AccelPro | Employment & Labor Law
AccelPro | Employment Law
On Worker Classification, Apps and the Future of Work

On Worker Classification, Apps and the Future of Work

With Samantha Prince, Assistant Professor of Law at Penn State Dickinson Law | Interviewed by Matt Crossman

Welcome to AccelPro Employment Law, where we provide expert interviews and coaching to accelerate your professional development. Today we’re featuring a conversation about worker classification, a world-wide issue that goes far beyond Uber, freelance work and other aspects of the gig economy.

Joining us to explain all the nuances of this complicated issue is Samantha Prince, an assistant professor of law at Penn State Dickinson Law. She says “uncertainty and volume of lawsuits” related to this issue is not sustainable, and that it’s not just a financial or book-keeping issue. It’s a health issue.”

People who work without benefits such as retirement plans, paid time off or health insurance face stress-related health issues. But there’s no legal reason for it to be that way. Employers can provide benefits even to contract workers. “Some people do conflate receiving benefits with the current culture of traditional employment, which means ‘giving up your freedom,’” she says. “But there’s no rule that says that you have to give up control of your hours or how you work just because you’re receiving benefits.” The supplemental materials and episode transcript are available below.

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Interview References:



Matt Crossman, Host: I’m going to start off by reading a blurb from your work that I think summarizes the scope of the problem. You wrote, “The uncertainty and volume of lawsuits created by this one issue, worker classification, is not efficient or sustainable and certainly not ideal. Boosting enforcement is necessary, but it would be even better if we did not have to allocate so many resources to this issue, and if workers and companies did not have to be burdened by so many lawsuits.” 

This issue has been around for decades. Why has it become more unsustainable lately? And what does this mean for HR execs, regulators, and employment attorneys?

Samantha Prince: Continuous changes in the laws is one reason. We see a lot of movement on a regular basis in this space. The other is that the way people work is constantly evolving more and more, and as our working population increases, we see the need to ensure that people are being treated properly and fairly.

And think about it: Our retirement system primarily relies on people working and having retirement plans through their jobs, and health insurance is expensive and needed by all humans regardless of what type of work you do. App-based work is a new type of work, and we need to look at it pretty closely. There’s a large population of people doing app-based work and independent work, so keeping our eye on this is really important.

MC: Let’s talk about those app-based workers: Uber drivers, Lyft drivers, the many different ways you can get your groceries delivered—they get a lot of attention. What, if anything, makes them distinct from a more traditional independent contractor?

SP: App-based workers are different from other types of independent contractors. They don’t find their own customers. They don’t have the ability to set their prices. These workers lack independence to do those kinds of things and a variety of other things, too. And while consultants and graphic designers are constrained by project parameters provided by who hires them, app-based workers have more pressures and rules to follow, and they’re even surveilled.

The control businesses like Uber have over their drivers is much more than the typical consultant-independent contractor relationship. Control is such an important component in testing classification of a class of employees. Really, no matter what test is used, (states and federal agencies use a variety of different tests to determine whether someone classifies as an employee) the control is an important aspect of determining that classification. The more controlled, the closer you are to an employee. Less control indicates a person is more independent and therefore properly classified as an independent contractor.

MC: Let’s talk a little bit more globally. You wrote, “Courts on all inhabited continents are being tasked with deciding how to classify app-based workers based on current statutes, statutes not created with the app-based economy in mind.”

The words that jumped out at me were “all inhabited continents.” You have studied what’s happening all over the world. What country has adopted rules or policies that HR execs, regulators and employment attorneys should know about, either good or bad?

SP: There’s literally a whole world out there with people working and doing all of this, and the main takeaway here is that classification is a moving target right now and continues to be.

The UK has a three-part classification system that includes employees, independent workers and a middle ground. The EU has set parameters on minimum standards for its member countries. The EU’s goal is to improve working conditions and social rights for people working through apps while still supporting the conditions for sustainable growth of digital platforms and that economy, the entrepreneurial aspect.

