Category Archives: contingent workers

The State of Independence

The “gig economy” may be the future, but growth in the number of independent workers is slowing as the nation’s robust job market lures some back to traditional employment, a new report concludes.

MBO Partners, a Virginia-based firm that offers a technology platform for self-employed professionals, each year tallies the number of independent workers. Its 2017 State of Independence in America, seventh in an annual series of reports, finds the total number of such workers edged up just 3 percent to 40.9 million since 2016.

Most of that growth was in what the authors call “occasional” independent workers — including people with regular jobs who pursue a freelance “side gig” at least once a month. The number of these workers soared 23 percent in one year to 12.9 million, the report finds.

By contrast, the number of full-time independent workers — those working for themselves at least 15 hours a week — dropped more than 4 percent to 16.2 million. This is the second straight year of decline for this group, study’s authors say. “Surveys tell us … that many people prefer the security of full-time jobs,” they note. “We expect the number of full-time independents to cycle up and down in response to the strength of the jobs market.”

Predictably, part-time independent workers — those working for themselves fewer than 15 hours a week but devoting more time than an “occasional” independent  — fell in the middle: Their numbers declined only slightly, by 3 percent, to 11.8 million.

 

The Gig Economy: Pros and Cons

More than one in 10 working Americans have joined the so-called gig economy, working as freelancers or independent contractors, according to a survey of 1,008 people from ReportLinker. A third of respondents said they would consider exiting the traditional workplace to work in the gig economy, while nearly half said they would be willing to consider doing so within the next three years.

Why would so many consider giving up the security and benefits of a full-time job for the uncertainties of gig work? Twenty eight percent of survey respondents cited “being your own boss,” while the ability to work flexible hours came in second. Nearly 40 percent of job seekers say they’d consider becoming an independent contractor, as would 59 percent of part-time workers and 33 percent of students, according to the survey.

The lack of benefits is a drawback for those working in the gig economy, however, with one in four of the respondents who work as freelancers citing the lack of retirement benefits as a downside. Indeed, the lack of traditional job benefits such as sick-leave pay and unemployment benefits has led the United Kingdom to appoint a team of four experts to review the impact of “disruptive” businesses such as Uber and Deliveroo on that nation’s workforce, reports the BBC. The panelists include Matthew Taylor, chief executive of the Royal Society for the Arts.

“One of the key issues for the review is ensuring that our system of employment rules are fit for the fast-changing world of work,” Taylor writes in a piece for the Guardian newspaper.

“As well as making specific recommendations, I hope the review will promote a national conversation and explore how we can all contribute to work that provides opportunity, fairness and dignity,” he told the BBC.

The lack of benefits typical in most gig economy jobs has resonated Stateside as well, of course, with a number of gig workers filing suit alleging that they’re actually employees, not independent contractors, and are thus eligible for benefits such as unemployment compensation. In response, companies that employ freelancers are pushing for bills that promote “portable” benefits that workers would be able to take from job to job. Online home-cleaning company Handy, for example, is circulating a draft bill in the New York State legislature that would establish guidelines for portable benefits for workers in that state’s gig-economy companies, reports Reuters. The bill would classify workers at companies choosing to participate in the program as independent contractors rather than employees under state law, as long as the companies’ dealings with their workers “meet certain criteria.”

Not all are pleased with the bill. Larry Engelstein, executive vice president of 32BJ Service Employees International Union, criticized it as offering workers too little.

“The amount of money that’s supposed to be put into these portable benefit funds seems so meager,” Engelstein told Reuters. “The actual benefit a worker is getting hardly warrants what the worker is giving up.”

War for Talent Hits Retail

Although seasonal hiring for the retail industry is expected to be mostly flat compared to last year, finding employees to fill positions for the holiday season is expected to be tougher this year, given changes in the economy and in the retail sector itself. Macys, Target and Toys R Us have announced they’ll hold their first-ever nationwide recruiting events for seasonal workers at all of their stores and facilities during a single day or over several weekends, CNBC reports.

