Bobby Silverstein of Powers Pyles Sutter & Verville, PC provided PEAT with background information that he compiled for an interview with us about the policy implications for people with disabilities participating in the gig economy.
By Bobby Silverstein, Principal, Powers Pyles Sutter & Verville, PC
The following document is background information I compiled for an interview with PEAT about the policy implications for people with disabilities participating in the gig economy.
The information below reflects my own research and analysis and does not represent the views of PEAT, the Department of Labor, or any other agency or organization. This background information should not be construed as providing legal advice; readers need to consult with their own attorney.
I. Definition of Gig Economy
The gig economy is a domain where companies hire workers for specific short-term projects or “gigs.” Gig economy workers complete tasks on a project-by-project or client-by-client basis by sharing and selling services and goods on platforms. Examples of gig economy workers include:
- Drivers for Uber, Lyft, or Sidecar;
- Any freelancer, such as a writer, photographer, consultant, artist, or journalist;
- Worker for a temporary agency; or
- Someone who is available for hire on websites like Fiverr, Guru.
II. Design of Platforms of Key Importance for How People Interact in the Gig Economy
The design of platforms becomes of key importance for how workers/other users and companies interact in the gig economy. With the “vendors” in the gig economy becoming individuals, the platform as a marketplace needs to be designed carefully, by providing the right piece of information to companies and other users when they are making different kinds of decisions.
Firms creating and running platforms are the ones that decide how to structure, elicit, and act upon customer feedback.
- What questions do they ask,
- What answer format is available,
- How is it analyzed, and
- How quickly, and with what other information is the feedback integrated?
Some platforms may result in some biases and discrimination. Albeit sometimes unintentionally. Are customer review systems having a discriminatory impact? People use different signals to assess the trustworthiness of other participants on the platform and how these platforms should take into consideration how people communicate and form impressions online in order to design a neutral platform where the “good” workers can be rewarded while the “bad” actors can be punished.
III. Classifying Employees as Independent Contractors or Employees
One of the biggest issues facing the gig economy, in the context of labor and employment law, is worker classification—whether gig economy workers are employees or independent contractors.
Companies that use contractors, freelancers, or temporary workers need to make sure workers are properly classified. The Equal Employment Opportunity Commission (EEOC), Department of Labor (DOL), Internal Revenue Service (IRS) and courts consider a variety of factors in making the determination whether an individual is an employee or an independent contractor.
Federal Agencies are beginning to recognize the need to refresh their policies in light of the new gig economy and increase scrutiny of employers and their business relationships with gig economy workers.
- Equal Employment Opportunity Commission (EEOC), which is responsible for implementing our nation’s equal employment opportunities laws, including Title I of the Americans with Disabilities Act. EEOC’s Strategic Enforcement Plan (2017-2021) issued on October 17, 2016 will:
- “Address issues related to complex employment relationships and structures in the 21st century workplaces, focusing on temporary workers, staffing agencies, independent contractor relationships and the on-demand economy.”
- “Focus on class-based recruitment and hiring practices that discriminate against people with disabilities. These include restrictive application processes (including online systems that are inaccessible to individuals with disabilities), and screening tools that disproportionately impact workers based on their protected status (e.g., pre-employment tests and medical questionnaires impacting individuals with disabilities).”
- National Labor Relations Board (NLRB) Office of General Counsel recently prepared an Advice Memorandum Misclassification of Employees as Independent Contractors (December 18, 2015). NLRB is responsible for implementing collective bargaining agreements and other aspects of the National Labor Relations Act.
- Wage and Hour Division, Department of Labor is responsible for implementing the Fair Labor Standards Act (e.g., overtime and minimum wage). Recently, W&H issued Administrator’s Interpretation (January 20, 2016)
- Internal Revenue Service is responsible for income taxes and FICA.IRS has issued Revenue Ruling and published articles about “Employee vs independent contractor: Differences You Need to Know” and the article “Independent Contractor (self-employed) or Employee?”
- EEOC, DOL and NLRB have issued guidance expanding the definition of “joint employer.”
