New Ways of Working Together

A primary goal of the sharing economy is to give individuals and communities control over their livelihoods and economic well-being.  This creates an immediate legal conundrum: Most of our employment and labor laws are designed to protect workers that lack control over their livelihoods.  The reach and coverage of such laws has grown to the extent that they now cover even the collaborative, democratic, participatory, self-sufficient, and accountable economic relationships we are creating in a sharing economy.  In fact, our employment law framework may be one of the greatest barriers to the creation of more cooperative and sustainable economies.

This section of this resource library will provide an overview of the common employment law puzzles that come up in contexts such as social enterprise, worker cooperatives, food cooperatives, shared housing, collaborative farming arrangements, and other activities common to the sharing economy.  In the new economy, everyone must be empowered to spot issues, learn the intricacies of the legal grey areas, and help implement legal solutions that balance the protection of individuals and preservation of cooperative visions.

From Working For Others…. to Working With Others

Working for others is how the vast majority (roughly 92 percent 1) of working adults in the U.S. earn their livelihoods.  Having a job is an attractive option to the extent that it provides us with a predictable source of income.  2 Unfortunately, widespread reliance on jobs creates a vulnerable economy.  The inherent flaw in relying on other people to create the opportunities for our livelihoods is that the system is designed to ensure that employers have enough workers, not to ensure that workers have just enough jobs.  Individual workers have little or no control over the availability and diversity of job options.

Searching for a job becomes like a game of musical chairs, where players, with great urgency, vie for a scarce number of seats.  The people that find a seat will not necessarily find it fitting or comfortable, but they likely feel relieved to at least have a seat.  These days, the game has a larger number of people and a smaller number of chairs.  Musical chairs was fun as a kindergarten game.  But as a way to sustain ourselves, our families, and our communities?  Not so much.

The solution, of course, is to stop waiting for chairs to appear and to make our own.  While jobs can disappear, our abilities to be productive and provide for one another will never disappear.  When we learn how to harness this powerful capacity and create stable opportunities to be productive, the game will always involve more than enough chairs.  The new economy is characterized by many new opportunities and arrangements to work, spend our time, and contribute productively to society.  Microenterprise, cooperative enterprise, community-supported enterprise, and sharing enterprise are likely to become the norm, since they put control of livelihoods back into the hands of communities.

Working with others is how we will make it happen.  We won’t succeed if we each create our own businesses and compete with each other for a share of the market; that would just result in different game of musical chairs.  Rather, we will succeed if we form relationships and organizations that allow us to collaborate.  Everyone can be and needs to be productive, and everyone can be and needs to be provided for, and we can achieve both through a variety of agreements with each other:

  • Agreements to cooperatively work for our mutual benefit: A grocery cooperative is, essentially, a group of people that provide for themselves by means of their own food aggregation and distribution center.  Many grocery cooperatives are operated entirely by the efforts of members, who order food and divvy it among themselves, thereby obtaining food at cost and removing the need for a commercial grocery store to serve as an intermediary.
  • Agreements by a group of people to “adopt” an enterprise: This is another way of saying “community-supported enterprise.”  In the example of community-supported agriculture, a group of people agrees to adopt and support a farmer, by purchasing a share of the farmer’s harvest in advance.
  • Agreements to work separately in multiple enterprises and provide reciprocal support: Controlling workload can be quite difficult in some industries, and this creates a particular strain on very small businesses.  A group of small-scale farmers or a group of caterers may, formally or informally, agree to chip in and help each other out when things get busy.  One farmer may get help from another at harvest time, and reciprocate later. A caterer may help out another during a big event and receive the same in return later.
  • Agreements to work separately and market together:  A producer cooperative allows multiple independent enterprises to benefit and thrive through cooperation.  For example, a group of home bakers may form an agreement to cooperatively sell their breads at a joint farmers market stand or under a single brand, thus reducing competition and the high cost of each entrepreneur marketing products alone.
  • Agreements to work together in an enterprise: Worker cooperatives are groups of people that have chosen to work together in the creation and operation of an enterprise.  Worker cooperatives are particularly useful as a structure for enterprises that would be highly difficult and expensive to start and operate as a solo entrepreneur, such as a construction business, a café, or many of the “blue collar” industries of modern society.
  • Agreements to engage in activities that bring together work and life:  People long to engage in productive work for a variety of reasons – to learn, to connect with other people, to get exercise, to provide for others, to build skills and credentials, to gain the respect of others, to have fun, and so on.  Any of these motivations may lead a person to volunteer in the kitchen of a local café or help a friend on her organic farm.  The motivations often outweigh the need or desire to spend that time working for money.  Cooking and growing food are things people do for sustenance and enjoyment – they are part of life.  In other contexts, they are work.  There is no reason that work and life must stay separate, and we are seeing a growing number of community-based activities  – like community farms and cafés – where the two merge and become somewhat indistinguishable.
  • Agreements to provide for each other without using dollars:  In modern society, people have a tendency to not do work for others if there is no one with dollars to pay for the work; other people suffer from a lack of access to goods and services when they lack dollars to purchase them.  But there is no reason that lack of access to dollars should make us unproductive and impoverished, when we need only turn to one another and exchange without dollars.  Working in exchange for housing, trading one product for another, providing and receiving services through a time bank – these are ways that our work can provide for us, even without dollars acting as an intermediary.  Within a close-knit community, people simply provide for each other on a gift basis; such communities can thrive and flourish even when their dollar income is very low (this, by the way, is how many people of the world do thrive even with $1 of monetary income per day).

