Employers and contractors enjoy a harmonious relationship

Employers and contractors enjoy a harmonious relationship
© Courtesy photo

On Monday, the U.S. Labor Department (DOL) wrote a letter to a company that employs independent contractors. In the letter, the department re-affirmed the Trump administration's position that those workers were not employees. Good.

Besides the Labor Department letter, April also saw a new rule from The Texas Workforce Commission that classified "gig" workers that were hired for jobs through online applications as independent contractors and not employees.

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In the past few years, Arizona, Florida, Indiana, Iowa, Kentucky, Tennessee and Utah have also passed laws that treat most on-demand workers as contractors too. Also good.

Employee advocates, of course, don't think this is so good.

They feel that workers across the country are being abused when they're not able to take advantage of a company's employee benefits. They believe that big companies — like Uber and Lyft — are not paying their contractors enough.

It doesn't matter that these companies are abiding by DOL and IRS rules or that their drivers signed independent contractor agreements and knew full well in advance that they were not employees.

It doesn’t matter that these drivers are able to enjoy all the freedoms of being independent and could take jobs elsewhere in this extremely low-unemployment economy in which employers are begging for workers.

Drivers at Uber and Lyft are striking and walking out on their work to protest those companies' treatment of them as independent contractors.

Fearing bad press, large tech companies like Google and Microsoft recently caved to demands and are now requiring their independent contractors to provide health care and other benefits to their own employees.

Carolyn Bobb, an AFL-CIO spokeswoman told the Wall Street Journal that while the labor movement “embraces advances in technology,” it still rejects “the use of 21st century breakthroughs as an excuse for 19th century labor practices.”

19th-century labor practices? That seems a little extreme.

Of course, businesses benefit when they use contractors. As a business owner, I love not having to pay employer taxes when I employ a contractor. I love being able to use — or not use — these workers at my discretion. I love not having to be responsible for their health care, paid vacation and other employee benefits.

Without independent contractors, my technology firm — like many other small and medium-sized firms — would truly suffer, maybe even go out of business.

But there's also one thing that employee advocates don't want to admit: Many independent contractors enjoy being independent. How else to explain the explosive growth of gig workers and platforms like TaskRabbit, UpWork, Guru and Fiverr?

In the 21st century, an unprecedented number of workers have the freedom to be full or part-time entrepreneurs, and they’re embracing the opportunity.

I use about a dozen independent contractors in my business and here's a news flash: They don't want to be employees. They are independent contractors because they prefer the lifestyle.

They are proud to be self-employed, and they are free to charge me whatever rates they think they can get away with (and believe me, they try). They also enjoy many freedoms that an employee would never receive:

  • They can work whenever and wherever they want;
  • they can do business with other companies, even my competitors;
  • they can use other people to get their work done;
  • they can stop work if I'm not paying them; and
  • they can choose how much time they want to spend working for my company and how much time they want to do other things.

Of course they have their challenges:

  • They need to get their own health care;
  • they have to figure out how to pay their own taxes;
  • they struggle finding people; and
  • they face cash-flow issues.
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Do these challenges sound familiar? They certainly do to any business owner. For these gig workers, the positives outweigh the negatives. 

Where will this debate end? Recent cases in California, Massachusetts and Pennsylvania regarding the classification of independent contractors, particularly in the trucking industry, have reached different outcomes.

Many legal experts believe that when such a thing occurs in the lower courts it's almost certain that the Supreme Court will have to weigh in. Let's hope that the court rules in favor of entrepreneurism.

Gene Marks is founder of The Marks Group, a small-business consulting firm. He has written on economic and financial issues for The Washington Post, The New York Times and The Guardian. He also frequently appears on CNBC, Fox Business and MSNBC. Follow him on Twitter: @genemarks.