IV. Title I of the ADA Barring Discrimination in Employment
One of the biggest issues facing the gig economy, in the context of labor and employment law, is whether a worker is covered by our nation’s civil rights statutes. Title I of the ADA prohibits discrimination by employers and employment agencies against applicants, employees, and former employees with disabilities. EEOC’s jurisdiction does not extend to independent contractors.
EEOC has discussed the existence of “customer preference” discrimination within the gig economy, which can occur where a gig economy website or platform conditions user access to its marketplace on customer reviews. Studies have found that task-sharing sites had more negative reviews of black users than white users and those who hired female workers were less likely to leave any feedback at all. At least one gig economy company has acknowledged that it incorporates reviews into its algorithm that decides search rankings.
If the EEOC wants to quash workplace discrimination in a growing area of the American workforce, it makes sense that the EEOC might start here, which means that companies need to get out on the forefront and ensure their businesses are not out of compliance with civil rights laws. Many legal scholars believe that, eventually, there might be a new classification of worker outside of the binary employee or independent contractor rubric. It is only natural that the EEOC could consider identifying a new “class” of workers who are not currently protected against discrimination to see whether the agency could blanket them under their protection.
B. EEOC Compliance Manual – Section 2 Threshold Issues
1. Who is a covered individual?
A charge must allege that a covered entity took a discriminatory action against a covered individual. A covered individual includes:
- Employees and applicants for employment
- Former employees
- Applicants to, and participants in, training and apprenticeship programs.
2. Who is an employee?
In most instances, an individual is only protected if he or she was an “employee” at the time of the alleged discrimination, rather than an independent contractor. An employee is an individual employed by an employer. The question of whether an employer-employee relationship exists is fact-specific and depends on whether the employer controls the means and manner of the worker’s work performance. This determination requires consideration of all aspects of the worker’s relationship with the employer.
Factors indicating that a worker is in an employment relationship with an employer include the following:
- The employer has the right to control when, where, and how the worker performs the job.
- The work does not require a high level of skill or expertise.
- The worker furnishes the tools, materials, and equipment.
- The work is performed on the employer’s premises.
- There is a continuing relationship between the worker and the employer.
- The employer has the right to assign additional projects to the worker.
- The employer sets the hours of work and the duration of the job.
- The worker is paid by the hour, week, or month rather than the agreed cost of performing a particular job.
- The worker does not hire and pay assistants.
- The work performed by the worker is part of the regular business of the employer.
- The employer is in business.
- The worker is not engaged in his/her own distinct occupation or business.
- The employer provides the worker with benefits such as insurance, leave, or workers compensation.
- The worker is considered an employee of the employer for tax purposes (i.e., the employer withholds federal, state, and Social Security taxes).
- The employer can discharge the worker.
- The worker and the employer believe that they are creating an employer-employee relationship.
The determination of whether an individual is an employee must be based on all of the circumstances in the relationship between the parties, regardless of whether the parties refer to it’s a an employee or as an independent contractor relationship.
3. Joint Employers
The term “joint employer” refers to two or more employers that are unrelated or that are not sufficiently related to qualify as an integrated enterprise, but that each exercise sufficient control of an individual to qualify as his or her employer. The joint employer issue frequently arises in cased involving temporary staffing agencies.
4. Employment Agencies
An entity is a covered employment agency if it regularly procures employees for at least one covered employer, whether or not it receives compensation for its services.
5. Contingent Workers and Staffing Firms
Contingent workers generally refers to workers who are outside an employer’s core work force, such as those whose jobs are structured to last only a limited period of time, are sporadic, or differ in any way from the norm of full-time, long-term employment. Staffing firm refers to temporary employment agencies, contract firms, facilities staffing firms, lease-back firms, and other firms that hire workers and place them in job assignments with the firm’s clients. Staffing firm workers are generally covered under the ADA and other anti-discrimination statutes. This is because they typically qualify as employees of the staffing firm, the client to whom they are assigned, or both.