The U.S. is a hotbed for all of this, primarily because we have laws that impact the classification or benefit entitlements at all levels: city, state, federal.


MC: You used the term entrepreneurial, and that is one that runs throughout your career. You have represented many entrepreneurs. You have written two textbooks on entrepreneurship law. What has that experience taught you about what entrepreneurs and the HR execs they might hire need to know about this issue?

SP: It’s certainly a really important area, and anytime that an entrepreneur starts a business, they need to consider how they’re going to classify their workers, or how they’re going to hire and what they’re going to do with those workers. Are they going to give them enough independence to be able to consider them independent contractors, which is economically better for the company, or are they going to need more control over them or need them to do more work that is geared toward what the company does itself?

MC: I’ve been an independent contractor myself for 10 years, and my experience is that the individual that I deal with, in most cases an editor at a magazine, frankly doesn’t really understand the rules and the regulations. What advice do you have for companies as far as dealing with independent contractors and how to teach people how this all works?

SPe: Yeah, that’s a really tough question because there are so many different tests out there. You have different things that people are entitled to at different city levels. You have different state laws, and within those state laws, they may apply differently. Some may apply for tax withholding, but there’s a different test for minimum wage within the state or for workers’ compensation within the state. And then you have federal agencies. The IRS has a test. The NLRB has a test. The Department of Labor has a test, so it’s really hard to think about all of this. 

And then you compound that with people working remotely, and the people working in states that are different than the state where they had been working, which may be different than the state where the company is located. Now those HR professionals and attorneys need to pay attention to where the individual is residing, what employment laws apply there, and what tests apply there as well.


MC: That goes right into one of the questions I was going to ask you. California, as it often is, has been among the first states to address this issue. What did California get right? What did they get wrong? And what are other states going to do to copy or improve upon California statutes?

SP: I’ve written an entire article just on the California law itself. There’s a reason for that, and I call it the AB5 experiment. Some of it’s good, and some of it’s not so good.

I look at this, and I just keep thinking how intriguing it is, what’s going on at the state level. California adopted this worker classification law called the ABC test, which puts a presumption out there: It presumes a worker is an employee, unless the hiring company can prove the three parts of the test.

And while California’s not even close to being the first to have adopted the ABC test, due to its sheer size and the far-reaching consequences of flipping this narrative to a presumption, California’s garnered a lot of attention. The ABC test shifts the burden onto the company to prove that its workers are not employees.

And California has pretty much applied it across the board, not just to the app-based companies. There were certain occupations that were carved out of being subject to the ABC test. I’ll just mention as a side note, that even though these occupations are carved out, they still have to use the prior test. That test does not presume employee status, but rather calls for the weighing of numerous factors to determine the classification.

But those carve outs in the California law are a big deal because soon after the AB5 passed, it was replaced with the same test language, but it incorporated many more carve outs, over 100. And so what do we need to watch here? We need to watch what the California courts and the Ninth Circuit are going to do.

It’s so important to flag that the court system is processing numerous cases regarding AB5 alone, its applicability and its constitutionality. Professionals and other state legislators are watching what’s going on. Some already have the ABC test codified and want to see how things go in California in case similar cases are brought in their state.

Also, some states are considering whether to adopt the ABC test, and the results of these court cases may be of interest to them. I’ll add that some states have chosen not to adopt the ABC test recently. Virginia’s one of them. A couple years ago, the Virginia legislature had a choice between the ABC test and a 20 factor test that came from the IRS from the 1980s. It chose the IRS test, and there are other states adopting that same test. This test does not presume employee status and weighs 20 factors to the extent that they’re factually applicable to the situation that the courts are looking at. Who would’ve guessed that a test from the 1980s would become in vogue now?

It’s crazy, but it’s what’s going on out there. A few states, like Tennessee, have tests that focus directly on app-based work, but not very many states do that.

MC: I’m trying to imagine myself as an HR executive trying to figure that all out. You’ve got California, you’ve got Virginia, you’ve got Tennessee. Is there a state in the middle that you can say, OK, this seems like the one I should follow?

