Chair Cutler, Chair Jehlen, and Members of the Joint Committee on Labor and Workforce Development: Thank you for the opportunity to testify today on behalf of the Economic Policy Institute. EPI is a nonprofit, nonpartisan think tank created in 1986 to research the economic status of working America and propose public policies that protect and improve economic conditions of low- and middle-wage workers.
My name is Jennifer Sherer and today I am testifying against H1848, an act that promises to “establish rights and obligations of transportation network drivers and transportation network companies” but which would in fact severely weaken the rights of rideshare drivers.
H1848 poses significant threats to the labor and employment rights of all workers. We support the many rideshare and delivery drivers who are organizing to improve their pay and conditions in Massachusetts and across the country. We believe drivers and other app-based workers are entitled to full labor and employment rights and deserve far better than the damaging proposals in this bill.
H1848 denies workers basic legal rights and undermines long-standing Massachusetts legal tests used to determine employment status
Determination of whether an individual performing services is an employee or an independent contractor carries enormous consequences. Workers misclassified as independent contractors lose coverage under wage and hour, nondiscrimination, and health and safety laws. They cannot access unemployment insurance if laid off or workers’ compensation if injured, and they are responsible for making their own payroll tax contributions.
H1848 declares drivers “non-employees”—depriving drivers of all these essential protections and allowing companies to avoid payments to state tax and social insurance programs.
As we’ve documented in past EPI reports, this is but the latest instance of tech companies using state legislation to weaken or exempt themselves from important legal tests of employee status, such as the strong ABC test Massachusetts has adopted.1 The ABC test establishes a presumption that an individual performing services for an employer is an employee, not an independent contractor, unless the employer can establish three factors:
- The work is done without the direction and control of the employer;
- The work is performed outside the usual course of the employer’s business; and
- The work is done by someone who has their own, independent business or trade doing that kind of work.
By establishing the presumption that a worker is an employee, the ABC test puts the onus on the employer to prove a worker is truly an independent contractor. In turn, this reduces the likelihood that workers are misclassified and lose protections they should be guaranteed under the law as employees. Such tests are necessary to prevent the misclassification of workers, a known and pervasive problem in sectors well beyond app-based work.2
H1848 consigns drivers to permanent second-class status, locking in substandard pay and benefits
This bill includes a typical trick used by tech companies to shortchange drivers. It appears to propose “new” minimum pay and paid leave rates but applies them only during what is knowns as “engaged time,” or time spent driving with a paying passenger in the car. Data show that 30%–50% of drivers’ work time is spent logged onto the app while dispatching or traveling to pick up passengers.3 Under this bill none of that work time counts. In other words, drivers may need to work twice as long to accrue the same amount of leave as other workers. Both research and driver experience from other states show actual pay under such systems falls well below minimum wage, in effect creating a new subminimum wage.4
The same applies to promised health insurance subsidies, available only to certain drivers hitting weekly “engaged time” thresholds. Under such systems, less than 15% of drivers might end up accessing this supposed benefit, as has proven to be the case under a similar company-backed program implemented following passage of Proposition 22 in California.5
This company trick is a dangerous assault on current legal definitions of work hours, and because Black, brown, and immigrant workers are disproportionately represented in app-based work, company attempts to consign drivers to second-class status serve only to deepen long-standing racial inequalities in our economy. A major 2020 national survey revealed that app-based workers are already suffering the effects of low pay and wage theft; nearly a quarter reported earning less than the equivalent state minimum wage, three out of five reported losing earnings due to problems with platform technology, and nearly one-third said they could not afford to pay their full utility bills in the prior month.6
Moreover, companies could choose today to increase rates of pay and extend paid leave, health insurance, and other benefits to drivers without any legislative action necessary. The substandard pay and benefits proposed in H1848 are in fact intended to permanently limit (not improve) labor standards while distracting policymakers and the public from tech companies’ larger goal to evade and erode these standards as they expand their business model into additional industries and occupations.
