The Downsizing of Labor Rights


Workers were a hot item in
1996. Born-again populists of both parties
jostled for votes from the anxious and the
downsized. Labor was Big again, elevating
workers’ issues—at least ones that
contrasted Democrats from Republicans—back
onto the electoral stage. But the AFL-CIO’s
$35 million pro-Democrat gambit did nothing to
illuminate a massive legal crisis affecting some
30 million of America’s burgeoning class of
contingent workers, who comprise nearly one-third
of the U.S. workforce. Lacking union protection
and political clout, these temporary, leased and
"contract" workers are slipping through
widening cracks in U.S. labor laws.

Numerous studies and court
cases indicate a fundamental contradiction
between contingent employment and labor rights
which were scripted for full-time, permanent

A groundbreaking study
sponsored by the Department of Labor provides
potent evidence of this disconnect—but it
may never see the light of day. In an unpublished
report scuttled by Congress, the National
Commission on Employment Policy (NCEP) documented
major failings in a wide array of labor statutes.
"Frequently, Federal protections afforded
full-time, permanent employees do not reach the
contingent worker," the commission
concluded, upon extensive analysis of federal
civil rights, labor organizing, equal pay, and
other laws.

From well-paid computer
engineers and business consultants in contract
jobs to temporary and leased workers, janitors,
and taxicab drivers, contingent workers of all
collars are discovering their legal rights are
even less secure than their jobs. The list of
exclusions encompasses nearly every aspect of
U.S. labor law:

    • Contingent workers—of
      whom two-thirds are women and minorities—get
      unequal protection when it comes to equal pay.
      Proving that contingent positions require the
      same skills and responsibilities, and therefore
      the same pay, as core staff jobs is exceedingly
      difficult, many legal experts say. Bureau of
      Labor Statistics data show temporary and
      part-time workers earn as much as $5.00 per hour
      less than full-time employees in similar jobs.
    • Temporary, leased, and
      contract workers rarely receive workers’
      compensation, and most are not protected by the
      Occupational Safety and Health Act, which only
      requires companies to provide a safe workplace
      for their own employees.
    • Millions of temporary and
      part-time workers do not qualify for unemployment
      insurance, even after a full year’s work. A
      temporary worker earning the industry’s
      average of $6.42 per hour for 30 hours a week
      would fail the minimum earnings requirement in 19
      states, according to Francoise Carre, an
      economist and labor expert with the Center for
      Labor Research at the University of
      Massachusetts. Thirty-eight states prohibit
      independent contractors from collecting
      unemployment compensation, and many others
      explicitly bar part-time workers from receiving
      benefits during a job search.
    • Part-time, temporary and
      casual workers at small businesses have little
      protection against discrimination, according to
      NCEP’s study. Companies that employ people
      sporadically often fall below employee numerical
      thresholds which determine whether an employer is
      liable for civil rights violations.
    • Independent contractors are
      excluded from anti-discrimination protections
      covering civil rights violations and sexual
      harassment. They are also exempted from
      workers’ compensation insurance. The General
      Accounting Office has found that 40 percent of
      supposed "contract workers" are
      actually employees who are improperly denied
      legal protections.
    • Rising from the ashes of
      corporate downsizing, contingent labor has
      arrived as a permanent fixture in corporate
      cost-cutting wars. A June 1996 Labor Department
      report boasting a 5.3 percent official
      unemployment rate also revealed temporary
      labor’s increasingly central role in job
      growth. Far outpacing new construction and
      factory employment, temporary-help agencies
      accounted for 35,000 of the 239,000 payroll jobs
      created in the second quarter of 1996. While
      temporary labor makes up 2 percent of the overall
      workforce, it comprised 15 percent of the latest

      A 1995
      Conference Board study found that contingent
      employment has become a primary, if not vital,
      ingredient in corporate downsizing. The
      management research firm’s survey of
      corporations concluded that contingent labor is
      "closely identified with continued
      downsizing, since headcount restrictions are
      often imposed on managers to keep the core
      employment down once the job cuts have been
      made." Eighty percent of the respondents
      said a just-in-time workforce "gives them
      the ability to add and subtract workers with
      little notice, a strategy that has become more
      urgent because of unpredictable conditions in the
      global marketplace." The business world
      aptly terms this "accordion
      management"—the inhaling and exhaling
      of workers according to peak production and
      marketing cycles.