SP: I think that’s a really interesting idea, and generally you would want to just say, well, maybe I’ll just pick this one state because it’s got a test that maybe the majority have. The problem is you still have the federal agency aspect of it. 

First, I would say there’s not a majority of states that have the ABC test. You do not have a majority of anything using these tests. They’re just so cut across the board. But I would say that focusing on the control issue is one of the most important things. We want to make sure that control is something that we pay attention to as far as how much our clients are exerting control over their workers, and I think that’s going to end up being somewhat key in this equation. 


MC: Set aside the test for a second and go back to something you said earlier, which is whether a particular classification is economically better for the company. You described the uncertainty of the gig-economy life as creating existential instability, which to me sounds like a plea to HR executives that this is not necessarily a classification issue, a bookkeeping issue, or even a way to save a buck on taxes. It’s a health issue. 

Can the case be made that HR execs and companies might want to treat independent contractors as employees as a default position because that would be better for their health and therefore better for the company because they’ll perform better?

SP: Before I answer your question, I’ll just clarify that you can treat independent contractors as employees. You can give them employee benefits, but you don’t have to treat them as employees completely in order to provide those benefits. A company is certainly within their rights to offer certain benefits outside of employment status if they wish.

You can locate all kinds of statistics that show that the happier your workers are and the less stress they have, the better they perform. And the healthier they are, the more time they can work, versus calling off. Independent contractors are not typically provided employee benefits, and they’re not protected by numerous laws, such as a minimum wage, overtime, anti-discrimination, or the ability to collectively bargain. But it doesn’t have to be that way.

All of that to say, independent contractors are often working without health insurance, retirement or other kinds of employee benefits, like paid time off, which can cause stress and keep them from managing their health or saving for retirement all because the onus is on them.

Some people do conflate receiving benefits with the current culture of traditional employment, which means “giving up your freedom.” But there’s no rule that says that you have to give up control of your hours or how you work just because you’re receiving benefits. Our culture ingrained that into us, but it doesn’t have to be this way. If you trust people to get their work done, which I suspect many do if they have independent contractors working on projects, then providing them with benefits should not come with a 9-to-5 working requirement.

MC: There is some talk, particularly in California, of creating a third level of employment, not quite independent, not quite full-time. It sounds like a version of what you were just describing. What do HR execs, regulators, and employment lawyers need to know about that?

SP: Yeah, you’re right. This idea has been tossed around for numerous years, actually. It’s not really gaining a lot of traction here in the United States. We hear about it occasionally, but it doesn’t ever seem to go far.

We see this middle-tier classification in other countries. I mentioned the UK already. Canada also has a middle classification. I think about how we were kind of approaching that sort of model informally already, like you just keyed in on what I was saying before. Some cities and states are requiring companies to provide benefits of some sort to certain app-based workers.

For example, in New York City, DoorDashers and other delivery drivers must be given restroom access. You can imagine why that’s important, right? While this doesn’t change the worker classification, it does provide a benefit that the typical independent contractor was not previously entitled to. And if we see continued city and state regulations requiring benefits, we may bypass the need for that middle classification entirely.

The key point being to know where your employees are and what laws apply to them, specifically like what you see with the DoorDash driver example. 

MC: With all of the confusion and all of the different regulations and all the lawsuits, do you foresee any kind of solution for this, or are we still at the beginning of the storm?

SP: There’s a lot of political divisiveness that goes around this decision. You have one side saying, “Well, we need to protect workers and provide them with benefits and rights and protections.” And then you have the other side saying, “Well, this should be an economic decision and we should be looking at this from the business side of things.” And I think that right now everything becomes a larger issue than it probably needs to be. It’s just another fighting point. I don’t want to sound cynical. I do think that progress can be made, but I don’t know how quickly that’s going to happen, and I don’t know how quickly it will actually simplify things for HR professionals and lawyers who represent businesses in this space.

