Monthly Archives: March 2017

The Independent Contractor vs. Employee Issue Gets Kinky

Although some think whether an individual is an independent contractor or an employee is a new legal question brought about by the gig economy digital platforms like Uber, the truth of the matter is the issue has been around for decades. As I say in my new book, Thriving in the Gig Economy  due out in May , when the news of the Uber lawsuit first broke, my former CFO called me from Toronto just to reminisce about old times in the compliance wars.  It was remarkable to us, that so many people and the media for sure seemed to view the Uber situation as a new development.

Of course the employment lawyers in the crowd also appreciate how pervasive this problem has been.  In its recent blog post, Littler chose to honor April Fool's Day by recounting some of the more bizarre employment cases that occurred this year.  http://www.jdsupra.com/legalnews/these-foolish-things-the-oddest-56353/,  My favorite was the case of a strip club in Ohio, where an exotic dancer sued the bar on the grounds that she should have been classified as an employee rather than as an independent contractor.

Credit J.D.S. from Shutterstock.com

There were several considerations arguing for independent contractor status.  Dancers were not paid by The Brass Pole, but rather by its patrons for individuals dances.  Dancers also made their own schedules and provided their own materials/costumes.  The bar offered no training; only experienced dancers were engaged.  Whether they were able to work for other establishments was a bit murky, but there was no explicit prohibition.  The Brass Pole did have a number of rules  the dancers needed to abide by including no chewing gum on stage, never refusing a drink and no boyfriends/spouses in the bar during the performances. http://www.lazzarolawfirm.com/Lester-opinion.pdf These rules were not meant to impose direction or control, but rather to ensure the efficient operation of the establishment.

The definition of an independent contractor, or for that matter, an employee, is never simple.  The Sixth Circuit court in Ohio used what they refer to as an "Economic Realities" test.  The six factor test, as outlined in the legal opinion in the case is based on:  "1) the permanency of the relationship between the parties; 2) the degree of skill required for the rendering of the services; 3) the worker’s investment in equipment or materials for the task; 4) the worker’s opportunity for profit or loss, depending upon his skill; ... 5) the degree of the alleged employer's right to control the manner in which the work is performed[; and] ... [6)] whether the service rendered is an integral part of the alleged employer’s business."

The first five items seemed to indicate that the dancers could be valid independent contractors. The dancers were regular, experienced and supplied their own costumes.  They determined when and how long they performed, which determined their income, and little to no control was exerted over them.  The problem, however, was whether the dancers were an integral part of the business.  Apparently the proprietor did attempt to claim that they were a bar which happened to have exotic dancers, rather than an exotic dancing locale that served drinks.  The judge didn't buy that argument and ordered a summary judgement for the plaintiffs, saying, "“[n]o reasonable juror could conclude that customers primarily came to the club for its other offerings, which included beer, liquor, and frozen burgers from Sam’s Club.”http://www.jdsupra.com/legalnews/these-foolish-things-the-oddest-56353/

At least the Brass Pole case was resolved.  The larger Uber lawsuit still has yet to be fully argued.  I for one am hopeful that it will be put to the test, because it could be this high profile case which finally puts some clarity on this very ambiguous area of the law.

The Gig Economy and the Office

Harvard Business Review published an interesting article by Professor Diane Mulcahey last week called, "Will the Gig Economy Make the Office Obsolete?" https://hbr.org/2017/03/will-the-gig-economy-make-the-office-obsolete .  The point Mulcahey makes is that when companies use independent workers  for key projects, these gig workers  are being  judged by their results; their presence or absence in a certain physical location is not germane to their performance.

What is interesting to note is the historical pattern of work locations.  Prior to the industrial revolution, work of most types  tended to be done at home.  Fishermen and soldiers are key exceptions here.  The work was not separate from life, but rather an embedded part of it.  As Alice Kessler Harris, a History Professor at Columbia put it, " the workplace was an extension of the household." http://gender.stanford.edu/news/2014/historical-view-american-workplace Professions which did have offices, i.e. doctors, were typically co-located at home. Although certain work was gender related, women tended the farm just as much as men helped with the weaving.  It was all just a part of life.