The lower unemployment rate and higher minimum wages in many states and localities means that finding workers to fill seasonal retail positions this year will be more difficult and expensive for retailers than last year — average hourly pay for seasonal workers is up by $4 from last year, to $14 per hour, according to Snagajob. But the growth of e-commerce means that they’ll be struggling to fill warehouse positions at fulfillment centers as well as cashiers and the like — and those jobs can be tougher to fill.

Retailers encountered difficulty filling warehouse jobs in areas such as central Ohio, Memphis, Tenn. and Louisville, Ky., Steve Osborn, a director at the Kurt Salmon consulting firm and supply chain expert, told CNBC.  “The same group of [retailers] that were fighting over people last year will be fighting over people this year. And there’s a few less people to fight over and a few more positions to fill,” he said.

Unlike most customer-facing positions, warehouse jobs tend to be more labor-intensive, which can make them less appealing, Osborn said. Plus, the facilities tend to be located in rural areas, where land is cheap but people are few, he said.

Some companies are responding to the challenge by opening “micro hubs” closer to large urban areas. “This not only helps them get goods to customers faster, but it solves some staffing issues pressing on them,” Challenger, Gray & Christmas CEO John Challenger told Multichannel Merchant. “They can find more people willing to do that work in city neighborhoods, who don’t want to do an hour commute to the exurbs or have transportation issues.”

Other companies are adding perks such as on-site child care to their facility, offering eight-hour days with no work requirement on the weekends, and removing their English language requirement to attract more Hispanic workers. “We have bilingual staff and our temp agencies support us with bilingual supervisors and coaches,” Christine Miller, director of operations for American Eagle Outfitters in Hazleton, Pa., told Multichannel Merchant.

Reflecting on Uber’s Classification Settlement

Worker classification can be a major headache for companies of all shapes and sizes, but for employers embracing the shared-economy business model, it can be one of migraine proportions.

Uber_ride_Bogota_(10277864666)No one knows this better than Uber, which has been facing an onslaught of lawsuits from drivers seeking employee status. Were the drivers to win that battle in the courts, the implications for the firm’s business would be huge.

Well, as you may have heard, Uber avoided that potential outcome in California and Massachusetts when it settled two class-action lawsuits: O’Connor vs. Uber and Yucesoy vs. Uber, respectively.

In the settlement, the parties agreed that …

  • Drivers will remain independent contractors, not employees;
  • Uber will pay $84 million to the plaintiffs (and there would be a second payment of $16 million if Uber goes public and its valuation increases one-and-a-half times from its December 2015 financing valuation within the first year of an IPO);
  • The firm will provide drivers with more information about their individual rating and how it compares with their peers. (It would also introduce a policy explaining the circumstances under which it deactivates drivers in these states from using the app); and
  • The parties would work together to create a driver’s association in both states, with Uber helping to fund these two associations.

In a post about the settlements, Uber CEO Travis Kalanick wrote that Uber is “pleased that this settlement recognizes that drivers should remain as independent contractors, not employees,” noting that drivers value their independence—the freedom to push a button rather than punch a clock.

Kalanick admitted that, as Uber has grown, “… we haven’t always done a good job working with drivers.”

As a story in the Los Angeles Times points out, the settlement still needs to be approved by a judge in the District Court of Northern California, which could take months.

“If approved,” the paper reports, “the payment will be distributed among drivers in California and Massachusetts who performed at least one trip up until the date of the preliminary settlement approval. Distribution will be based on miles driven while a passenger was in the car.”

The plantiffs’ attorney, Shannon Liss-Riordan, released a statement to various press outlets saying the settlement was the right move, considering the risk of having a jury rule against the plaintiffs.

Earlier today, I spoke to Thomas Lewis, a shareholder in the Princeton, N.J., office of Stevens & Lee, who told me it was probably a smart move for Uber, too.

“What’s interesting about the Uber case is that the class-action settlement came just short of effectively giving certain rights to these independent contractors that should belong to employees,” he said. “So this is telling me that Uber is clearly aware that there could be a push to classifying independent contractors as employees were it to go through the court system and there was an adjudication.”

And it’s no secret, of course, that, were Uber to come up on the losing end of a court battle, it would be costly, considering the company’s business model.