6. ADA covers third-party interference.
Under the ADA, the respondent must be accused of interfering with an employment relationship but the respondent need not be a covered employer. Interference with an independent contracting relationship is NOT covered. Example: Respondent is an insurance company that provides insurance for the employees of Company ABC. An employee of ABC company files a charge alleging that the Respondent violated the ADA by providing a lower level of coverage for AIDS-related illnesses. Under the circumstances, the employee has an ADA claim against the Respondent insurance company for providing discriminatory insurance benefits arising out of the employment relationship.
V. Section 504 of the Rehabilitation Act – Claims by Employees and Independent Contractors
Section 504 of the Rehabilitation Act (Section 504) prohibits discrimination on the basis of disability by recipients of federal financial assistance. Section 504 specifies that:
“No otherwise qualified individual with a disability in the United States …shall, solely by reason of her or his disability, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service.”
To ensure consistency between Section 504 and Title I of the ADA (employment), Congress added Section 504(d), which specifies that: “The standards used to determine whether [Section 504] has been violated in a complaint alleging employment discrimination under this section shall be the standards applied under title I of the ADA…”
The Department of Justice has issued coordination regulations, providing a template for each federal agency to issue their own Section 504 rule. The coordination regulations include the following policies:
- A recipient, in the selection of procurement contractors, may not use criteria that subject qualified individuals with disabilities to discrimination on the basis of disability.
- A recipient may not, directly or through contract or other arrangement, utilize criteria or methods of administration that have the effect of subjecting qualified individuals with disabilities to discrimination on the basis of disability.
- A recipient shall take appropriate steps to ensure that communications with applicants, participants, members of the public are as effective as communications with others.
B. Circuit Court Conflict
Several Circuit Courts of Appeal have addressed the question whether Section 504 permits discrimination suits by independent contractors as well as employees.
- The 6th and 8th Circuits have concluded that Title I of the ADA (employment) is incorporated by Section 504 literally for all purposes i.e., only covers employees, not independent contractors.
- The 5th, 9th and 10th Circuits have concluded that Section 504 incorporates the standards of Title I of the ADA for proving when discrimination in the workplace is actionable, but not Title I in toto, and therefore the Rehabilitation Act covers discrimination claims by independent contractors.
C. Flynn v. Distinctive Home Care, Inc., 812 F3d. 422 (5th Cir. 2016)
Section 504 of the Rehabilitation Act permits employment discrimination suits by independent contractors. Unlike Title I of the ADA, Section 504 is not limited to the employment context. Section 504 is far broader—it prohibits discrimination under any program or activity receiving federal financial assistance and program or activity is defined to include “all of the operations of the ….[entity]” Importing Title I of ADA’s requirements that the plaintiff and defendant have an employee-employer relationship would conflict with the plain language of the Rehabilitation Act, which broadly authorizes discrimination suits against a wide variety of entities, including non-employers.
Section 504(d) of the Rehabilitation Act adopts only the substantive standards for determining what conduct violates the Rehabilitation Act, not the definition of who is covered under the Rehabilitation Act.
D. Fleming v. Yuma Regional Medical Center 587 F. 3d 938 (9TH Circuit, 2009); cert. denied, 561 U.S. 1006 (2010)
An independent contractor may assert a disability claim against an employer under the Rehabilitation Act. Scope of Rehabilitation Act is broader than ADA—covers any otherwise qualified individual who has been excluded from the participation in, or denied the benefits of, or subjected to discrimination under any program or activity receiving federal financial assistance. Program or activity includes all of the operations of entities, not only those related to employment.
Section 504(d) addresses only the substantive standards for determining what conduct violates the Rehabilitation Act (employment nondiscrimination standards) when a recipient engages in particular act in the capacity of an employer vis a vis an employee, not the definition of who is covered under the Rehabilitation Act. The language of the Rehabilitation Act is not limited to employers and employees as defined in Title I of the ADA, but rather applies to independent contractors and the entities that hire them.
