What’s in a Name? Class Struggle and “Employee” or “Independent Contractor” Status

Photo by Tim Mossholder on Unsplash

Jack Verner, Associate Member, University of Cincinnati Law Review

I. Introduction

“The history of all hitherto existing society is the history of class struggles…The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers.”[1] Certainly, the adversarial history of labor in America illustrates this thesis. Generations of workers in America have organized, picketed, boycotted, and physically fought for workplace protections and the right to unionize.[2] In turn, those protections and rights have been steadily eroded by the ruling class.[3] One such eroding force comes from the blunting of the National Labor Relations Act as legislatures and corporations press to reduce the class of “employees” afforded the Act’s protection.[4]

Section II of this note explores the erosion of the class of “employees” protected by American labor law. Section III argues for expanding the definition of “employees” as a necessary tool to protect workers. Section IV concludes with a possible pathway for extending the protection of the NLRA to more workers.

II. Background

The National Labor Relations Act of 1935 (“NLRA”) is the cornerstone of the rights of employers and employees.[5] Among other things, the NLRA confers to employees the right to organize, join unions, and bargain collectively.[6] However, the NLRA’s definition of “employee” does not include all workers.[7] At the time of passage, the NLRA’s definition of employee was broad, open-ended, and containing only a few enumerated exceptions (most notably, agricultural and domestic workers).[8] Therefore, in NLRB v. Hearst Publications, the Supreme Court initially interpreted the definition of “employee” under the NLRA to be as expansive as possible.[9] In Hearst, the Supreme Court rejected the traditional common law test of classifying workers based on factors such as to what extent the worker was a “servant of the master” and to what extent the “master controls the details of the servant’s work” and other similar factors.[10] Rather, the Supreme Court found that the purpose of the Act is best achieved by allowing the National Labor Relations Board (“the Board”) broad discretion in deciding whether a certain class of workers constitute “employees” and that the purpose of the act is to substitute “so far as its power could reach, the rights of workers to self-organization and collective bargaining for the industrial strife which prevails where these rights are not effectively established.”[11] The Supreme Court in Hearst adopted what came to be known as the “economic realities” test of determining employee status; a worker is an employee not if the worker’s employment conforms to the old common law system of “master-servant” analysis, but whether the “economic facts of the relation make it more nearly one of employment than of independent business enterprise with respect to the ends sought to be accomplished by the [Act].”[12]

Shortly after Hearst, Congress passed the Taft-Hartley Act of 1947 (“THA”).[13] Among other things, the THA amended the definition of “employee” in the NLRA to exclude “independent contractors” from coverage by the Act.[14] This amendment “legislatively overturned Hearst Publications’ adoption of the economic realities test and ordered the Board and courts to use the common-law test to define the employer-employee relationship.”[15] Therefore, the next definitive Supreme Court ruling on the matter, NLRB v. United Insurance Co., eschewed the economic realities test in favor of a multi-factor test reminiscent of the common-law factors; considering the agency workers have over their hours, their relationships with management, whether they own their own businesses, whether they have a permanent/impermanent working agreement, how their work is assigned, whether they can refuse work, to what extent the employer supervises and controls work, whether the workers have offices, whether they can be disciplined, and whether the workers have traditional benefits.[16] The Board has clarified in Roadway Package System Inc. that this multi-factor test “specifically permit[s] the consideration of other relevant factors as well, depending on the factual circumstances presented.”[17]

III. Discussion

The evolution of the legal distinction between employees and independent contractors may seem subtle but has important implications. The cynic may justifiably be concerned about this development; after all, the very purpose of the THA and rulings which follow seem designed to exclude a larger share of workers from the category of employee. When the Supreme Court in Hearst rejected the old distinction methodology and adopted a test designed to extend more protections, Congress struck back and specifically created a new class of workers to exclude from employee protection and functionally compelled the courts to return to the old test, affording protection to fewer workers.[18] Notably, the NLRA as originally passed and as amended contained very specific exclusions from the definition of “employee”; first agricultural and domestic workers and then independent contractors.

This shrinking of worker protections must be stymied wherever possible. The NLRA rights of employees to organize and collectively bargain are essential tools for protecting workers’ rights, promoting healthier and more democratic workspaces, and even for growing a stable economy.[19] Furthermore, the elephant in the room cannot be ignored: every statutory exception from NLRA coverage disproportionately impacts people of color.[20] Historically and presently, people of color have been disproportionately overrepresented in the excluded categories of agricultural and domestic workers and independent contractors.[21] Legal scholar Juan F. Perea asserts that these exceptions impermissibly discriminate against these workers based on race in violation of the Equal Protection Clause.[22]  

So what is the legal path forward toward ensuring more workers are protected by employee status? The easiest answer is simple legislative change: Congress could pass the PRO Act or similar legislation to amend the NLRA and THA with clear and expansive guidelines either categorizing a larger share of independent contractors as employees or extending NLRA employee rights to independent contractors.[23]

Legal professionals should also take a litigation approach to expanding employee rights coverage. Perea sets forth a constitutional framework to petition for judicial invalidations of the exceptions, demonstrating both racially discriminatory intent in the Act’s legislative history and a racially disproportionate impact. [24] Critics of the exceptions could also reconsider the framework set forth in United Insurance as a blessing in disguise. This note argues that courts following the multi-factor test could consider the matters of public policy discussed above in deciding whether to classify a group of workers as employees or independent contractors. Courts can clearly consider the relationship between the workers and their employers as a factor;[25] it is time that courts consider the relationship between the working class and employer class as whole entities. Similarly, courts evaluating this distinction should consider the racial impact their classifications could effectuate. If the racially disproportionate consequences of these exceptions do not render the exceptions facially unconstitutional, at the very least courts should consider the racial consequences as the most important factor in evaluating relevant factors in determining employee status. Certainly, the history of excluding workers (especially along racialized lines) from NLRA protection should be a “relevant factor” for courts to consider while still following the guidelines of Roadway Package System Inc. This consideration could bring about the broad interpretation of employee coverage that the Supreme Court set forth with the economic realities test in Hearst,[26] which would provide government protection for workers who need it without undoing the framework mandated by the THA and United Insurance.

