Worker voice, representation, and power

Improving Work for Independent Contractors through Worker Voice and Power

Jacqueline Rayfield, Batia Katz, Jessica ShakesprereAugust 16, 2021

Independent workers, many of whom have low and unpredictable incomes, faced unique challenges during the COVID-19 pandemic. This, along with recent debates over misclassification, has increased awareness of their lack of workplace protections and is fueling calls for better working conditions.

Throughout the pandemic, some workers, such as rideshare or delivery service drivers, construction workers, and home health aides, were deemed essential. They kept working and faced elevated exposure to the coronavirus without guaranteed access to protective equipment or health insurance. Others, such as domestic workers, experienced long spells of unemployment (PDF) and lost wages. Although some independent workers received paid leave and unemployment benefits during the pandemic, most live with a precarious safety net.

Now, as attention grows around the vulnerable status of the country’s independent workers—many of whom should be classified as employees—so is the realization that they need formal structures to advocate for themselves.                                                                                                                

Independent workers in the labor market: Knowledge gaps

Improving work for independent contractors will require better data collection, including measurement of their presence in the labor market and the kinds of work they do. 

The US Bureau of Labor Statistics’ Contingent Worker Supplement to the Current Population Survey is the main government survey that captures workers in both “contingent” and “alternative” work arrangements, including contractors, freelancers, and consultants. Fielded only three times since the 1990s, experts agree the survey needs to be improved to accurately represent the changing nature of work. The most recent estimate from 2017 shows about 10 percent of the workforce, or 15 million workers, rely on alternative arrangements—independent contracting, on-call employment, work through temp agencies or contracting firms—for their primary source of income, a share virtually unchanged since the 2005 survey.

Researchers explored why the 2017 survey didn’t reflect a more significant increase in the share of workers in alternative arrangements given the rise of online platforms and outsourcing. They concluded the share of independent workers did increase, but modestly (1–2 percentage points), and the growth in nonstandard work was driven by those relying on it for supplementary income. Private surveys estimate that more than one-quarter of workers are engaging in nonstandard work either full time or part time.

These surveys also don’t address the extent to which employers misclassify employees as independent contractors to minimize costs. The debate over misclassification has been focused on app-based platforms, but advocates argue the misclassification is also rampant in low-wage industries, such as restaurants, trucking, construction, janitorial services, and home health care. Despite the lack of an official measure, audits consistently find 10 to 30 percent of employers misclassify employees as independent contractors.

Workplace rights and protections tied to employee status

How employers classify their employees is critical to their job security. In the US, nearly all federal social insurance programs and workplace rights and protections—including the right to organize—are tied to employee status. For example, independent contractors are ineligible for workers’ compensation and aren’t protected by federal minimum wage, overtime, and antidiscrimination laws. Independent contractors are also excluded from the federal-state unemployment insurance program, although they became eligible under a temporary program, Pandemic Unemployment Assistance. Independent contractors don’t benefit from employer contributions to Social Security and Medicare, and most don’t have access to employer-provided benefits, such as health insurance, retirement, and paid vacation and medical leave. 

Independent contractors are also not covered by the National Labor Relations Act (NLRA), which gives employees the right to organize and collectively bargain with or without union representation. Labor advocates and scholars argue the Depression-era NLRA is ill-equipped to address labor challenges of the 21st century because technology and fissuring, or the outsourcing of core business functions to reduce costs, have fundamentally altered work and employment relationships.

Advocates also argue that antitrust law needs to be reformed, as it exposes independent contractors to liability if they join collectively to negotiate the price of their labor. And they contend that the Protecting the Right to Organize (PRO) Act, which was introduced in Congress earlier this year, would deliver a much needed update to labor law. If passed, the legislation would be significant for independent contractors; it would allow them to form unions. 

Alternative modes of organizing

Despite the legal and logistical barriers to organizing, independent contractors in recent years have built coalitions to improve working conditions in specific sectors. Though these groups are not formally recognized unions under the NLRA.

Among them are the Gig Worker’s Collective, which advocates for better pay and treatment for all gig workers and helps coordinate protests and other collective actions. Rideshare Drivers United has organized workers across multiple platforms (PDF), including Uber and Lyft, in California. Google employees and contractors formed a minority union, which allows independent workers to join, although it can’t negotiate a contract with management. And other groups, such as the National Domestic Workers Alliance, have won major campaigns to change state and municipal laws to strengthen labor standards for domestic workers.

Union wage premium and other benefits

If independent contractors were permitted to form unions, labor advocates say it could provide contractors collective bargaining power to challenge worker misclassification, seek better wages, and gain essential benefits and protections.

Research shows unions generate wage premiums for workers in unions, compared with nonunion counterparts, with men and low-wage workers (PDF) reaping larger premiums than other workers. A recent Reuters analysis of retail wages shows the weekly wage gap between unionized and nonunionized workers increased from nearly $20 in 2013 to more than $50 in 2019. Union wage increases also have spillover effects for nonunion employees, improving wages and benefits and setting higher labor standards.

Policy outlook

At the federal level, the PRO Act offers the most comprehensive reform of labor laws, including giving independent workers the right to form unions. Despite passage in the House of Representatives, chances of the act becoming law in its original form are slim. 

States and municipalities have focused more on strengthening worker classification laws and antidiscrimination and wage protections for independent workers, rather than policies to facilitate organizing. California’s AB5, for example, makes it harder for employers to misclassify employers as contractors, although industry-backed exemptions threaten to weaken the law’s power. In 2015, the City of Seattle passed an ordinance allowing Uber and Lyft drivers to collectively bargain, but it was mired in litigation and never implemented. Under a new Seattle city policy, rideshare drivers must be paid the local minimum wage and receive benefits and compensation for expenses, and they can contest deactivation and other issues through a new driver resolution center.

Gig and independent workers will continue to be an important and growing segment of the US workforce. Labor laws will need to adapt to give these workers greater voice and power to change their circumstances and gain the protections and benefits all workers—regardless of their employment status—need and deserve.