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Labor & Worker Rights Wed Jun 15 2011

The New Employment Relationship: Workers Bear All the Risks while Employers Keep the Profits

by Jamie Hayes

In our work at Arise Chicago, we’ve lately noticed a dangerous new trend: employers are forcing employees to work as contractors, in order to subvert labor laws and their responsibility as employers.

Campaign #1

Margarita (pseudonym) worked for 2 years at a laundromat in the Albany Park neighborhood. She was paid $5/hour, worked over 40 hours a week but never received overtime payment, and worked seven days per week. When Arise contacted her employer to inform him of his legal responsibility to pay employees minimum wage and overtime, and to give employees one day of rest per week, he tried to shirk responsibility by claiming that Margarita was actually an independent contractor. Since Margarita could not make her own schedule, perform her work autonomously, nor bid out the work (the basic marks of a truly independent contractor), this defense was fairly preposterous. However, we are seeing a rise in savvy employers who force employees to sign contracts and incorporate, all for the privilege of toiling day in and day out for the same abusive employer, often at rates below minimum wage, and outside of the jurisdiction of OSHA, the Department of Labor’s Wage and Hour Division, and the other government agencies that enforce workers’ rights.

Campaign #2

Luis (pseudonym) worked for a suburban window and gutter washing company for 8 years. Though the company had forced him to sign a contract stating that he was a contractor, and had forced him to incorporate, he was indeed an employee of the company: he reported to the same manager and same office day-in and day-out, he could not set his own hours or take on his own clients, and he could not bid out his own jobs. One day, he fell off of a roof two stories high. Luis was injured badly, but thankfully survived the fall. Though the company had forced him to sign contracts saying he was not an employee, the company knew that these contracts may not hold up throughout the workers compensation process. Thus, the company settled out of court. The settlement was not large, but at least covered the cost of his medical bills. Another worker had a very similar experience at this company, falling off a roof and then winning a settlement out of court.

Upon Luis’ return to work after an extended recuperation period, rather than providing workers fall prevention training and safety equipment, instead the company forced workers to sign even tighter contracts, and to purchase their own workers’ compensation insurance (conveniently deducted from their paychecks). Workers get to keep 50% of the cut, but must also provide their own transportation, pay for their own gas, cover any damages to homes, pay twice as much in tax as employees, and pay out their assistants (the company insists that all workers hire assistants, again violating the autonomy of a truly independent contractor). At the end of the day, sometimes workers barely make enough money to cover their expenses. Luis reports that oftentimes he shows up to a job, only to find out that the company has improperly bid out the job. For example, clients have more windows than reported, or different types of windows that take many hours to clean. However, Luis is forbidden from charging clients more for this extra work. Additionally, the company provides clients with coupon promotions–promotions that come out of workers’ paychecks, even though they have no say in how and when these promotions are given. Finally, since Luis is classified as an independent contractor, he is not entitled to breaks or overtime wages even though he regularly works 12 hour days.

But perhaps most disturbingly, workers are not provided with fall protection gear and safety training by the company. In fact, Luis reports that when a worker on Luis’ team fell off a ladder and grabbed onto a gutter to hang on for dear life, the company’s response was to charge Luis for the damage done to the gutter. And, while workers have received settlements in the past for their injuries, now that they are forced to buy their own workers’ compensation insurance, it’s unclear that the company would pay for the cost of these injuries. More importantly, these injuries are preventable, but workers are not trained properly, nor can they necessarily afford the cost of the protective gear, given their meager wages.

Classical economic theory presumes that if these contracts were really such raw deals, workers would seek work elsewhere. However, classical economic theory does not take into account the power differential between workers and employers. Workers are told that they will not be given any more jobs if they do not sign these contracts, incorporate, and purchase their own workers compensation insurance. They are also forbidden from taking independent clients. In today’s economy, workers who are often recently-arrived immigrants, often lacking knowledge of English and US labor law, feel that they have no other choice but to continue in an abusive employment relationship, especially as more and more employers catch on to this new trend of passing market and health safety risks on to the worker, while they collect all the profits.

Recently the company has fired Luis, ostensibly due to client complaints, though the company refused to give him the names of said clients. Luis believes that the company is actually retaliating against him for pursuing his workers compensation claim. To whom can Luis turn? As an “independent contractor”, he does not even have a right to unemployment insurance–yet another way that his employer has passed precarity on to those most vulnerable, the workers.

The Illinois Department of Labor has recognized the severity of the problem of misclassifcation, however, the Employee Classification Act only covers workers employed on construction sites. Here at Arise Chicago, we are attempting to pursue other strategies; but without stronger laws regarding the misclassification of all types of workers, workers are left unprotected and even more vulnerable.

-Jamie Hayes is an Organizer at Arise Chicago Worker Center. This piece is cross-posted from the Dignity at Work blog.

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cristin / June 15, 2011 12:21 PM

Realistic scenarios and well written article. We so often hear the corporate perspective on this type of situation. It is easy (though cliché!) to point the finger at the government for "chasing tax dollars" when in reality they are looking out for the worker.

WAJ / June 15, 2011 3:13 PM

The sad thing is that with the passage of Obamacare, companies have more incentive to hire temporary workers than full-time workers, and are especially incentivised to do so with lower wage positions.

Do these workers have legal standing in IL and in the US? The statement "workers who are often recently-arrived immigrants" gives me the impression that they are illegal immigrants and therefore not willing to go to the appropriate authorities.

Gray Fox / June 15, 2011 11:14 PM

How about this for a strategy, name the companies. Public shame, they will continue abusing their workers so long as they get away with it legal or illegal.

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