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Will New York Follow California In Confronting the Misclassification of App-based Workers?

The New York State Legislature is

NEW YORK, N.Y.—Should New York follow California and enact legislation limiting when employers can hire workers as “independent contractors”?

The answer is “very simple,” New York State AFL-CIO President Mario Cilento told a 4½-hour state Senate hearing in Lower Manhattan Oct. 16. Workers “should be considered employees” and have all the rights and protections that come with that, “including the right to unionize.”

By classifying workers as independent contractors, he said, employers, particularly those who hire workers through apps, can avoid paying minimum wage and for overtime, sick leave, disability coverage, and workers’ compensation. For example, if someone delivering a pizza is injured in a fall after they’ve dropped off the pie, they’re eligible for workers’ compensation if they’re a pizzeria employee—but if they’re working through a delivery app, they’re not, because they’re off the clock until their next assignment. The practice is also unfair to traditional employers, he added, who have to pay into the funds for unemployment benefits and workers’ compensation. 

“We can’t allow any group of workers to be carved out,” he said, and any law the state passes should specify that workers redefined as employees have the right to unionize. The federal Taft-Hartley Act of 1947 prohibits independent contractors from organizing unions, because it’s considered businesses stifling competition.

Business lobbyists argued that the state should not redefine independent contractors as employees, but create a “third way” between the two statuses, especially to cover workers for app-based services. “Making everyone an employee isn’t a modern solution,” said Frank Kerbein, director of the Business Council of New York State’s human-resources department. 

Business Council vice president Kenneth Pokalsky said this “third way” could include benefit pools run by intermediaries to provide health insurance, retirement benefits, and workers’ compensation. App-based workers trade minimum wage for flexibility, he added, and allowing workers hired through intermediaries to bargain collectively “would require major reforms of federal labor law.” Hiring workers as employees increases labor costs by 15-20%, he concluded.

“New York should not make the same mistake as California,” Kathryn S. Wylde of the Partnership for New York City told the committee. The state should not “interfere with voluntary business relationships.” She proposed judging whether workers are employees by how many hours they work, whether they’re occasional or steady, whether they do an auxiliary or core function of the business, and whether they’re low-paid or professional workers.

The California law, signed last month by Gov. Gavin Newsom, sets up an “ABC test” to define when workers are genuine independent contractors. They have to be working without being controlled by the hiring entity, doing work “outside the usual course of the hiring entity’s business,” and be “customarily engaged in an independently established trade, occupation, or business” doing that kind of work. It does not specifically guarantee workers it defines as employees the right to collective bargaining, however.

There is no similar bill currently pending in the New York State Legislature, Sen. Diane Savino (D-Staten Island), who chaired the hearing, told LaborPress afterwards. She introduced one last session, but “nobody liked it.” The hearing was to collect information to shape future legislation, she said.

Uber, whose business model depends on defining drivers as independent contractors, said after the California bill passed that it would continue to do so. It claimed that drivers are not part of its “core business” because it’s primarily an app connecting drivers and passengers, not a taxi service.

The Independent Drivers Guild, a union partially funded by Uber that advocates for the company’s drivers, argued against defining them as employees. Instead, IDG executive director Brendan Sexton testified, the state should pass a law giving app-based drivers the right to collective bargaining. Since the Trump National Labor Relations Board ruled in May that Uber drivers are not employees eligible to unionize under federal law, he said, “a state law reclassifying drivers as employees would not reverse that and would leave drivers in a strange legal purgatory, unable to unionize and with legal challenges continuing to stretch on for years.” “Uber would squash any union campaign,” he added.

“The idea of collective bargaining without employee status makes no sense,” responded Bhairavi Desai of the New York Taxi Workers Alliance. “In the absence of labor law, workers don’t have a floor to stand on.”

If any legislation passed gives tech companies an exemption, she testified, they will find a way to evade labor protections.

“What is less about us as workers that we don’t need minimum wage or paid time off?” asked Saibou Sidibe, a yellow-cab driver and NYTWA organizer.

The NLRB ruled in January that SuperShuttle airport-van drivers in the Dallas-Fort Worth area who were converted to independent contractors in 2005 can’t legally form a union. It voided an Obama-era ruling that said the board had to consider whether they were genuinely independent entrepreneurs. 

However, the IDG’s argument that New York State can give app-based drivers the right to collective bargaining “may be at least a short-term path,” says Rebecca Smith of the National Employment Law Project. The federal 9th Circuit Court of Appeals’ May 2018 ruling on Seattle’s law that gave the drivers collective-bargaining rights, she said, “indicates that states can establish collective bargaining for independent contractors.” 

“In my view, it’s a strategy worth pursuing, but there are also a number of unresolved legal issues that counsel for deep research and thinking,” she added. “There is a much clearer path for workers who are employees, under the National Labor Relations Act—but of course the NLRA is far from perfect.  If you just focus on collective bargaining without any baseline rights, workers are bargaining from zero.  And any collective-bargaining bill that the state passes would also be subject to litigation, as we saw in Seattle.”

The yellow-cab industry, NYTWA staff attorney Zubin Soleimany said, eliminated the taxi drivers’ union in the early 1980s, when it switched from paying drivers a percentage of the fares collected to having them lease the cabs as independent contractors. The technology used by app-based taxi services, he added, has intensified the control they have over their supposedly independent drivers: They monitor drivers’ routes and even when and how they brake.

Savino said several times that cab drivers should be defined as employees, possibly by amending the state Fair Play Act, which protects truck drivers against being misclassified as independent contractors.

Tech-industry trade groups also argued for a “third way.” App-based gigs give workers the ability to stop and start when they want to, and that’s “unique to the on-demand economy,” said Julie Samuels, executive director of TechNYC.

But Rocío Alejandra Avila, a staff attorney at the National Domestic Workers Alliance, called the idea that gig-economy work is different from other kinds of work a “false premise.” The app-based cleaning service’s defining its workers as independent contractors, she said, means they have no protections against wage theft, such as being forced to work off the clock or being charged fees that reduce their pay below minimum wage. Nail salons are another sector where workers are routinely classified as independent contractors, both in brick-and-mortar salons and online beauty services.

Larry Engelstein, secretary-treasurer of 32BJ SEIU, also rejected the “third way” concept, citing cleaning services—both online and off—that call workers independent contractors to shift the costs to them and avoid paying minimum wage. The argument for such a third category, he said, ignores the fundamental power relationship between workers and employers in the “guise of technology and the aura of progress.”

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