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.
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.