YAMS repeatedly insisted that its agreement with Plaintiff established “no employment relationship” and that an “employment agreement does not exist.” Alleges case should be dismissed because plaintiff is not an “employee.” YAMS cannot have it both ways. If plaintiff is not an employee and defendant is not an employer, then the complaint should be not be treated as one alleging employment discrimination. YAMS is also subject to suits under Section 504 by individuals who are not employees. Section 504 affords comprehensive protection against disability discrimination in the workplace and beyond.
VI. Title II of the ADA Barring Discrimination by State and Local Governments
Under Title II of the ADA, no qualified individual with a disability shall, by reason of such disability, be excluded from participation in be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity. Regulations implementing Title II of the ADA shall be consistent with regulations implementing Section 504 of the Rehabilitation Act. [Section 202 and 204 of the ADA; 28 CFR 35.130]
- A public entity, in the selection of procurement contractors, may not use criteria that subject qualified individuals with disabilities to discrimination on the basis of disability. [28 CFR 35.130(b)(5)]
- A public entity may not, directly or through contract or other arrangement, utilize criteria or methods of administration that have the effect of subjecting qualified individuals with disabilities to discrimination on the basis of disability. [28 CFR 35.130(b)(3)]
- A public entity shall take appropriate steps to ensure that communications with applicants, participants, members of the public are as effective as communications with others. [28 CFR 35.160]
VII. Title III of the ADA Barring Discrimination by Public Accommodations
Under Title III of the ADA, no individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodations by any entity who owns, leases, (or leases to) or operates a place of public accommodation. [28 CFR 36.201] A place of public accommodation includes a service establishment. [28 CFR 36.104]
- A public accommodation shall not, directly or through contractual or other arrangements, utilize standards or criteria or methods of administration that have the effect of discriminating on the basis of disability, or perpetuate the discrimination of others who are subject to common administrative control. [28 CFR 36.204]
- A public accommodation shall furnish appropriate auxiliary aids and services where necessary to ensure effective communication with individuals with disabilities. [28 CFR 36. 303(c)] Auxiliary aids and services includes accessible electronic and information technology.[28 CFR 36.303(b)]
- Federal and state laws barring discrimination in public accommodations or, as in California, “business establishments” more generally, may apply, and with a much longer list of protected statuses.
A. Framework for Ensuring Universal Access to the Gig Economy for People with Disabilities
1. Policy Underpinnings
The policy underpinnings of the framework are the precepts of the ADA, including Title I (employment), Title II (state and local governments) and Title III (public accommodations i.e., businesses providing goods and services to the public). The ADA is a civil rights statute ensuring that people with disabilities enjoy opportunities to participate in the gig economy that are equal to and as effective and meaningful as those provided to others.
- Businesses should be provided the opportunity to select the best, brightest, and most creative individuals.
- Individual vendors should be provided the opportunity to compete in the marketplace on the basis of their qualifications and not be excluded or denied opportunities based on arbitrary and capricious reasons such as disability status.
2. Policy Issues
Businesses participating in the gig economy may want to consider addressing the following issues:
- Whether the businesses that use the web-based platforms to select gig workers are acting as employers and whether the individual vendors are considered employees subject to Title I of the ADA.
- If the vendors are considered independent contractors and the companies are not considered employers subject to Title I of the ADA (and other civil rights acts), whether the company that retains the vendor’s services is still required to select vendors based on their qualifications to perform specified tasks, in their capacity as public accommodations (or state and local governments) subject to the nondiscrimination provisions of Title III (or Title II) of the ADA.
- Whether the company designing the web-based platform is required to ensure that the marketplace offered through its web site provides equal, meaningful, and effective opportunity to all vendors, including vendors with disabilities.
- Is the company operating the platform an employment agency subject to Title I of the ADA?
- Is the company operating the platform a public accommodation subject to Title III of the ADA?
- Is the platform accessible to and usable by all, including individuals with disabilities?
- Does the platform include questions and analyze answers in a manner that is neutral or do the algorithms used to analyze the data result in discriminatory treatment of certain vendors on the basis of disability?
