Now the first thing we're going to talk about is also the most important thing. Because it lays the foundation for pretty much everything else that follows. It's also, as you can probably tell, one of the most complicated aspects of gig work regulation. What I'm talking about is the basic question of whether gig workers are legally classified as employees or as independent contractors. In everyday conversation, we tend to use words like employee and employment pretty loosely. As long as you're doing work for someone else and being paid for that work, we might call it employment, and we might call you an employee. By the same token, if you don't work for anyone else, say you run a small business, we tend to say that you're self employed. But in the legal world, employment has a very particular meaning. An employee is a very special kind of worker. Only employees are protected against workplace discrimination, on the basis of age, sex and gender, religion, national origin, and disability. Only employees are guaranteed a minimum hourly wage, a minimum overtime pay rate, and equal pay as between men and women. Only employees are assured that someone else will calculate and withhold relevant taxes from their pay steps. Only employees are granted protections when they seek advice regarding their retirement planning. And when they try to act collectively to win better terms from the people who hire them. Only employees are promised accommodations at work when they are or perceived to be disabled. All of the statutes that make these promises only make them to employees. So if you're not an employee in the United States, you're pretty much on your own when it comes to your working conditions. And most often, if you're not an employee, you're what's called an independent contractor. You might think that with so much riding on employee status, we have straightforward ways of distinguishing between employees and independent contractors, but we don't. That's partly because of some of the structural factors we discussed earlier. Like our federal system, which allows for variation both vertically between different levels of government and horizontally across different states and localities. It's also because of the mix of common law and statutory law that make up our system of work regulation and how that complicates judicial efforts to clarify what the law is. But above all this, one of the main reasons our worker classification law is as muddled as it is, is because what we call employment law today is a blend of two older subjects, Contract Law and Agency Law. And combining the two has made for some pretty puzzling circumstances. Contract Law, at its most simple, governs the agreements between two or more parties. Contracts function as a special kind of promise. Ones that are legally enforceable, because they were assented to by the parties involved, that are usually about commercial exchanges that leave both parties better off. And that include consideration, something of value in return for the promise is being exchanged. So to use the same example as the course on employment contracts. If I promise to transfer ownership of my car to you in exchange for money, you're getting a car, I'm getting money, and the whole thing constitutes a contract with consideration. And all of this promising exchanging and consideration is imagined to be happening between two parties of similar sophistication who intend for it to happen. In the car example, that probably means that you and I have about the same level of knowledge as to the shape of my car. We both have about the same level of knowledge as to the going rate for this kind of car given its age, and mileage, and overall condition. And neither one of us is a professional, who does this repeatedly, or has a team of experts whispering in our ear about how to strike the best deal. In other words, we're pretty much on an equal footing. That's what contract law assumes, the parties to a contract are equally sophisticated and they choose the terms that will apply to them. What you get depends on what you decide to ask for. But the other branch of law, that's in the mix here, namely Agency Law assumes the opposite. Agency Law depends on there being a hierarchy between the two parties to a relationship. Because one is acting as the agent or the representative of the other. The agent is subordinate to the principal in a way the classic theory of representative democracy is built on the same idea. Our elected representatives are supposed to act on our behalf, representing our interests and adhering to our wishes. Now, of course, in order for this to work, principles need to be able to tell agents what to do, and to enforce their demands. And if a principal gets to tell their agent what to do as well as when to do it, how to do it, and so on, then it seems reasonable to hold the principal responsible for when things go wrong. This is how agency law leads us to the concept of vicarious liability. Which says, that under certain conditions a party will be responsible for the bad acts committed not by them, but by their agent that affect people outside the relationship. So we might say that a farmer who hires someone to drive a tractor is vicariously liable when the worker accidentally hits a pedestrian while driving the tractor and causes the pedestrian physical injury. And because of this potential exposure to liability, the principal has a strong interest in both controlling the agent and in determining who counts as an agent in the first place. When it comes to Agency Law, what you get both as the principal and as the agent, depends on who you are, either principal