From employment to contract: section 1981 and antidiscrimination law for the independent contractor workforce.

• Author: Tarantolo, Danielle

NOTE CONTENTS INTRODUCTION THE RISE OF CONTINGENT WORK A. The Contracting-Out Phenomenon B. Independent Contractors and the Antidiscrimination Law "Black Hole" II. SECTION 1981 AND THE RIGHT TO CONTRACT A. Section 1981'S Origins B. Section 1981 Today C. Independent Contractor Plaintiffs and [section] 1981 Ill. SECTION 1981 AS AN IMPERFECT SOLUTION A. Section 1981's Structural Limitations B. Section 1981's Doctrinal Limitations IV. RETHEORIZING [section] 1981 A. Why Protect Independent Contractors ? B. Why [section] 19817 C. Implementing the New [section] 1981 CONCLUSION INTRODUCTION

Over the past several decades, the American workplace has undergone a fundamental transformation. (1) Gone are the stable, long-term employment relationships that prevailed during most of the twentieth century; today, firms increasingly hire "contingent workers": independent contractors, temporary and leased workers, and part-time employees. (2) While many businesses have reaped benefits from these new arrangements, workers themselves frequently have suffered. Contingent workers earn less on average than their traditionally employed counterparts, generally do not receive health insurance or pension benefits, and enjoy little to no job security. (3) Moreover, many fall outside the critical social and economic protections of labor and employment laws. (4) In distinguishing between "employees," whom these laws protect, and "independent contractors," whom they do not, courts have applied to these modern work relationships legal definitions of employment developed in other eras and for other purposes. (5) As a result, the broad swath of contingent workers legally classified as "independent" contractors--largely because their employers exert less control over the manner in which they perform their duties (6)--has been excluded entirely from critical workplace regulations. (7)

Title VII of the Civil Rights Act of 1964, (8) considered one of the most important pieces of legislation of the past century, offers fundamental protections for American workers. Yet courts have interpreted Title VII, which circularly defines those it covers as "individual[s] employed by an employer," (9) not to cover those classified as "independent contractors." (10) The Age Discrimination in Employment Act (ADEA) (11) and the Americans with Disabilities Act (ADA) (12) share Title VII's definition and are thus similarly limited. Because the legal test to distinguish protected "employees" from independent contractors is complex, and because statistics about the contingent workforce do not address that dichotomy, it is impossible to identify precisely how many American workers lack coverage. But given the trends indicated by existing data, contingent workers, including independent contractors, likely represent a substantial and growing portion of the population. (13)

Moreover, contingent workers have the demographic characteristics of those who most need antidiscrimination protection. First, they are more likely than traditional workers to be female and to be black or Hispanic, making them readier targets of workplace discrimination. (14) Second, because they are lower-paid, they are at greater risk of falling into poverty if they lose their jobs. (15) Nonetheless, Title VII provides no recourse if an employer treats an independent contractor differently because of her race or sex by, for example, refusing to hire her, terminating her contract, paying her lower wages, or harassing her. The ADA and ADEA similarly lack protections for independent contractors treated differently because of disability or age.

Independent contractors are not entirely without legal remedy, however. Section 1981, a provision of the Civil Rights Act of 1866 that remains good law, (16) forbids discrimination in the making and enforcing of contracts. (17) Though the Reconstruction Congress passed the statute to alleviate the plight of freed blacks in the post-Civil War South, courts have breathed new life into the provision over the past half-century. (18) At present, [section] 1981 provides protection roughly equivalent to that of Title VII to a subset of the independent contractors whom Title VII excludes: those who suffer race-based disparate treatment discrimination. Because [section] 1981 leaves untouched a range of discriminatory conduct, including nonracial discrimination and disparate impact discrimination, and because it has a number of procedural limitations, [section] 1981 remains an imperfect remedy. (19) But the statute's language, origins, and applications suggest it might be revamped to fill critical gaps in workplace antidiscrimination law's coverage of independent contractors.

