When Corporations Say Employees Aren’t Employees

Our country has figured out that low wage workers often have much less bargaining power than their employers, and, as a nation, we do not want a group of workers to be subjected to exploitation and having to live in poverty. We therefore have a variety of laws (some federal, and some that vary by state) establishing minimum wages and working conditions that apply to most employees.

Unfortunately, there are loopholes in the laws that allow employers to take advantage of their workers and avoid paying them or giving them benefits that they by rights are owed. As our economy changes in the face of automation, the gig economy, and new corporate employment schemes, we need to focus not just on how employees are treated, but on who counts as an employee at all. Here are a few of the ways corporations are taking advantage of loopholes in our employment law.

Indirect Employees  

Some employers, particularly those who have policies of treating employees well, are often approached by outsourcing firms promising to perform some task while saving them money. For example, in the US Senate office building, the workers who prepare the food in the dining rooms are not federal government employees; they are employees of a company called Restaurant Associates. Restaurant Associates convinced the US Senate that they could run the food service in their offices for a lower cost. And they might have been right. 

But how can they charge the government less than they were previously paying, pay all the expenses of running the dining facilities, and earn a profit? It could be that the Restaurant Associates executives are really smart and have found some brilliant new cost-saving way to run a dining hall, but their main advantage is that they don’t provide the kinds of pay and benefits to their workers that the workers used to have as employees of the government. 

Don’t forget that every dollar saved by the government in that contract is one dollar less in the household budget of a low wage worker in Washington DC. That also means one dollar less in the pocket of a small business owner in the community where that worker lives.

For many workers, it is even worse, as their legal employer is a here-today, gone-tomorrow company that isn’t even there to sue if something is wrong. Farm workers, janitors in offices of big banks, and many others occasionally find their pay short, complain, and find out that the company that actually pays them no longer exists, and they are now employees of a new temporary staffing agency that was just created.  

Gig Economy Workers

As the gig economy grows, so too do ways for companies to take advantage of the “gig” workers who make their work possible. It’s become common practice for companies to hire workers as independent contractors, not employees, because independent contractors are not owed many of the basic labor rights that employees are entitled to. These include a minimum wage, rights to unionize, unemployment insurance, workers’ comp, and overtime pay, among others. 

In many cases, companies are forced to make increasingly ludicrous claims about the nature of their business in order to dodge the fact that their “independent contractors” are very clearly employees in everything but name.

Uber, for instance, says that its drivers are not in fact its employees, but are actually its customers. The company claims that the app’s purpose is to connect drivers with riders, and that matching is the actual service it provides, rather than any sort of transportation service. 

Seriously. Does Uber provide transportation services, or do you think of Uber as just a matchmaking service, providing a match between you and the independent business person who provides transportation services? It’s an absurd legal fiction that is obviously false.

Franchisee employees 

Some big companies, such as McDonald’s use what is called a franchise system. That means that the actual restaurants (or many of them) are not actually owned by the company, but are instead owned by business people who operate the restaurants according to McDonald’s procedures (because the food and the experience are supposed to be very standardized).  The franchise owners tell the workers that they are paid in accordance with McDonald’s procedures, using McDonald’s computer systems, in a way that McDonald’s believes to be in accordance with the laws. The businessperson pays McDonald’s a fee for the use of their systems and branding (often in addition to renting the building from McDonald’s).

But while every McDonald’s operates in exactly the same way under the exact same broader system, the company uses the technical legal distinctions between the ownership of different franchises as a way to avoid accountability for employment law. If anyone complains about overtime, for instance, McDonald’s responds that it has nothing to do with anyone’s employment terms — that if they assign someone to work for 25 hours per week at one location and 25 hours per week at another location, that those are two separate jobs, and the worker should not get any overtime or even be considered a full time worker.

In these types of cases, the workers sometimes claim that their real employer (as opposed to the company that sends them their paychecks) should be responsible for them being paid enough. They would then have “joint employers.” McDonald’s has claimed that it is not a joint employer, while workers say that it clearly is.

Unfortunately, the legal pretense being used by franchises was recently reinforced when the Ninth Circuit ruled against some workers recently, saying that McDonald’s does not meet the legal definition of a joint employer, meaning it does not have responsibilities for its workers.

All of these issues are just excuses that some short sighted employers use to try to get richer at the expense of the rest of us.

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