Council set to pass independent contractor regulations, despite stakeholder concerns (UPDATED)

(update below)

Tomorrow afternoon the City Council will likely give final approval to a bill that requires the employers of independent contractors to provide pre-contract written disclosure of contract terms, and to make payments within certain timeframes, and to provide similar written disclosures accompanying payments. It sounds straightforward, but the devil is in the details and the Council is pushing this through despite the misgivings of the city’s own Office of Labor Standards (OLS) and Labor Standards Advisory Commission (LSAC).

Last month both OLS and the LSAC sent letters to the Council raising concerns and requesting a slower pace of progress on the bill. OLS raised three specific concerns: first, it felt there needed to be more time for engaging stakeholders on the bill; second and related to that, it feared unintended consequences because of the breadth of the application; and third, it was concerned about the budgetary impacts on the department in order to conduct education, outreach, and enforcement. The LSAC agreed with OLS, saying in its letter, “this ordinance, if enacted, would be unworkable without additional resources for OLS. The outreach necessary to make this legislation workable would dwarf OLS’s current capabilities.”

The breadth of the bill, which the LSAC said “goes far beyond” its recommendations, was of particular concern given the overlap with ongoing efforts to establish minimum pay standards for domestic workers and “gig” workers. In fact, the LSAC, in somewhat of a reversal from its original position, recommended in its letter that the Council postpone the work on the transparency requirements and prioritize minimum pay standards for gig workers. “Rather than carving out exceptions for those sectors, the Commission urges council to build those minimum pay systems before turning to this complement.” It specifically called attention to one potential unintended consequence of the current bill: requiring pre-disclosures might end up establishing a ceiling on gig workers’ pay, instead of a floor.

Nevertheless, the Council is pushing ahead and has embraced trying to fix its bill by doing the very thing the LSAC asked it not to do: expand the number of exemptions it carves out. Contracts under $600 are exempted, as are independent contractor relationships outside of “services in the course of  the hiring entity’s business or commercial activity.” Also exempted: when the contractual relationship is just for property, such as a hair stylist renting out a workspace in a salon.  Gig workers are still covered, but provisions in the bill specifically for gig workers (such as those requiring notices to be given electronically within an app, and before every job) have been removed. And the Council granted to the Director of OLS the ability to unilaterally exempt other sectors, under certain conditions:

The Director may issue rules excluding classes of independent contractors from this definition based on the Director’s determination that the class of independent contractors has adequate bargaining power in establishing their business relationships with hiring entities. The Director shall not exclude classes of independent contractors from this definition who are working in professions with workforces that are vulnerable to violations of this Chapter 14.34. When considering whether classes of independent contractors are vulnerable to violations of this Chapter, the Director may consider any number of factors, including but not limited to whether classes of independent contractors work in industries prone to misclassification, have limited English proficiency, or are unlikely to volunteer information about violations.

But the Council also removed specific exemptions for medical personnel and other other fields that are covered by “a comparable code of ethics.” While there was talk of exempting small businesses to spare them from the extra overhead every time they, for example, hire an outside IT guy to do some work on their computers, the Council chose not to add such an exception. However, because it only applies to commercial activities it exempts the city government from its own labor law, with the exception of Seattle City Light and Seattle Public Utilities.

But now there are so many dimensions to the applicable exemptions that it’s difficult to keep track of who this ordinance actually covers and when — and of course the OLS Director can change it over time as well, without the Council’s involvement.

The ongoing costs to OLS related to this ordinance are substantial: the department estimated $684,000 for the first year, and $623,000 in subsequent years. That includes hiring three new staff members, as well as $220,000 annually for contracting with community-based organizations for outreach and education.

The local workers-rights lobbying powerhouse Working Washington is a major force behind this bill, and no one is even trying to hide it: Working Washington was cited in the letter from OLS to the Council as well as in the Council committee meetings discussing the bill, and its field director has a seat on the LSAC. Working Washington also runs the “#PayUp” campaign advocating for minimum pay for gig workers that Councilmembers are already talking up. Ordinarily this wouldn’t be an issue, it would just be standard practice for a sophisticated and well-established lobbyist; except that Working Washington is the Office of Labor Standards’ largest contractor for outreach and education work, through its sister organization, the Fair Work Center, with which it shares an executive director, staff, and several board members, and is “formally aligned.” OLS paid the Fair Work Center $2.97 million to do outreach and education on the city’s ever-evolving labor standards from 2017 to 2019, and another $1.7 million for 2020 and 2021. In its letter to the Council, OLS claimed that it would need another $220,000 annually for outreach and education for this new bill, and there’s a good chance that the lion’s share of that money will also flow back to Working Washington and the Fair Work Center. The more labor standards that Working Washington successfully lobbies the city to adopt, and the more complicated they are, the more its business — and its importance to the city — grow.

In April, SCC Insight reported that Council President Gonzalez’s chief of staff, Brianna Thomas, was until recently Secretary of the Board of Working Washington, while concurrently working on labor issues for Gonzalez and while Working Washington was directly lobbying her boss and other Councilmembers.

In the bill up for approval tomorrow, the Council kicks the can down the road on the issue of more funding for OLS to support this new ordinance. It provides nothing for 2021, and directs OLS to make a formal request to the Mayor’s Office for 2022 (through a funding mechanism already in place). The one adjustment the Council did make on behalf of OLS was to move the effective date out, from March 2022 to September 2022, to give the department more time to prepare. That will be especially necessary if it won’t have any funding in the second half of 2021 and must wait until January 1 to begin work. In its letter to the Council, OLS notes that this will be challenging new work that will negatively impact its other work:

In particular, because this legislation would cover both workers and hiring entities who are unaccustomed to labor standards regulation, resourcing outreach and education will be critical. Similarly, the ordinance envisions two novel enforcement methods, which OLS must build from the ground up. This proposal will only be successful if OLS and community partners are sufficiently resourced to provide outreach and enforcement services in multiple languages and via multiple strategies.
Further, even if sufficiently resourced, this ordinance will have a significant impact on OLS’ current workplan as staffing to complete the work could not be realized until the office receives the appropriate budget and hiring authorities, but the groundwork must begin immediately. I anticipate that this new ordinance will setback OLS’ ability to implement and enforce existing ordinances and respond to ongoing policy issues, including the two TNC ordinances, the forthcoming DWSB recommendations, and the temporary Gig worker and Grocery Employee ordinances.

Nevertheless, in an email exchange last Friday a staff member for Councilmember Herbold, the prime sponsor of the bill, expressed their office’s belief that the bill in its final form addresses the concerns raised by both OLS and the LSAC. We should expect the bill to pass easily tomorrow.

UPDATE: Gay Gilmore, co-chair of the Labor Standards Advisory Commission, provided a second letter, dated June 3, from the LSAC to Herbold confirming that the updated bill still does not resolve their concerns. In response to the assertion from Herbold’s office, Gilmore said (via email), “Any characterization that the current version of the legislation addresses the concerns of LSAC is 100% false.”

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