H1848 could block drivers from exercising collective bargaining rights
EPI research shows that the erosion of collective bargaining rights, and persistent exclusion of entire occupational groups from federal labor and employment laws, accounts for a significant share of income inequality and wage suppression in our economy.7 Rather than recognizing drivers have full rights under the federal National Labor Relations Act (NLRA) to collectively bargain with their employers over wages, hours, and working conditions, H1848 unilaterally sets driver wage and benefit levels at substandard levels while reclassifying drivers as independent contractors excluded from NLRA coverage.
H1848 would set damaging precedents with national implications
Tech companies have waged an aggressive campaign to exempt themselves from labor and employment laws over the past decade. They will undoubtedly continue pursuing legislation like H1848 in Massachusetts and other states and have made clear their intent to attempt to carve out other occupations from existing employee protections. Meanwhile, efforts to follow Massachusetts’s lead in establishing a strong, protective legal test for determining employee status are under way in many states and at the federal level, but could be harmed if tech companies have their way and succeed in codifying new forms of second-class “non-employee” status for app-based workers in state law.8
Allowing tech companies to permanently reclassify drivers as independent contractors would have severe implications both for affected drivers and for long-standing Massachusetts labor and employment laws. These are threats with potential to erode conditions of working people all across the country, and thus we urge opposition to H1848.
Notes
1. Jennifer Sherer and Margaret Poydock, Flexible Work Without Exploitation: Reversing Tech Companies’ State-by-State Agenda to Unravel Workers’ Rights and Misclassify Workers as ‘Contractors’ in the Gig Economy and Beyond, Economic Policy Institute (February 23, 2023), https://www.epi.org/publication/state-misclassification-of-workers/.
2. Lynn Rhinehart et al., Misclassification, the ABC Test, and Employee Status, Economic Policy Institute (June 16, 2021), https://www.epi.org/publication/misclassification-the-abc-test-and-employee-status-the-california-experience-and-its-relevance-to-current-policy-debates/.
3. See p. 9, Figure 3, “Breakdown of TNC VMT by Phase for each Metro Region,” in Melissa Balding et al., “Estimating TNC Share of VMT in Six U.S. Metropolitan Regions (Revision 1),” Fehr & Peers (August 6, 2019); https://www.fehrandpeers.com/what-are-tncs-share-of-vmt/.
4. Ken Jacobs and Michael Reich, “The Uber/Lyft Ballot Initiative Guarantees Only $5.64 an Hour,” University of Berkeley Labor Center blog (October 31, 2019), https://laborcenter.berkeley.edu/the-uber-lyft-ballot-initiative-guarantees-only-5-64-an-hour-2/; and Ken Jacobs and Michael Reich, Massachusetts Uber/Lyft Ballot Proposition Would Create Subminimum Wage: Drivers Could Earn as Little as $4.82 an Hour, University of California Berkeley Labor Center (September 29, 2021), https://laborcenter.berkeley.edu/mass-uber-lyft-ballot-proposition-would-create-subminimum-wage/.
5. Brian Chen and Laura Padin, “Prop 22 Was a Failure for California’s App-Based Workers. Now, It’s Also Unconstitutional,” National Employment Law Project blog (September 16, 2021), https://www.nelp.org/blog/prop-22-unconstitutional/.
6. Ben Zipperer et al., National Survey of Gig Workers Paints a Picture of Poor Working Conditions, Low Pay, Economic Policy Institute (June 1, 2022), https://www.epi.org/publication/gig-worker-survey/.
7. Lawrence Mishel and Josh Bivens, Identifying the Policy Levers Generating Wage Suppression and Wage Inequality, Economic Policy Institute (May 13, 2021), https://www.epi.org/unequalpower/publications/wage-suppression-inequality/.
8. Lynn Rhinehart et al., Misclassification, the ABC Test, and Employee Status, Economic Policy Institute (June 16, 2021), https://www.epi.org/publication/misclassification-the-abc-test-and-employee-status-the-california-experience-and-its-relevance-to-current-policy-debates/; Ross Eisenbrey and Lawrence Mishel, Uber Business Model Does Not Justify a New ‘Independent Worker’ Category, Economic Policy Institute (March 17, 2016), https://www.epi.org/publication/uber-business-model-does-not-justify-a-new-independent-worker-category/.
