The U.S. Department of Labor joined opponents of the “sharing economy” Wednesday in condemning the new use of contracting as a way to avoid paying employee benefits.
“Misclassification of employees as independent contractors is found in an increasing number of workplaces,” the agency claimed in a report. “When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections.”
Advances in digital technologies have allowed companies like Lyft, Uber, FedEx and Airbnb to use contracting in unique ways. Known as the sharing economy, companies make digital platforms in which individuals can create their own business ventures. Opponents, however, argue these individuals should be classified as employees of the company instead of contractors.
“In addition, many states have acknowledged this problematic trend and have responded with legislation and misclassification task forces,” the agency continued. “Understanding that combating misclassification requires a multi – pronged approach.”
The Labor Department argued those companies are abusing contracting to avoid paying their employees benefits like a minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.
“The Teamsters Union has been leading the fight against misclassification on both the state and federal levels for more than a decade,” Teamsters General President Jim Hoffa said in a statement. “The administrator’s interpretation only reinforces what we have said for years – misclassification must be eliminated.”
The recent brief from the Labor Department is only the latest in a series of attacks against the sharing economy. As well as recent lawsuits against companies like FedEx and Uber, Democratic presidential hopeful Hillary Clinton promised she would put an end to the sharing economy if elected.
“I’ll crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages,” Hillary said during a speech in New York City. “It’s also raising hard questions about workplace protections and what a good job will look like in the future”
Companies utilizing the sharing economy are fighting back in court and by speaking out on the issue. Last month, when a California judge ruled Uber misrepresented one of its employees as a contractor the company shot back, arguing it is merely a technological platform used by independent drivers.
“We believe that the majority of decisions finding that FedEx Ground’s relationship with contracted service providers, in whatever form, is not an employer-employee relationship were decided correctly,” a spokesman for FedEx told The Daily Caller News Foundation. “[FedEx] provides customers with the industry’s best service and has enabled thousands of entrepreneurs to start and grow profitable businesses.”
Unions have been among the more vocal opponents of the sharing economy. The use of contracts makes it incredibly hard to organize workers and so undermining the sharing economy will make it much easier for unions.
“We have seen the negative impact of misclassification firsthand,” Hoffa also noted. “As unscrupulous employers manipulate the system to not only deny workers the wages and benefits they rightly deserve, but prevent them from collectively bargaining.”
Though contractors can still join a union, it’s much easier to unionize employees because consent doesn’t have to be unanimous. If a union can get the majority of employees within a single bargaining unit to agree to representation, it becomes the Exclusive Representative of all the employees.
If that bargaining union happens to exist in a mandatory dues state, all the employees within a unionized bargaining until must pay union dues or fees whether they agree with the union or not. The same principal applies to franchisees which would have to be unionized individually unless they were considered part of the larger corporations they contracts with.
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