3. Implications if Employer-Employee Relationship Exists
Title I of the ADA prohibits discrimination on the basis of disability when there is an employer-employee relationship. Title I of the ADA does not cover independent contractors. The question of whether an employer-employee relationship exists is fact-specific and depends on whether the employer controls the means and manner of the worker’s work performance. This determination requires consideration of all aspects of the worker’s relationship with the employer, regardless of whether the parties refer to the relationship as an employer-employee relationship or as an independent contractor relationship. The factors indicating that an employer-employee relationship exists are described above.
If an employee-employer relationship is established, the company hiring the gig worker may not discriminate on the basis of disability. Discrimination includes:
- Denying effective and meaningful opportunities to compete for work (e.g., recruitment, hiring, retention, and advancement);
- Adopting criteria or methods of administration that deny opportunities to work; and
- Entering into contracts or other arrangements that have the effect of denying opportunities to work.
As part of its Strategic Enforcement Plan, EEOC is reviewing the factors and the weight given particular factors to determine whether an employee-employer relationship exists and Title I of the ADA and other civil rights statutes apply.
4. Vendors are Considered Independent Contractors
If the vendors are considered independent contractors and the companies are not considered employers subject to Title I of the ADA, is the company that retains the vendor’s services still required to select all individual vendors, including individuals with disabilities, fairly (ensuring effective and meaningful opportunity), in their capacity as public accommodations (or state and local governments) subject to the nondiscrimination provisions of Title III (or Title II) of the ADA?
The pending cases against Uber illustrate a possible approach for addressing this question. It is my impression that in cases pending around the country, Uber is arguing that since drivers are not employees and thus Uber is not an employer, then complaints by drivers should not be treated as allegations of employment discrimination under Title VII of the Civil Rights Act or Title I of the ADA. Instead, Uber's theory appears to be that drivers (just like passengers) are its customers, paying for access to the web-based platform. Thus, if Uber convinces courts that it isn’t in the “driving” business at all but instead is merely creating an online marketplace through its web-based platform, then the result should be that drivers may state their claims as customers seeking fair access to the marketplace offered on the web-based platform rather than as employees seeking fair employment opportunities.
In other words, companies cannot have it both ways. If an individual vendor is not an employee and the company seeking workers is not an employer, then a complaint should not be treated as one alleging employment discrimination but rather as one alleging that the company, in its capacity as a public accommodation, is engaging in discriminatory acts by entering into contracts or other arrangements with entities that fail to design and implement a nondiscriminatory marketplace (web-based platform).
Recently, several circuits (5th, 9th, and 10th) of the U.S. Court of Appeals, interpreting the law on which the ADA is modeled (Section 504 of the Rehabilitation—nondiscrimination on the basis of disability by recipients of federal financial assistance) held that independent contractors serving as workers may file a discrimination complaint, even though they were not protected by the specific provisions of Section 504 applicable to the employer-employee relationship.
In addition to Title I the ADA (employment discrimination), the ADA includes Title III applicable to public accommodations and Title II applicable to state and local governments. In a nutshell, under Title III and Title II of the ADA companies and state and local governments, respectively, procuring goods and services may not discriminate against individual vendors on the basis of disability. These covered entities may not, directly or through contract or other arrangement, adopt criteria or methods of administration that have a discriminatory effect, including the entering into of contracts or other arrangements with companies establishing marketplaces on web-based platforms. If the company offering the platform is engaging in discriminatory practices then the company using its services is liable.
5. Companies Operating Web-Based Platforms
The framework can also be used for determining whether the company designing the web-based platform is required to ensure that all vendors, including individuals with disabilities enjoy equal, meaningful, and effective opportunity to participate in the web-based marketplace. If the company operating the platform is considered an “employment agency” it is subject to Title I of the ADA and other civil rights statutes. An entity is considered an employment agency if it regularly procures employees for at least one covered employer, whether or not it receives compensation for its services.
Let’s assume that the company operating the platform is not an employment agency subject to Title I of the ADA but rather an independent contractor. The company is still providing a service to the public (a marketplace for its customers—both those wanting to purchase goods and services and those wanting to provide the goods and services). The company could be considered a public accommodation under Title III of the ADA—a service establishment.