Of course, there’s no way to know if this will put an end to the worker-classification issue at Uber. Lewis noted if a new class action is filed, it would be need to be filed with a different set of facts or issues that were brought forth.

But at least for the time being, you would think Uber executives should be able to rest a little easier.

Sharing Economy Hits a Speed Bump

Some call it the sharing economy, others call it peer to peer and some just call it the Uber economy: Whatever one calls it, the startups that are using smartphones and the desire of many people to set their own hours to create new businesses that are disrupting fields such as the taxi economy are drawing a lot of attention these days from investors, consumers … and legal plaintiffs.

Confused Driver

Specifically, some of the workers who perform these services believe they’re actually employees rather than independent contractors. In California, the state labor commission agreed, ruling in June that an Uber driver was actually an employee of the company. Now, two similar startups have decided to proactively address the question but in radically different ways. Homejoy, an on-demand cleaning service, has announced it will shut down in the face of multiple lawsuits from workers alleging employee misclassification. Meanwhile, on-demand grocery delivery service Instacart said it will offer its in-store workers in three cities (Atlanta, Miami and Washington) the opportunity to convert from independent-contractor status to part-time employee.

Instacart says it plans to expand the program to more of the 16 cities in which it operates — a list that includes Los Angeles, New York, Austin and Boulder, according to Entrepreneur.com. About 75 percent of the eligible workers are expected to apply for part-time status, Instacart spokeswoman Andrea Saul told Entrepreneur.com. The company has more than 7,000 contract workers. Saul said workers who convert to part-time status will be paid above whatever the minimum wage is in their respective locality. Workers will continue to be eligible for tips and commissions, she said. As employees, Instacart will also be responsible for their workers compensation and payroll taxes, of course.

The confusion over whether workers who participate in the sharing economy are independent contractors or employees has prompted calls for changes. One approach would be to make things like unemployment compensation, workers compensation and benefits portable, so they would follow workers from job to job instead of being the responsibility of whichever entity employs them. Another would be to create a new classification – the so-called “dependent contractor,” according to Bloomberg View. Countries including Germany, Canada and Sweden already use this classification.

Whatever ends up happening, the controversy over worker classification in the sharing economy – not to mention at long-established companies such as FedEx Ground – won’t be resolved anytime soon, and we’ll continue keeping a close eye on it.

The Feds’ War on Employee Misclassification

Seeking to clarify the issue of just what it is that distinguishes an independent contractor from an employee, the Department of Labor yesterday  issued its first Administrator’s Interpretation (AI) of the issue as it pertains to the Fair Labor Standards Act. The issue has only grown more heated in recent months with the rise of “gig economy” companies such as Uber and Lyft, along with long-running disputes between companies and workers such as FedEx Ground’s dispute with its drivers, who claim they were misclassified as independent contractors.

Written by the DOL’s Wage and Hour Division Administrator, David Weil, the 15-page memo states that the misclassification of employees as independent contractors “is among the most damaging to workers and our economy.” It emphasizes the WHD’s six-factor economic realities test that’s used to determine a worker’s status along with what a just-released briefing from law firm Seyfarth Shaw describes as “an extremely expansive reading of the FLSA’s ‘suffer or permit to work’ definition of ’employ.'”

“Combined,” the Seyfarth Shaw briefing says, “WHD’s efforts indicate a significant hostility towards the use of independent contractors.”

An agreement between an employer and a worker stating that the worker is an independent contractor “is not indicative of the economic realities of the working relationship and is not relevant to the analysis of the worker’s status,” Weil’s memo states. The true measure of whether a worker is an employee or an independent contractor, Weil writes, is the extent to which the worker is economically dependent on the employer. A worker who is really in business for him-or-herself is an independent contractor, he notes; a worker who is economically dependent on the company is an employee.

Weil’s AI serves as a reminder to employers to regularly question their independent-contractor classifications as a part of their global risk audits, writes Michael Droke, a partner in the labor and employment division of Dorsey and Whitney. They should also be keeping records on the process used to determine whether one is an independent contractor or employee, and ensure that those classified as independent contractors aren’t given rights or access that may call their status into question, he writes: “For example, contractors should not have internal email accounts, should not be given server access, and should not be invited to employee functions.”

