Heather Bussing is a returning contributor to our HRExaminer Editorial Advisory Board. Heather has practiced employment and business law for over 20 years. She has represented employers, unions and employees in every aspect of employment and labor law including contract negotiations, discrimination and wage hour issues. While the courtroom is a place she’s very familiar with, her preferred approach to employment law is to prevent problems through early intervention and good policies and agreements. Full bio…
A Modest Proposal—Eliminate the Employment Relationship
The employer-employee relationship is one of the most legislated, regulated, taxed and litigated relationships we have. The finances of our state and federal governments are tied largely to payroll taxes that include income tax, social security, Medicare, disability, unemployment and local taxes. Our financial markets are also largely dependent on retirement and insurance investments tied to the employment relationship.
However, independent contractors are exempt from most of payroll taxation and regulation. Businesses that hire independent contractors don’t have to withhold taxes, pay benefits or contribute to the 401K accounts. Other laws, including wage and hour, workers’ compensation and EEOC requirement often do not apply to the hirer/independent contractor relationship.
So there is a huge financial distinction between the employer-employee relationship and the hirer-contractor relationship
The distinction in the workplace is becoming negligible.
Control over the method and manner of the work, whether the person has independent judgment and discretion, and who provides the workspace and equipment are the primary factors in determining whether someone is an employee or an independent contractor.
A doctor can be an independent contractor and the person who pulls the lever on the assembly line is an employee. But it’s not always so easy.
Thinking about the people I encounter every day, how many are actually employees and which ones could be either an independent contractor or an employee?
Gas Station: The person behind the counter is most likely the owner—not an employee. The mechanics could be either. If he’s not the owner, the guy who runs the food-mart register is probably an employee. But if he is the only one there and in charge of the entire store and decides what gets ordered and which vendors to use, he may qualify to be an independent contractor.
School: The teachers could all be independent contractors, the principal too and the office staff has more discretion about what happens on campus than almost anyone besides the janitor.
Coffee Shop: Probably employees, especially if the baristas are trained to make the coffee a certain way—but we are not far from the day when they all are independent artisans who have cult followings based on their blends and technique.
Office Supply Store: Probably employees, although the computer repair person and graphic designers in the copy shop could easily be independent contractors.
Law Office: Lawyers—I have performed the exact same job under nearly identical circumstances as an owner, independent contractor and employee. Most of the staff has discretion over when and how they do their work including the receptionist and file clerk who determine how the entire firm runs.
Restaurant: Chefs and bartenders could easily be independent contractors, but the kitchen and wait staff are probably trained to perform in specific ways.
Grocery Store: Grocery stores seem like they would be full of employees stocking, cleaning and manning cash registers. However, the vendors who are independent contractors to the store do most of the displays and much of the stocking.
So the only people who are truly employees are middle management who have no discretion whatsoever. And the sign of a really great employee is that she could be an independent contractor.
What would happen if all the information workers and people who have judgment, discretion and control over how they do their job became independent contractors? The changes would be dramatic, damaging and transformational.
The entire financial system would shift from companies to individuals.
Governments would have a much harder time collecting taxes and providing services.
Workers would have more autonomy, but also more financial risk.
The national health insurance debate would have to be resolved, and may not involve governmental intervention.
Human Resources would become part of Procurement and would be managing contracts rather than benefits and compliance.
And legislatures would be figuring out how to tax contracts.
I don’t know if eliminating the employment relationship would be a good thing or not. I do think it’s possible to an extent never imagined.
I also think it is important to notice that employment has much more to do with payroll taxes than work.