Let’s not forget the workers themselves who can’t understand what the heck’s going on either. They can’t even advocate for themselves in these positions because they don’t know, so if you think that as a professional operating in this space you’d have difficulty, imagine the people that are living this life and don’t get it. They don’t know what they’re entitled to, so they’re scared. 

When AB5 came out, you had a lot of people come out screaming, saying, “Hey, we don’t want someone telling us that we have to work at this time of day or that time of day,” and “We don’t want to be an employee,” and that’s totally not it. You don’t have to be told what time of day to work in order to be entitled to things, but that’s what everybody kind of thinks. I guess we’ll see. It would be nice if we saw companies stepping up and offering benefits to help us reduce retirement insecurity and things that we know are a problem in this country.

MC: Let’s put your private practice hat back on. Somebody calls you and says, “I’m an independent contractor and with all of these rules and regulations I’m scared.” How do you counsel them?

SP: Yeah, that’s a good question. I would first want to know what their situation is and ask them a lot of those questions that go toward the control aspect. But after that, if it looks like this is something questionable, you can file a form with the IRS so that the IRS will check and see if you should be considered an independent contractor for tax purposes. You can send something to the Department of Labor as well and ask them to check. 

You can also just go to your HR person and just ask them and say, “I’m doing all of these things. It seems like I’m doing employee work, or I’m doing a lot of things like Joe Employee over here. Why am I considered an independent contractor?” Maybe you’ll get some more information that way. I think that that’s something that definitely people should look into if they’re concerned.


MC: I want to pivot and talk about your career path. You made a career change from partner to professor. Why?

SP: I practiced law for 20 or so years. Initially, I taught as an adjunct professor for a number of years, juggling a practice, family and teaching at two different law schools before I settled into being a full-time member of the faculty.

Why did I do it? I enjoy practicing a lot. For anybody that represents entrepreneurs, you know how much fun that is. You get involved, and you’re almost like a partner in the business, right? You’re helping them. If you’re not one of those attorneys that tries to block everything they do, but you’re in tune with what they need to do and how to do it, you really make a big difference with helping folks set up their businesses.

I do miss that, for sure, which is why I developed two entrepreneurship law courses at the law school so that I can teach and still stay in that space and invite entrepreneurs in to talk to the law students and teach students how to better represent entrepreneurs and maybe become entrepreneurs themselves. Because there’s no rule that says you go to law school only to be a lawyer. 

I like being able to bring that energy to the students. I get the space and the time to research and really look into some of these issues more deeply than I could in practice. In practice, you’re always on the fly and running, and now I have a little bit more time so I can sit and think through some of these issues that I encountered during practice and look at what’s going on now. And as you said at the outset, worker classification has been a hot issue for so many years. It just hasn’t stopped.

MC: You used the term juggling, and I suspect that every attorney on the face of the earth has, at one point or another, had to juggle things as you described. What advice do you have for the early- to mid-career attorney who is juggling different career aspirations, a growing family, and just life in general?

SP: I don’t know that I really have the magic advice on this, but being present for your kids is something that’s really important because you cannot get time back. You can earn more money tomorrow. You cannot go back and watch your kid play baseball again, or watch your daughter play volleyball again. One thing that I tried doing was bringing the laptop with me to a baseball game, but then I just realized exactly what I was doing and how wrong that was, and I stopped.

Maybe that’s great for the client, but that’s not great for my son who sees me doing that. I think that being a good role model for your children and for other people around you is really important. What does that mean when it comes to juggling? It means prioritizing. When I’m at work, I’m working as efficiently as possible. I’m not a social butterfly around the office. I’m sitting there to work and to get my stuff done. Maybe that sounds awful, but for me, that’s the kind of stuff that worked. 

And then there’s just doing things that bring you joy. Whether it’s vacations or teaching or doing something just different from a career aspect, I think that gives you a lot of energy and that’s what’s really important too.

Listen on Apple Podcasts, Spotify and YouTube.

This AccelPro audio transcript has been edited and organized for clarity. This interview was recorded on April 12, 2023.

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AccelPro | Employment & Labor Law
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