      One of America’s
      hottest yet lesser-known business trends, staff
      leasing, is cashing in on both ends of this
      accordion effect. "Professional employer
      organizations (PEOs)," as leasing firms
      prefer to call themselves, are making a booming
      business of liability outsourcing—assuming
      labor law obligations for their client
      companies’ workers. To avoid the headaches
      of personnel management and labor law compliance,
      more and more businesses are firing their staffs
      and renting their workers from a leasing company.

      The Your Staff leasing
      firm, a 5,000-employee subsidiary of the Kelly
      Services temporary labor corporation, is one such
      company promising, as a promotional video puts
      it, to "provide your company with an extra
      measure of insulation against damaging litigation
      and inflated insurance costs…Your Staff becomes
      the employer of record for your employees, while
      you maintain day-to-day control over directing

      The promotions are working.
      Leasing’s member group and lobbying arm, the
      National Association of Professional Employer
      Organizations (NAPEO), reports a staggering
      industry-wide revenue growth rate of 30-40
      percent per year. According to the Bankers Trust
      Company, an investment analysis firm in New York
      City, this boom is likely to continue through the
      next five to ten years.

      In the past 12 years,
      leasing has exploded from 98 firms leasing 10,000
      workers in 1984, to 1,700 companies which now
      employ 2 to 3 million workers. Gregory Hammond,
      the former general counsel of NAPEO’s
      predecessor, the National Staff Leasing
      Association, predicts leasing’s exponential
      growth will "culminate sometime in the next
      10 or 50 years at a point when no one will ever
      again be employed by the people for whom they
      perform services."

      The industry advertises
      this detachment of workers from employers as the
      most efficient way to run a business in the
      global economy. Retired Air Force Colonel Regis
      Canney, a top industry executive, calls leasing
      "America’s secret weapon" in the
      global business battlefield. But leasing’s
      primary allure is that it exploits loopholes in
      family leave, pension, and worker health and
      safety laws. In order to qualify for Family and
      Medical Leave Act protection, workers must log
      1,250 hours in a year for a single employer. But
      according to Cathy Ruckelshaus, a staff attorney
      with the National Employment Law Project in New
      York City, a business can "employ a worker
      for eleven and a half months and then switch over
      to a leasing arrangement to avoid the

      Businesses also use leasing
      as a "secret weapon" against union
      organizing drives. When the Service Employees
      International Union attempted to organize
      janitors employed by Advance Building
      Maintenance, which cleans Toyota headquarters
      offices in Torrance, California, Advance opted to
      lease its workers. According to Jono Shaffer,
      organizing coordinator for the Service Employees
      International Union’s building services
      division, Advance "tried to take the
      position that they were no longer employing the
      workers, that our dispute was with the leasing
      company." Through aggressive corporate
      campaigning, SEIU forced Advance to settle
      collective bargaining agreements and numerous
      wage and hour disputes.

      With such tantalizing
      loopholes, this risky business of liability
      outsourcing is expanding rapidly under minimal
      regulatory oversight. Only 13 states require PEOs
      to obtain a license or register their business.
      Likewise, the industry’s self-monitoring
      body, the Institute for the Accreditation of
      PEOs, reports that but 13 of the nation’s
      1,700 leasing firms have met the group’s
      standards for ethical behavior and financial

      In their quest for cheap,
      hassle-free labor, more and more companies are
      finding creative—often illegal—ways to
      erase workers’ rights. As a condition of
      employment, taxicab firms now require drivers to
      sign "lease agreements" which, on paper
      at least, turn employee drivers into independent
      contractors, thus denying them minimum wage,
      unemployment insurance, workers’
      compensation, and other protections.

      Workers’ compensation
      is routinely denied to cab drivers, who,
      according to a recent study by the National
      Institute for Occupational Safety and Health,
      hold the most hazardous job in America. In 1994,
      86 drivers lost their lives on the job, the study
      found. Thousands more are badly injured, and
      frequently these uninsured workers must pay
      enormous hospital bills out of pocket.