In this Note, I analyze the failure of the federal workplace antidiscrimination regime to protect independent contractors, and I propose using a modernized [section] 1981 to address that failure. In Part I, I explore the characteristics of the contingent workforce and describe how Title VII excludes those considered to be "independent contractors." (20) In Part II, I describe the origins of [section] 1981 and how it has evolved to provide partial coverage for some independent contractors who fall outside Title VII's scope. In Part III, I discuss why [section] 1981's structural and doctrinal limitations currently render it an inadequate solution to the plight of independent contractors. Finally, in Part W, I propose a revised vision of [section] 1981 that both reflects its original purpose and extends practical antidiscrimination coverage to independent contractors.

1. THE RISE OF CONTINGENT WORK

   1. The Contracting-Out Phenomenon

      The American workplace is in the midst of a change so profound that some have called it a "crisis of work." (21) The model of career employment, characterized by workers' orderly progression through the internal labor markets of single firms, has given way to shorter-lived and less secure contingent jobs. (22) Instead of hiring additional traditional employees, companies today increasingly outsource tasks to peripheral workers, including temporary and leased workers (whom they procure from a supplying agency) and independent contractors (who operate by themselves). (23) The economic incentives to contract out are substantial. For many businesses, the greatest advantage of these nontraditional arrangements is their tremendous flexibility. Temporary or contract workers are easy to hire and easy to dismiss because they have short-term contracts and no expectation of continued employment. (24) Unlike core employees, whom employers can fire only with difficulty, contracted workers can be terminated with minimum hassle, at virtually no cost, and with little fear of legal repercussions. (25) Firms therefore can respond quickly to rises and falls in demand, minimizing the number of extra workers on their payrolls. (26) Contingent workers also cost employers less because their wages are usually lower than core employees' and they do not receive benefits. (27) Businesses hire contingent workers for a variety of positions--for example, as janitors, secretaries, construction workers, security guards, technology consultants, truck drivers, insurance agents, and agricultural laborers. (28)

      While most scholars recognize that the contingent workforce is sizable and growing, little reliable information exists about the current number of contingent workers. (29) Using a conservative measure, the Bureau of Labor Statistics (BLS) reported in 2005 that contingent workers now account for up to 4.1% of the workforce and that workers in "alternative arrangements" (an overlapping category) account for l0.7%. (30) Many scholars have criticized the BLS definition of contingency, which relied on perceived job insecurity instead of the inherent insecurity of the work arrangement, and have found the measurements generally underinclusive. (31) Other researchers, using a work-arrangement-based definition, have found that contingent workers represent at least 16% of the labor force and possibly as much as 290/0.32 Because of definitional ambiguities and methodological challenges, counting contingent workers has proven highly difficult, (33) and disagreement over their numbers is likely to persist.

      Contingent workers are a diverse group in terms of their occupation, level of skill, pay, and demographic characteristics. (34) Nevertheless, certain trends are observable across studies. First, contingent workers are less secure than their traditionally employed counterparts in terms of job stability and socioeconomic status. (35) To be sure, the flexibility of alternative work arrangements substantially advantages some workers: parents who wish to work while they raise children, students while they attend school, the elderly while in semiretirement, and the inexperienced while acquiring human capital. (36) Yet these workers are also at risk of arbitrary dismissal, as contingent relationships are easier to terminate than traditional employment. (37) Moreover, even when they are working, contingent workers tend to be lower-paid and receive fewer benefits than classic employees, (38) rendering them less able to cope with the unwanted periods of unemployment they are more likely to experience. (39) In light of the economic gap between contingent and noncontingent work, scholars have begun to describe the American labor force as "two-tiered," (40) with one tier motivated by "prospects of advancement, participation, and job security" and the other by "insecurity and fear." (41)

      Second, contingent workers are more likely than traditional employees to be female and to be black or Hispanic. (42) A standard explanation for the prevalence of women in the contingent workforce is that they choose more flexible schedules to accommodate their family responsibilities. (43) A parallel argument for minorities is that they choose contingent work to gain skills. (44) Yet these accounts are undermined by the finding that...