Weil’s AI is yet one more piece of evidence that the federal government is aggressively seeking out employers that misclassify (either deliberately or by mistake) employees as independent contractors and that businesses must proceed very carefully in this area, according to the Seyfarth Shaw memo.

“The guidance now makes it likely that DOL investigations and enforcement actions and private litigation contesting the classification of such workers will intensify,” the Seyfarth Shaw attorneys write. “Businesses should, therefore, carefully evaluate the DOL’s guidance and its potential impact on their operations.”

Disney World’s H-1B Controversy

Additional  and corrected information below:

A front-page story in the New York Times focuses on what critics say is flagrant abuse of the H-1B visa program by Walt Disney World Inc. It’s only the latest example of the controversies swirling around the temporary visa program.

The Times is actually a bit late to the story: In April, Computerworld profiled several of the approximately 250 Disney IT employees who were required to train their replacements, prior to being laid off at the beginning of this year, in order to receive severance pay. The replacement workers were immigrants who had been brought in to the country by an India-based outsourcing firm via the H-1B program, according to Computerworld and the Times.

The H-1B program is, of course, intended for the use of highly skilled immigrant workers to fill jobs for which companies cannot find qualified candidates in this country. Disney CEO Bob Iger is a big proponent of the program: He is one of eight co-chairs of Partnership for a New American Economy, which lobbies for an increase in the number of H-1B visas allowed each year, reports Computerworld.

Disney has said the restructuring was necessary for increased innovation and has led to more IT jobs at the company: Kim Prunty, a Disney spokeswoman, provided the following statement: “Disney has created almost 30,000 new jobs in the U.S. over the past decade, and the recent changes to our parks’ IT team resulted in a larger organization with 70 additional in-house positions in the U.S. External support firms are responsible for complying with all applicable employment laws for their employees.”

A source at Disney tells me that the Disney Parks IT department underwent a shift from focusing on systems maintenance to developing new capabilities, with much of the support function shifted to outside vendors. The source says she can’t comment on the allegations that the employees were forced to train their replacements, but stressed that Disney expects its vendors to comply with “all applicable employment laws.” Of the 250 Disney employees laid off, 120 found new jobs within Disney, 40 took early retirement or found new jobs outside the company and 90 did not find new jobs at Disney, she says.

Earlier this spring, a group of former employees filed suit against Southern California Edison charging the utility with abusing the H-1B program. The plaintiffs say they, too,  were laid off and forced to train their replacements.

And just a few days ago, the Wall Street Journal reported what appears to be abuse of the H-1B program: Immigration lawyers involved in the process say they have helped firms file multiple H-1B skilled-worker visa applications for the same person in the hopes of prevailing in the lottery under which the visas are allotted. Some workers, meanwhile, are accepting offers from multiple employers, each of whom files a petition on their behalf, lawyers told the WSJ.

Given that this is an election year, and that the H-1B program has been a sensitive topic for years now, I’d say the chances are very good that Congress will soon be  holding more hearings about the program. As for increasing the visa cap, currently limited to 85,000 per year? I’d say not very likely this year, for sure.

Employers’ ‘Scariest Issues’ in 2014

I don’t know how frightened you are by all these. I do know you’re aware of each and every one of them. But I thought I’d share them anyway.

465250769 -- frightenedWhat intrigued me about this free downloadable list of the 11 (not 10, mind you) Scariest Issues Employers Face in 2014 from XpertHR is how cleanly they’re all packaged. And the list itself seems pretty accurate as well: medical (and, yes, recreational) marijuana in the workplace, same-sex marriage, technology in the workplace, healthcare reform, immigration and Form I-9 compliance, misclassification of independent contractors, minimum wage and overtime violations, curtailing background checks, emerging protected classes and curbing workplace discrimination, employee leaves and reasonable accommodations, and expansion of “protected concerted activity.”

Whoever put this together knows a little something about HR leaders’ sleepless nights, I’m thinking.

I also like the way each topic is broken down into two parts: “The Issue” and “What an Employer Should Do.” Hey, those are certainly two of the most important points we need to cover in our features and news analyses here at HRE.

