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The Great Recession of 2007-2009 changed the employment landscape in the United States. Employers cut costs by laying off staff, and many workers changed jobs or left their chosen industry entirely for one with brighter prospects.
One lingering effect of the recession is the rise of contract employees. Even though the recession officially ended in 2009, staffing agencies are still reporting record numbers of contract and temporary workers. What’s driving this trend?
Defining The Terms
The line between a contract worker and a regular employee can be a blurry one. These definitions depend heavily on the worker’s terms of employment and specific job duties. But in general, contract workers are short-term, seasonal, or freelance employees.
Between 1995 and 2015, the number of contract workers rose more than 10%. And as of January 2018, an NPR/Marist poll found that 1 in 5 jobs in the U.S. was held by a contract worker.
Some employers are hiring more contract workers because they’re having trouble filling vacancies caused by the low unemployment rate. Meanwhile, more employees find themselves in need of flexible working arrangements, and are turning to contract work as a solution.
From 1995 to 2005, construction and professional services were the two industries most likely to employ contract workers. And the educational and health industries have seen huge growth in contract workers in the last decade.
And this trend isn’t set to change anytime soon. According to Forbes, 50% of the U.S. workforce will be doing freelance or contract work in some capacity by 2020.
Contract Workers & The Law
The contract work trend is creating confusion both for employers and workers.
Employers aren’t responsible for providing benefits – like health, paid time off, or retirement sharing – to contract workers. That means there’s a lot at stake for both parties when it comes to determining which workers are permanent employees and which ones aren’t.
This classification issue is especially problematic within “gig economy” companies like Uber and Lyft.
Uber uses language in its driver contract that defines these workers as “partners” rather than employees. It also describes itself as a “technology company” and not as a transportation company
Uber drivers, though, argue that despite the language in its contracts, Uber behaves as an employer. So they argue that drivers are entitled to benefits, overtime pay, and collective bargaining.
Several lawsuits so far have agreed with the drivers. Courts in California, New York, and Britain found that Uber is in fact an employer, because the company “controls and directs” its drivers.
California courts have taken further steps to clarify these murky definitions. On April 30, 2018, the state’s Supreme Court adopted a test for independent workers, one that generally assumes workers are employees unless the employer establishes otherwise.
The court’s “ABC test” allows a worker to be classified as an independent contractor only if the employer shows:
(A) That the worker is free from the control and direction of the hirer in connection with the performance of the work.
(B) That the worker performs work that is outside the usual course of the hiring entity’s business.
(C) That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.
California is surely not the only state whose courts will take up this issue. Therefore, it’s advisable for every company considering using contract workers to use caution with how they integrate these employees into their business.
Sources: Krueger.princeton.edu, NPR, HR Dive, Forbes (1), Forbes (2), HR Dive
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