A New Category of Worker for the On-Demand Economy?

Published June 22nd, 2015 -  - 06.22.156

As legal challenges to the “1099 economy” mount, and as it becomes more and more likely that companies like Uber and Lyft will be deemed employers of their drivers and delivery workers, some participants in the debate are beginning to push for a new legal category of worker.  In a helpful piece on BuzzFeed last week, Caroline O’Donovan surveys the development of this trend, and Senator Mark Warner (most recently, in response to the recent Uber ruling) has been floating some legislative ideas.

There may well be a need to experiment with a new, intermediate category of worker: a legal status somewhere in between “employee” and “independent contractor,” a status that would ensure sufficient protection to people working in the on-demand economy.

In the initial discussions of this idea, though, a number of participants have identified “dependent contractor” as a candidate for the new classification.  Back in January, the Wall Street Journal raised the possibility, the Washington Post did so in March, and O’Donovan’s piece also names dependent contractor as the leading candidate for the new status.  Now, in some ways, dependent contractor is serving as a placeholder for a yet-to-be-named and yet-to-be-defined category.  That’s appropriate, and that’s where we are in this debate and discussion.  We may need something, even though we don’t yet have a handle on what.

But, it’s also important to recognize that “dependent contractor” is an actual legal category in other countries, and its a legal category that may not make sense for what we need in the United States.

As Guy Davidov has explained in his writing on the subject, the dependent contractor category was “created with explicit reference to economic dependency, in order to provide some degree of protection to very small businesses – mostly operated by a single person – that depend economically (to a large extent) on a single client [my emphasis].”  In other words, the “dependent” in “dependent contractor” as it is used in other jurisdictions refers to an economic relationship in which the contractor depends mainly or entirely on a single employer or client.  In order to qualify for dependent contractor status in some Canadian jurisdictions, a worker must earn 80% or more of their income from a single source.  In Spain, it’s 75%.  And in Germany, to qualify for their version of dependent contractor (called an “employee-like” person), more than 50% of your income has to come from one client.

For obvious reasons, this kind of a dependence test is not appropriate for the on-demand economy in contemporary America. Part of the essence of the on-demand economic model – in theory, if not always in practice – is that workers move from platform to platform and derive their income from a wide variety of sources.  If we make “dependence” on a single firm the requisite for the new employment status, we will write off many of the workers we would be intending to cover.  And we would succeed only in adding another legal category that doesn’t address contemporary needs.

We could, it’s true, take the model of dependent contractor and just lower the threshold until, as a practical matter, the definition reaches all the on-demand workers who need protection.  We could, for example, say that a worker is a “dependent contractor” if she earns at least 5% of her income from a single firm.  We could do this, but it would render the concept of dependence fairly meaningless: if 5% constitutes dependence, then anything does. And, ultimately, this is the conceptual problem.  If we want a new employment category for on-demand workers, the definition should not be built around “dependence” on one, or two, or any number of firms or platforms.

So, while it is undoubtedly the right time to consider whether we need a new category of employment, “dependent contractor” may not fit the needs of the on-demand economy.

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