IV. Conclusion

The history of the distinction between employees and independent contractors is not simply a legal curiosity; rather, the distinction illustrates the history of worker oppression and racial discrimination. Any legal analysis which fails to grapple with this history yields unjust conclusions which deny the essential rights of workers to organize free from retaliation and discrimination. While the legal evolution of distinguishing between employees and independent contractors seems to necessarily exclude an increasingly large share of workers, there is room for the legal community to consider our history and breathe life back into the laws protecting the rights of workers.

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[1] Karl Marx and Frederick Engels, Manifesto of the Communist Party, 14-16 (Samuel Moore and Frederick Engels trans., 1888) (1848) https://www.marxists.org/archive/marx/works/download/pdf/Manifesto.pdf.

[2] Labor Wars in the U.S., PBS (last visited Apr. 1, 2022, 10:31 AM), https://www.pbs.org/wgbh/americanexperience/features/theminewars-labor-wars-us/.

[3] Steven Greenhouse, Beaten Down, Worked Up: The Past, Present, and Future of American Labor 153-166 (2019).

[4] For example, three companies spent over $200 million dollars in support of “Prop 22”, a California ballot measure classifying app-based drivers as independent contractors as opposed to employees. See Graham Rapier, Uber, Lyft, and DoorDash have now spent more than $200 million on Prop. 22 — but there’s still no guarantee it’ll pass, Business Insider (Oct. 30, 2020), https://www.businessinsider.com/uber-doordash-lyft-prop-22-spending-200-million-close-polling-2020-10.

[5] 29 U.S.C. §§ 151-166 [hereinafter “N.L.R.A.”].

[6] N.L.R.A. §7.

[7] National Labor Relations Act of 1935 (Wagner Act), Pub. L. No. 74-198.

[8] Seth Harris, Joeseph E. Slater, Anne Maire Lofaso, Charlotte Garden, and Richard F. Griffin, Jr., Modern Labor Law in the Private and Public Sectors 91 (Carolina Academic Press, eds., 3rd ed. 2021).

[9] N.L.R.B. v. Hearst Publs., 322 U.S. 111 (1944).

[10] Id. at 124-25.

[11] Id. at 125 (emphasis added).

[12] Id. at 128.

[13] 29 U.S.C. 7 §§ 141-197

[14] Ryan Vacca, Uncertainty in Employee Status Across Federal Law, 92 Temp. L. Rev. 121, 130 (2019).

[15] Harris et. al., supra note 8, at p. 95.

[16] N.L.R.B. v. United Ins. Co., 390 U.S. 254, 258-59 (1968).

[17] 326 N.L.R.B. 842, 850 [“Roadway Package System Inc.”].

[18] V.B. Duval, Wage Slave or Entrepreneur?: Contesting the Dualism of Legal Worker Identities, 105 Calif. L. Rev. 65, 72 (2017).

[19] Richard Freeman and James Medoff, What Do Unions Do? A Twenty-Year Perspective, 4 (James T. Bennett and Bruce E. Kaufman eds., 1st ed. 2007); Asha Banerjee, Margaret Poydock, Celine McNicholas, Ihna Mangundayao, and Ali Sait, Unions are not only good for workers, they’re good for communities and for democracy, (Econ. Policy Inst., 2021) (“Unionization has a range of positive economic impacts in addition to decreasing wage inequality and closing gender and race wage gaps…union membership yields a positive “net fiscal impact”) https://www.epi.org/publication/unions-and-well-being/#:~:text=Unionization%20has%20a%20range%20of,and%20therefore%20pay%20more%20taxes.

[20] Juan F. Perea, The Echoes of Slavery: Recognizing the Racist Origins of the Agricultural and Domestic Worker Exclusion from the National Labor Relations Act, 72 OHIO ST. L.J. l 95 (2011).

[21] Vanessa May, Domestic Workers in U.S. History, (Oxford Rsch. Encyclopedia of American Hist., 2017) https://doi.org/10.1093/acrefore/9780199329175.013.431.

[22] Perea, supra note 20, at 118-35; see also https://www.pbs.org/newshour/nation/labor-laws-left-farm-workers-behind-vulnerable-abuse.

[23] For a favorable view of this proposal, see Moshe Marvit, How the PRO Act Would Fix Labor Law’s Worker Classification Problem, The Century Foundation (May 27, 2021), https://tcf.org/content/commentary/pro-act-fix-labor-laws-worker-classification-problem/?agreed=1; for a critical view, see Sean P. Redmond, The PRO Act’s Attack on Independent Contracting, U.S. Chamber of Commerce (Mar. 19, 2021), https://www.uschamber.com/workforce/independent-contractors/the-pro-act-s-attack-independent-contracting.

[24] Perea, supra note 20, at 127-35.

[25] United Insurance, 390 U.S. 254, 258.

[26] Dubal, supra note 18, at 76.