What comes to mind when you think of a mom-and-pop small business: A hardware store? A diner? A family-run clothing store or small-scale supermarket?
Here’s one that’s probably never crossed your mind: a dishwashing business. By that, I mean a business of a single person — unincorporated, no business address or capital behind him, just one guy — working as a dishwasher for a restaurant, using the restaurant’s machinery to wash the restaurant’s dishes on the restaurant’s premises.
Two explosive enforcement actions disclosed by the City and County of Denver this month expose the lengths to which some corporations will go in trying to exploit the “gig” business model. At issue is whether dishwashers and others like them, placed in their jobs by online temporary staffing agencies, are employees of the agencies or independent contractors running their own businesses.
To Denver Labor, the city’s labor enforcement office, they are employees under law. The office recently issued citations to two businesses, Instawork and Gigpro, seeking over $1 million in restitution and fines.
These two staffing companies place workers in a range of hospitality positions, including as servers, bartenders, line and prep cooks and, yes, dishwashers. The citations assert that the companies misclassified the workers as independent contractors and in doing so, violated the city’s minimum wage ordinance and state law on paid sick leave.
Colorado’s labor law defines an employee as any person who performs labor or services for the benefit of an employer. Factors that go into making that determination include the degree of control an employer exercises over the person and the degree to which the person’s work is the primary work of the employer. By contrast, an independent contractor is considered someone who works primarily free of control and direction and is “customarily engaged” in an independent trade or business related to the service performed.
The Denver cases may at first glance seem like small potatoes. But they are actually a very big deal. The cases demonstrate the spread of the exploitative gig business model far beyond Uber drivers and DoorDash food deliverers, to encompass a growing number of jobs that have long been performed by employees with legal protections. And the cases illustrate the urgent need for government intervention to safeguard core workplace rights.
Because workplace laws protect employees and not independent contractors, gig companies like Uber and Lyft save a bucket of money on both wages and taxes by avoiding the obligations that every other employer must follow: wage-related laws as well as unemployment, Social Security and Medicare taxes. As a result, gig workers can find themselves paid sub-minimum wages, for example, or left without workers’ compensation when injured or killed on the job. Another consequence is that law-abiding employers face unfair competition with businesses that don’t follow the rules, and critical safety-net programs like unemployment insurance lose badly needed funds.
The Denver cases make it clear that the gig business model isn’t just about drivers and food delivery workers anymore. Instawork, for example, also places warehouse, housekeeping, janitorial and retail workers, and Gigpro places workers at hotels. San Francisco’s city attorney, David Chiu, sued Qwick, a hospitality staffing company, last year, succinctly summing up the gig business model: “Qwick is inequality disguised as innovation, a staffing company with an app that is in flagrant violation of labor and employment laws.”
With rare exceptions, businesses that use similar independent contractor models in other sectors, like health care and education, generally have not yet faced government scrutiny. If corporations can avoid workplace laws just by hiring workers via an app and giving them a modicum of scheduling flexibility, workers are in big trouble.
Denver Labor’s citations lay out in detail the extensive control that Instawork and Gigpro exerted over their workers. At Instawork, for example, workers (in company lingo, “professionals”) can’t use their cellphones while on the job, their performance is continuously monitored, and they must have their location tracking services activated. As the citations note, there are also public health implications, when “workers who prepare and serve food and beverages” in “close-quarters interactions” are denied paid sick leave.
Workers clearly need government-set ground rules to make sure working people are properly treated. In New York City, for instance, app-based food delivery workers had to get a law passed just to have something so basic as access to the bathroom at restaurants where they pick up an order. Many gig companies require workers to sign arbitration provisions that block them from filing lawsuits or bringing class actions, leaving government enforcement as the only realistic option.
The Biden administration’s Labor Department earlier this month issued a robust federal rule, effective in March, that is likely to make it harder for employers to treat workers as independent contractors rather than employees. It’s already been challenged in court by a group of freelance writers and editors.
Given the Supreme Court’s hostility to worker rights and government regulation, state and local governments must play a leading role in protecting workers. Some, like Denver Labor, have already stepped up to the task. The attorneys general for Minnesota and the District of Columbia sued the gig delivery company Shipt in 2022, and New York City and Seattle recently enacted minimum wages for certain gig workers.
But the spread of the exploitative model laid bare by Denver Labor shows the need for far more action.
New laws preventing abuses by tightening the definition of “independent contractor” would help. But legislation alone isn’t the answer; enforcement is also essential. Even under current law in many states, workers engaged by these online platforms — restaurant dishwashers, prep cooks, hospital nurses and janitors — would already be considered employees entitled to the protection of workplace laws.
American businesses large and small have managed to operate and flourish while paying minimum wage and overtime, providing a safe workplace, buying workers’ compensation insurance, and paying unemployment insurance and other payroll taxes. They’ve made a choice not to engage in the fiction that their employees are running small businesses. Allowing the gig model to expand and fester would be a choice as well — a choice with terrible outcomes for workers.