or agent, more than on what you asked for. One last factor contributing to the confusion in our worker classification system, is the fact that the relationship between employers and employees grows out of what was once called the master/servant relationship. The word servant here doesn't just mean the kind of domestic help or personal attendant we're used to see in television shows about minor British inability. It's referring to a whole range of tasks, because in pre-industrial England, work relationships usually existed within a household, rather than at a separate designated place you went to for several hours a day. The servant was part of the master's household, an extension of his person, and a charge for whom he was responsible. Along with three other severely hierarchical relationships. Between husband and wife, parent and child, and guardian and ward, the master/servant dynamic was one of the four household relationships. In which the subordinate party owed obedience, and the dominant party owed both care and control. So now we have these two bodies of law, Contract Law and Agency Law, as well as one type of relationship, the master/servant relationship. How did all of these get jumbled together? When did they get jumbled together? And why does it matter for worker classification? The first two questions are historical puzzles that we aren't going to explore too deeply. But suffice it to say that the conditions of work, political commitments, and legal developments that occurred during the 18th and 19th centuries brought these three things together. One of the single most important factors in this convergence, was the process of industrialization. Which led more people to work outside the home for other people with whom they had no relationship except the one that they built through work. Those relationships were more formal, more intentionally entered into, and less permanent. You could say that they started to feel a little bit more like contracts. Another important factor was the gradual, though extremely imperfect, extension of rights. Specifically, the idea that people who paid for work shouldn't have unlimited authority over those who worked for them, although they still had a lot of authority. And yet, because one of the primary models for governing labor had been a master's/servant dynamic. Which granted the master virtually unchecked authority over the servant, but also obliged the master to provide for the servant. People who paid for work were accorded a great deal of authority under the new rights oriented framework as well. By the late 19th century, masters were called employers and servants were called employees. Their obligations and expectations with respect to one another had changed quite a bit from the old master/servant dynamic. But the old hierarchy remained. And importantly, it was now couched in the language of contract between equal parties. The employer who wanted work done, offered money, and the employee who wanted money, offered work. The law called this a contract and described the parties as equals. But the old way of understanding labor exchange was not just lurking in the background, it was explicitly encoded into the relationship. This is where we start to get an answer to our third question, namely why does all of this matter for worker classification? It matters, because the single most important question across all areas of labor regulation, whether someone is an employee or an independent contractor, is informed by areas of law that proceed from different baseline assumptions. Employment in the United States is a contract, and contract law assumes the parties are equal. They get what they asked for, and if they don't like what they get, well, they should have asked for more. But employment in the United States is also an agency relationship and a derivative of the master-servant dynamic. And both of those assume that the parties are not equal. They get and they give what they're required to because of the position they hold. Because of the tension between these two very different ways of thinking about relationships, the legal tests we use to determine whether a particular worker is an employee or an independent contractor, and there are a few tests, are constantly struggling with how to think about the work relationship at all. This is a lot of history and legal theory to cover. But it plays an important role in the challenge of regulating gig work today. If, as we've already noted, a foundational question in work law generally is whether any given worker is an employee or an independent contractor, then it stands to reason that this is one of the most important questions regarding gig work too. And it is. What courts, legislators, companies, and workers, all want to know is, are gig workers employees or not? But as this little excursion into legal history suggests, that question doesn't have easy answers. Employment is a contract, which as we know, is assumed to involve equal parties. But, it's a contract that creates an asymmetrical relationship based on one party's right to exercise authority over the other. And the same parties obligations as a result of that authority. Any test that's developed to identify this kind of relationship, the employer employee relationship, is going to import this fundamental tension along with it. And as we'll see in the next session, the primary test that's used to identify employer-employee relationships and therefore to identify workers who are employees as opposed to independent contractors, is chock full of the problems that have always been apparent. That becomes glaringly so in the context of gig work.