The same-sex-marriage section was especially helpful, laying out specifically how United States v. Windsor (in which the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act unconstitutional) impacts employers:

Following this landmark decision, both the Internal Revenue Service and Department of Labor adopted a state of celebration rule, meaning that a valid same-sex marriage from another state must be recognized for federal tax purposes in all states. Thus, even if an employee resides in a state that does not recognize same-sex marriage, that employer must comply with IRS regulations regarding the tax treatment of employee benefits. The DOL has pronounced that in the wake of Windsor, same-sex spouses are now eligible for the same benefits and protections as opposite-sex spouses under employer health plans, retirement plans and other benefits covered under the Employee Retirement Income Security Act. Same-sex spouses are also entitled to leave under the Family and Medical Leave Act if living in a state recognizing same-sex marriages.”

Kind of wraps it up nicely. The advice to employers is what you’d expect, and what we’ve written about, but it’s still nice to see it packaged concisely as well:

Accordingly, employers should review their employee handbooks, policies and procedures — particularly pertaining to discrimination, benefits and leaves — and make any necessary revisions regarding the treatment of same-sex spouses. Further, employers should know what types of same-sex relationship their states recognize, the tax benefits provided to an employee’s same-sex spouse or partner, and whether the state follows or departs from federal law under Windsor.”

Also helpful, and in one place, is a chart listing where every state stands on legalized marijuana, same-sex-marriage recognition, minimum wage (with each state’s wage listed) and adoption of Ban-the-Box (criminal background) legislation.

Again, you may not learn anything startlingly new, but armed with brief rundowns and good advice on each of these “scary issues” might help alleviate some trepidation.

I know I plan to hang onto it for some handy frames of reference.

 

 

Revisiting the Value of Farming Out Work

Pretty much everyone agrees the nation needs to do something about getting the federal-deficit under control. There seems to be little agreement, however, when the discussion turns to what that something is.

Well, if you think part of the answer lies in using more contractors to do federal work, a just released study by the not-for-profit Project on Government Oversight (POGO) suggests maybe you should think again.

Among other things, this first-of-its-kind study found the federal government, on average, paid contractors 1.83 times more than the government pays federal employees in total compensation, and more than two times the total compensation paid in the private sector for comparable services.

Of the 35 job classifications POGO looked at, 33 had contractor billing rates that were significantly steeper than the average compensation for federal employees (with benefits factored in). (The two exceptions: groundskeeper and medical records technician.)

So how does HR management work, in particular, fare? POGO reports that HR contractors received nearly twice the amount it would have cost were it done in-house—$228,488 versus $111,711.

In a story appearing in yesterday’s New York Times about the study, James Sherk, a policy analyst with the Heritage Foundation, said he was skeptical of the findings “because it’s not a real apples to apples comparison.”

But despite some obvious flaws—including some noted by POGO in the report’s methodology—the study should, at the very least, give federal entities reason to pause and reconsider the pros and cons of farming out certain work, as well as what they’re paying.

The Changing Nature of Work

Gary Kushner offered lots of data about the future nature of work so that HR leaders could begin questioning the way their organizations are designed, the composition of their total rewards and the purpose underlying their HR strategies — but he didn’t provide any answers during his session at SHRM on Monday afternoon.

Kushner, president and CEO of Kushner & Co., a consultancy focusing on employee benefits and strategic HR, outlined five global trends affecting strategic HR: technological advancement, outsourcing, changes in demographics and diversity, changing worker attitudes and values, and globalization.

He also noted that, while business success was based on manufacturing processes 40 years ago and on technology 20 years ago — that it is people who “are our competitive advantage” today.

Kushner talked about the adjustments that would have to be made with four generations — and soon, five — in the workplace, especially the way it would impact upward advancement. And that the ever-growing segment of older workers would impact total rewards and benefits.

He talked about the challenges that the combination of employees, temps, independent contractors and outsourcing have on creating a shared vision and facilitating teamwork. And he talked about how individuals have changed their attitude from living to work to working to live.

“How do we leverage the way we think about all of these trends?” he asked. “The way work has been done is not the way it is going to continue to be done.”

But it will be up to individual CHROs to take it to the next step — and figure out what the answers are.