      In a profession where
      knifings and beatings are part of the job
      description, signing away your rights to
      workers’ compensation seems suicidal. But
      drivers say that under the cab industry’s
      contracts—recently ruled illegal in a
      class-action lawsuit—it’s
      "economic suicide" to become an

      According to the
      industry-authored lease agreement,
      "lease-drivers"—those who sign as
      independent contractors—pay $85 to rent a
      cab for a 10-hour night shift, while
      "employee-drivers" must pay $103. For
      the extra $18 a night, employee drivers get
      workers’ compensation and unemployment
      insurance. Over the course of a year, access to
      these basic employment rights costs $3,500 to
      $4,000 a year—forcing drivers to choose
      between higher incomes and employment rights.

      gangsterism," adds Paulsen, a driver for
      DeSoto Cab Company since 1976. "You either
      drive for these guys or you don’t drive at
      all. You have no control…The driver is kind of
      like an economic slave."

      Spurred by the near-fatal,
      on-the-job beating of driver John Coleman,
      thousands of San Francisco cab drivers joined and
      recently won a class-action lawsuit against three
      major taxi firms. According to the original
      complaint, "Taxicab drivers who are injured
      in the course and scope of their service…are
      unable to obtain medical care for their injuries,
      lose employment, are denied unemployment
      insurance benefits, and in many instances are
      forced on welfare." If it withstands appeal,
      the San Francisco Superior Court ruling will
      force taxi companies to cover their drivers for
      workers’ compensation, unemployment
      insurance, and other employee rights.

      But Ruach Graffis, a
      long-time organizer with San Francisco’s
      United Taxicab Workers, says major financial
      incentives still encourage worker
      misclassification. "This will keep happening
      forever, until we get national health care,
      because these companies don’t want to pay
      workers’ compensation," says Graffis.

      Legal aid lawyer
      Christopher Ho, who represented the drivers and
      has handled similar cases involving strawberry
      pickers, agrees. "This whole independent
      contractor misclassification thing has really
      taken off. Employers are doing it with increasing
      frequency because it’s easy for them to
      avoid statutory obligations…The fact that
      it’s happening so far afield shows that
      employers are using this as a ruse to save

      Low-wage and immigrant
      workers are not the only victims. Even highly
      paid independent contractors by choice are denied
      basic rights. Minnesota business consultant Caryn
      Wilde endured sexual harassment by a county
      development official for more than a year before
      filing a restraining order. Within two weeks of
      her complaint, the county agency, Wilde’s
      largest client, "voted to cease all
      communications" with her, Wilde testified in
      court. Two months later, according to Wilde, the
      agency terminated all its business with Wilde.

      Meanwhile, Wilde’s
      legal and medical expenses related to the case
      soared to more than $30,000. After losing her
      biggest client and tens of thousands of dollars
      due to her sexual harassment complaint, Wilde
      also lost in Federal Court. The judge ruled that
      since Wilde was an independent contractor, she
      was not protected by Title VII of the 1964 Civil
      Rights Act; nor was she covered by the Minnesota
      Human Rights Act. When Wilde appealed to a
      Circuit Court, the EEOC took notice and, at
      first, offered its support. According to Wilde,
      the agency soon backed out, saying that
      "although they were very interested in the
      case, they were still living under the narrow
      interpretation of the term ‘employee’
      as ordered by the Reagan/Bush

      The EEOC’s about-face
      corroborates the National Commission on
      Employment Policy’s finding that Reagan-era
      Federal courts have narrowed the scope of
      employee status, often denying workers legal
      protection. "The breadth of…the
      legislative language is narrowing," the
      report stated. "Congress may want to expand
      coverage by extending the definition of employee
      to independent contractors." To date, this
      has not happened.

      The ultimate challenge,
      says Anthony Carnavale, who headed the National
      Commission on Employment Policy, "is how to
      reconcile the need to furnish contingent workers
      protections in the workplace similar to those
      afforded permanent employees while continuing to
      provide employers with the work force flexibility
      they need to be competitive in a global
      economy." The commission warned that
      expanding contingent labor without extending
      labor rights promises dire results: "It is
      incumbent upon us to decide if, in the long-term,
      it is economically and socially viable for this
      country to sustain a large portion of the
      American working population in such a precarious
      and insecure employment status."

