Thursday, July 27, 2017
This past May, Uber initiated what it calls a “driver injury protection program” for its drivers. As anyone who has read my posts knows, I am an “independent contractor” skeptic. I simply do not find credible most of the companies claiming to have independent contractors but no employees. While Alaska seems to find the employee/independent contractor analysis too difficult to perform, I’ll bet most of my readers do not. Section 220(2) of the Restatement 2d of Agency states:
In determining whether one acting for another is a servant (employee) or an independent contractor, the following matters of fact are considered:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant; and
(j) whether the principal is or is not in business.
For those keeping count, those are ten factors. Any second-year law student can do an analysis of these factors. I have written probably a hundred briefs using the factors. In most cases, one gets a pretty good idea, pretty darned quickly as to whether the employee analysis tips one way or the other.
What is really going on is that companies do not like to be told they cannot dictate to states who is, and is not, an employee. The great irony is that it was employers who insisted upon common law factor tests after courts in the 1940s, most notably the U.S. Supreme Court in NLRB v. Hearst Publications, Inc., began to apply the “economic realities” test – what I describe to my students as the “oh, give me a break” test. Courts saw very well the reality of the situation – that a “contractor” obviously was a servant of a company just looking at the reality of the situation. Business went into convulsions over the opinion, complaining loudly that common law tests (such as the one now reflected in the restatement provision set forth above) must be used instead of any “realities” test. Thus, many statutes—including the National Labor Relations Act, which was at issue in Hearst-- were amended to ensure that common law tests be used. But, you know how it goes, you like the test until it produces outcomes you do not like.
So, the Driver Injury Protection Program (which for many reasons is not workers' compensation), asks us to buy into the assumption that drivers are independent contractors, without the mess and bother of analysis. And, I suppose, if states are going to exempt Uber by fiat from workers’ compensation laws (leaving state constitutional “special laws” considerations to one side—see page 71 here), something is better than nothing. It is probably worth mentioning, however, that, sooner or later, the federal courts will get cases in which aggrieved “contractors” will argue that the Program is governed by ERISA. ERISA, of course, applies to the “welfare benefit plans” of “employees.” Guess what the federal courts apply in addressing who is, or is not, an “employee” under ERISA? The Darden factors, named after the 1992 U.S. Supreme Court case, Nationwide Mutual Insurance Co. v. Darden, in which a rather muscular version of the factor test was established for determining who is an employee under ERISA. (Given that the asset value of just ERISA-governed health plans is roughly $9 trillion dollars, it is pretty important to know who qualifies as an employee in that environment).
In the end, I admit to being morally intransigent on this issue. It is not that economic activity is emerging that simply defies application of Section 220(2), or similar tests. It is rather that arguments that should not even be taken especially seriously have been sold to willing politicians. To me, opt-out is opt-out and, in the end, the wrong party is very likely to bear the cost of injury.
Michael C. Duff