The Department of Justice has entered into numerous settlement agreements with public accommodations and state and local governments requiring that their web sites, online systems, mobile apps, and other forms of information and communication technology are accessible to and usable by individuals with disabilities. Other settlement agreements require that criteria e.g., questions and algorithms used to analyze answers/data must be neutral and not have discriminatory effects.
Settlement agreements with DOJ have been entered into by companies that only use web sites as their sole mode of business i.e., they do not have a physical store. In addition, a number of U.S. Circuit Courts of Appeals have held that companies operating web sites (platforms) are subject to Title III of the ADA, regardless of whether they have a physical store. (1st, 2nd, 5th, and 7th). It should be noted that other circuits require a physical store or nexus between the web site and a physical location (3rd, 4th, 9th, and 11th).
B. Summary of Major Points
First, a company procuring services or goods in the gig economy must determine whether it is considered an employer and the workers are considered employees. If an employer-employee relationship has been established, the company is subject to the nondiscrimination provisions of Title I of the ADA. The ADA does not, however, cover independent contractors. Likewise, if the company making available the web-based platform is serving as an employment agency, it is subject to the nondiscrimination provisions of Title I of the ADA. These determinations are fact-specific and depend on certain factors assessing the extent to which the company controls the means and manner of the worker’s work relationship, regardless of how the parties refer to the relationship.
If an employer-employee relationship exists, discrimination includes entering into contracts or other arrangements with third parties that have a discriminatory effect e.g., entering into an arrangement with an entity that establishes a marketplace via a web-based platform that discriminates on the basis of disability.
Second, even if there no employer-employee relationship or employment agency-applicant relationship exists, a company operating in the gig economy that procures goods or services is still required to provide equal opportunity in the selection of individual vendors, in their capacity as public accommodations. Public accommodations may not adopt criteria or methods of administration or enter into contracts or other arrangements that deny equal, effective, and meaningful opportunity to its customers, including entering into arrangements with entities that provide marketplaces via platforms on websites that are inaccessible to and unusable by individuals vendors with disabilities and/or that include questions and answers that are discriminatory.
Third, the entities establishing the marketplaces via web-based platforms may also be considered public accommodations and required to make their websites accessible to and usable by people with disabilities and design platforms that include questions and answers that are neutral and nondiscriminatory.
Companies should embrace the concept of universal design i.e., ensure that the greatest number of people can participate in the gig economy free from discrimination. Whether an entity participating in the gig economy is subject to the provisions of the ADA is less important than whether the company embraces the concepts of universal design, the policy underpinning of the ADA.
Companies may wish to evaluate their use of individual independent contractor relationships, to determine the extent to which an individual may properly be considered an employee rather than an independent contractor and the attendant risk. Similarly, companies indirectly using independent contractors, such as through staffing or “temp” agencies, may want to consider evaluating their agreements with these agencies to ensure that they contain appropriate safeguards (including guarantees of compliance) and perhaps indemnification agreements to protect against the potential risk of a finding of “joint employer” status. Companies may wish to consider adding terms to contracts with vendors entitling the companies to guarantees of compliance with federal and state laws and may consider including indemnification provisions in agreements with third-party vendors.
- U.S. Equal Employment Opportunity Commission Strategic Enforcement Plan Fiscal Years 2017 – 2021
- How is the Department of Justice Addressing Website and ICT Accessibility?
- National Labor Relations Board Office of General Counsel Advice Response Memo Misclassification of Employees as Independent Contractors (December 18, 2015)
- Department of Labor Wage and Hour Division Memorandum: Joint Employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act. (January 20, 2016).
- EEOC Compliance Manual Section 2: Threshold Issues
- Flynn v. Distinctive Home Care 812 F3d. 422 (5th Cir. 2016)
- Fleming v. Yuma Regional Medical Center 587 F. 3d 938 (9TH Circuit, 2009); cert. denied, 561 U.S. 1006 (2010)