      The commission answered its
      own question rather boldly, which may explain why
      congressional Republicans and the Clinton
      administration agreed to eliminate the group.
      "Our goal should be to provide all workers
      with the same level of protection to reduce the
      incentives to create a two-tiered labor
      market," the report said.

      But as contingent labor
      proliferates, policy makers are ignoring this
      challenge. Only two members of Congress have
      proposed reforms, and both (Ohio Senator Howard
      Metzenbaum, and Colorado Representative Patricia
      Schroeder) have opted for
      retirement—effectively removing contingent
      labor from the national policy making map. The
      two congressional attempts to extend legal
      protections to contingent workers languish in
      archival obscurity.

      Senator Metzenbaum’s
      "Contingent Workforce Equity Act,"
      proposed in October 1994, remains by far the most
      comprehensive attempt to protect contingent
      workers. It proposed to "extend the
      protections of Federal labor and civil rights
      laws to part-time, temporary, and leased
      employees, independent contractors, and other
      contingent workers, and to ensure equitable
      treatment of such workers." Among other
      provisions, the bill would have made it illegal
      for companies to pay temporary and part-time
      workers less than regular employees doing similar
      jobs. The European Court of Justice has already
      taken a similar tack, ruling that unequal pay for
      part-time workers is discriminatory.

      When Metzenbaum retired the
      measure was passed along to now-retiring Illinois
      Senator Paul Simon; it has since been forgotten.
      Nonetheless, the bill amply reflected attempts by
      advocacy groups and unions to write contingent
      workers into the law. The National Employment Law
      Project, a New York City-based group advocating
      for the unemployed and working poor, is urging
      the Equal Employment Opportunities Commission to
      include Workfare recipients and other contingent
      workers within its antidiscriminatory aegis. The
      aim, according to staff attorney Cathy
      Ruckelshaus, is to "make it clear in the
      definition of employee that they’re

      The Law Project and many
      policy researchers urge a complete overhaul of
      U.S. labor law, arguing that single-issue reforms
      "simply encourage the development of new
      forms of contingent status," a coalition of
      worker advocacy groups told the Dunlop Commission
      on the Future of Worker-Management Relations in
      1994. "Mandating fair treatment for
      employees…gives employers a reason not to
      directly hire ‘employees,’ but instead
      to hire ‘temps,’ ‘lease’
      workers or engage ‘independent
      contractors’ for whom they have no

      Francois Carre and fellow
      labor experts Virginia duRivage and Chris Tilly,
      say the National Labor Relations Act needs to be
      re-framed to allow new forms of union
      association—enabling temps and other
      transient workers to join collective bargaining
      units based on their occupation or geographic
      location, rather than on the traditional NLRA
      model of employer-based unionism.

      Proposals for reform pile
      up by the dozens at labor conferences and in
      congressional archives. What’s missing is
      government will and interest in discouraging
      unprotected work and expanding labor protections.
      If the silent slaying of NCEP’s report is
      any indicator, politicians of both parties would
      rather not even discuss it. And while some
      unions, most notably the Service Employees
      International Union and the United Food and
      Commercial Workers, have pressed hard to address
      the needs of part-time and contract workers, the
      labor movement has been slow to embrace
      contingent workers as the new frontier for

      Even in seemingly
      labor-friendly circles, the legal problems of
      contingent workers are merely "a topic that
      merits further inquiry." Such was the
      conclusion of the Dunlop Commission, a Clinton
      Administration fact-finding panel that many saw
      as the best hope for progressive labor law
      reform. Contingent workers merited but 2 pages in
      the commission’s 200-page report, which
      failed to promote any reforms. According to one
      labor union source close to the commission, chair
      John Dunlop, the U.S. Labor Secretary under
      President Gerald Ford, "just didn’t
      want to talk about it. He didn’t think
      contingent workers were an issue that needed to
      be addressed."

      Christopher D. Cook is a
      freelance writer from San Francisco who has
      written for The Nation, In These Times,
      and The San Francisco Bay Guardian.