen­sion sys­tem in the Unit­ed States: Social Secu­ri­ty. And build­ing trades unions have had portable health care, pen­sion and train­ing pro­grams for decades, pro­vid­ing a mod­el where­by work­ers car­ry ben­e­fits through­out their careers work­ing for many dif­fer­ent employ­ers. These joint employer/​union trusts, estab­lished pur­suant to fed­er­al labor law, have addressed exact­ly these issues of work­ers who work for a num­ber of com­pa­nies. But this assumes the work­ers are clas­si­fied as employ­ees. Nei­ther of these exam­ples were men­tioned in the letter.

The mythol­o­gy of Sil­i­con Val­ley is seduc­tive. Advo­cates in new labor are fas­ci­nat­ed by changes in the struc­ture of work in the gig econ­o­my and the pow­er of tech­nol­o­gy. To address new inequal­i­ties it has become pop­u­lar to build apps or to make invest­ments in the style of social entre­pre­neurs. But even Pres­i­dent Oba­ma in the Work­ers Voice sum­mit observed that the on-demand econ­o­my is just a frac­tion of the over­all econ­o­my. It’s real­ly not impact­ing the work­places of most Amer­i­cans. Oba­ma, hard­ly an old-guard labor rad­i­cal, had to remind his audi­ence at the con­fer­ence that they should not get dis­tract­ed and think that things are chang­ing faster than they real­ly are.

Sim­i­lar­ly, Ross Eiben­brey of the Eco­nom­ic Pol­i­cy Insti­tute told Lydia DePil­lis of the Wash­ing­ton Post that sign­ers of the portable ben­e­fits let­ter inflat­ed the num­ber of free­lancers in the econ­o­my. The result is that peo­ple think that things are chang­ing much faster than they are, and that there­fore the legal mod­els that we have shouldn’t be applied.”

It’s exact­ly that fal­la­cy that attor­neys like Liss-Rior­dan are push­ing back against. She rep­re­sents work­ers who say they are employ­ees of the giant com­pa­nies that prof­it from their labor. Her clients want the same ben­e­fits as oth­ers. Some of them even want a union.

Per­haps the most sur­pris­ing thing about the portable ben­e­fits let­ter is that it entire­ly omits the idea that work­ers should have some pow­er vis-à-vis man­age­ment, and that the solu­tions might lie in work­ers tak­ing col­lec­tive action. It is the col­lec­tive pow­er of work­ers that gives them pro­tec­tion, not new tech­no­log­i­cal advances” or entre­pre­neur­ial cre­ativ­i­ty.” Dis­rupt­ing employ­ment pro­tec­tions as envi­sioned by some of the sign­ers, such as the R Street Insti­tute and the tech com­pa­nies, could erode work­ers’ abil­i­ties to engage in col­lec­tive action or to union­ize. Cur­rent­ly the Nation­al Labor Rela­tions Act, which pro­tects work­er orga­ni­za­tion, only pro­tects employ­ees. Free­lancers with indi­vid­ual con­tracts, as pro­posed by R Street, would not have access to the courts to redress wrong­do­ing by the com­pa­nies they work for.

New ideas are great; the labor move­ment cer­tain­ly needs them; and the ener­gy of new labor, includ­ing the non­prof­it work­ers cen­ters, has poten­tial. But if work­er advo­cates join crowds like this, and pro­pose the elim­i­na­tion of pro­tec­tive rights, they will lose all cred­i­bil­i­ty out­side of Sil­i­con Valley. 

Jay Young­dahl is a labor attor­ney. Dar­win Bond­Gra­ham is a jour­nal­ist in the Bay Area.
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