Marion McGovern

A portion of Diego Rivera's murals depicting American industrialization at the Detroit Institute of Art

But life changed with the advent of industrialization,  because the location of work shifted, with many roles requiring an onsite presences, whether at a factory, a warehouse or an office.  Along with that shift, came set hours and shifts which delineated work time. These separate  workplaces were often in conflict with  household schedules and further accelerated the segregation of work from home life.  As more women entered the work force the conflicting demands of work and household became all more acute.

However fast forward to the end of the 20th century. As the knowledge economy grew in importance, supported by technological enhancements, the time and place where work could be done became less important. With increased connectivity and advances in software and security, remote work has become commonplace. Coupling that with hard working employees who want more work life balance, many companies have made moves to reduce their physical office footprint.  Indeed, software company, Citrix, has predicted that by 2020, 70% of people would work away from the office as much as they worked at their office.

Add to this the increasing adoption as a strategic business practice of using independent consultants, high-end gig economy workers, for projects throughout the organization and the question of worker location becomes even more pertinent.  Most of these gig economy workers rate flexibility and control over their lives as key reasons for pursuing the independent career path.  In researching my upcoming book, Thriving in the Gig Economy, I read half a dozen different studies about the reasons independent consultants choose this path and flexibility is chief among them all. Whether they work at a client office, a co-working space or a home office, these professionals want be in charge,  They want the balance in life that comes from control.  They want their work to be an extension of their household just like it was 200 years ago.  As the saying goes, what comes around, goes around.

 

International Women’s Day and the Gig Economy

On this International Women's Day, I thought a good post would be to talk about women in the Gig Economy. In the recent McKinsey Global Institute Report, "Independent Work: Choice Necessity and the Gig Economy", http://www.mckinsey.com/global-themes/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy, they report that women comprise 51% of the alternative work force in the United States.  In fact in the six developed economies profiled in the report, women were  not the majority in only Germany and France, where they represented 48% and 45% respectively.

As someone who was in the gig economy before anyone ever called it that, it has always been clear that women were a major component of the alternative workforce.  When I started M Squared Consulting in 1988 one of my prime observations were that credentialed women were leaving traditional corporate  environments in droves.  Whether it was the management consulting world where I was, advertising, consumer products or financial services,  the need to balance competing demands in life trumped for many women the need to break the glass ceiling.

I am dating myself here, but before the advent of email and the internet, balancing family obligations was much harder. I remember several nights at Booz Allen where I would leave at 5:30 pm to the incredulity of my ( male)  peers, head home to feed and bathe my newborn baby, put her to bed and then drive back to the office at 9 to work until midnight or 1 a.m., and roll into bed an hour later.  I'd get up again at 6a.m. to feed the baby and spend some time with her before heading back to the office that morning.  That grueling schedule was not sustainable and helped awaken my entrepreneurial streak to figure out a better way to work.

Over the years, I discovered that so many people, not just women wanted more control over time.  Whether it was to write the great American novel, support an aging parent, or salsa dance competitively, consultants chose  the independent path to make their entire  life work, not just the career part. Don't get me wrong, many also chose this path because they felt that could make more money on an independent basis and have greater intellectual challenges. But flexibility for many is a key factor.

MBO Partners has done a study on independent workers in America for the past six years and notes, as McKinsey did, the roughly equivalent level of male and female participation.  In  their most recent  study, The State of Independence in America, https://www.mbopartners.com/state-of-independence, MBO Partners noted that men and women have different concerns and goals. For women, flexibility is more important than money.  For men, control by virtue of being your own boss was more important.

But women are not just a part of  the gig economy as workers, they are also part of the eco-system that supports the participants. From apps that provide effective time reporting, to platforms for liability insurance, entrepreneurs are seeing that this is a trend that is not going to sunset anytime soon.  One part of the eco system is co-working space.  WeWork, the giant in the segment is now the 4th largest real estate firm in the country.  But in their shadow, some women in The Bay Area decided they wanted to figure out a new way to co-work.  The Hivery, https://www.thehivery.com, a co-working space in Mill Valley,  a suburb of San Francisco, is a specialized networking space just for women. They offer all sorts of events to members, like writer’s workshops, entrepreneur circles and meditation Mondays, all intended to build a sense of community, the kind of community designed for women.

So on this International Women's Day, I salute all the independent women and entrepreneurs who have been able to design their work to support their life and their spirit rather than the other way around.

 

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