In essence, collaboration, not competition, becomes the key to success of “enterprise” and productive activity in the new economy.  A consumer cooperative is unlikely to fail from lack of “customers;” entrepreneurs that frequently barter are unlikely to fail from lack of customers with money; through relationships of reciprocal support, a farmer is unlikely to fail from lack of support during a busy harvest.  In sum, the agreements we make with each other ensure something important: that we will have enough.  What does enough mean for the game of musical chairs?  It means that when the music stops, we can take our time, help others to find a seat, let others help us find a seat, and, in the end, we all have a seat.

Employment Laws Get an Economic Reality Check

The arrangements listed above sound quite doable from a practical standpoint; from a legal standpoint, some are incredibly challenging.  Many people’s eyes open very wide when their lawyers tell them that their idea for a food cooperative, work exchange system, or farm volunteer program violates employment laws.  The highly collaborative, egalitarian, or community-oriented reality of their project may have so little in common with the impersonal, unequal, and often exploitative reality of the employment relationships that our laws were designed to protect.

Our labor and employment laws recognize that a basic reality pervades most employment relationships: Employers 1) control the work of an employee and 2) benefit economically from work of the employee.  If you are in control of someone’s work and you are benefiting from it, chances are you will make decisions to maximize your gain.  A perverse incentive system is embedded into this relationship: for example, the less an employee is paid, the more an employer makes.  The less an employer invests into the health and wellbeing of employees, the more the employer will have available to invest in growing the business and profits.  It’s a system of competing interests where one side is primarily in control.

Employers will do right by employees to the extent that they care about their workers.  Unfortunately, caring is not a sure thing in a world full of large and impersonal companies controlled by absentee shareholders.  Employers will also do right by employees to the extent that they are dependent on finding and retaining good workers.  But in an economy where there is a scarcity of job opportunities and few alternative ways to make a livelihood, the reality is that workers are far more dependent on an employer than the employer is on them.  The result is that employees have far less bargaining power than the employer.  In the late 1800s and early 1900s, there were an enormous number of labor unions, which gave bargaining power to workers.  However, by the 1930s, unions were disappearing, and legislators were seeing more clearly the harsh effects of the imbalance.  Thus began the adoption of a long line of laws to give rights and protections to workers, beginning with the Fair Labor Standards Act. 3

Employment Laws and Our Relationship “Issues”

Regulation is the government’s way of saying: “If you can’t balance your own relationship, we will have to balance it for you!”  And we have a long history of worker exploitation to show that employers and workers have serious relationship “issues.”  In that respect, it’s enormously important that we have implemented minimum wage laws, limits on work hours, occupational health and safety protections, mandatory workers compensation insurance, wrongful termination laws, whistleblower protections, anti-discrimination laws, mandatory employer contributions to unemployment and disability funds, and so on.

It’s a funny story how we got to our current regulatory framework, though.  Courts were initially, in the early 1900s, quite reluctant to let the government regulate our work relationships, since the Contracts Clause of the U.S. Constitution says that the government should not intervene in our right to set the terms of our economic relationships. 4  The Supreme Court broke with this trend in 1937 when it upheld Washington State’s minimum wage law. 5  It’s revealing to see how the Court explained itself:

“Deprivation of liberty to contract is forbidden by the Constitution if without due process of law, but restraint or regulation of this liberty, if reasonable in relation to its subject and if adopted for the protection of the community against evils menacing the health, safety, morals and welfare of the people, is due process.” 6  […]

“In dealing with the relation of employer and employed, the legislature has necessarily a wide field of discretion in order that there may be suitable protection of health and safety, and that peace and good order may be promoted through regulations designed to insure wholesome conditions of work and freedom from oppression.” 7

 In other words, the Court was saying: The government can limit your freedom of contract and impose regulations, because your relationship “issues” are causing harm to people.  But this leaves us to wonder: Can those regulations be upheld in application to a very different kind of relationship – one of collaborative work and mutual support?  That’s a hard question, and it’s one that may not be answered until we ask the Court in a more official manner and bring them a case.

In 1983, the Supreme Court further elucidated the circumstances under which laws may restrict the private right of contract.  First of all, the state “must have a significant and legitimate public purpose behind the regulation, […] such as remedying of a broad and general social or economic problem.” 8  The next inquiry is whether “the adjustment of ‘the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation’s] adoption.’” 9

The Court has potentially left us a window to renew our inquiry: Are the conditions still appropriate to the public purpose of the regulation if their impact is to limit society’s ability to create an alternative to the worker/employer relationship?

The sad irony about all of the regulation is 1) it still hasn’t led to balanced employer/worker relationships, and 2) it contributes to another kind of social and economic imbalance: while the laws are designed to protect employees, the laws also force some people to become and remain employees by making it prohibitive for them to operate a small enterprise, a cooperative, or a project designed to generate a non-monetary income.  In contrast, large businesses can afford the cost of complying with employment laws because the reliance on the work of employees generates a surplus of monetary income.  In essence, the situation leaves two kinds of people in the game: 1) people that work for others and 2) people that make a lot of money by having others work for them.  The challenge now is to maintain those critical legal protections for workers, while carving out a space for them to join a third category of people: 3) people that thrive by working together for mutual, cooperative, non-profit, low-profit, and/or non-monetary benefit.

Employment Laws and the Relationships of the Sharing Economy

Many people in the sharing economy will create relationships that they do not intend to be subject to employment laws.  It will sometimes devastate them to learn from their lawyer that their voluntary, enjoyable, and collaborative relationships are subject to minimum wage requirements and other employment laws.  The goal in the case of many cooperatives and community-based activities will be to find ways to re-structure relationships and to legitimately argue that there is no master-servant relationship.

The legal system has carved out categories of work that are not subject to the normal regulations on employers and employees.  The threshold question tends to be: “Is the worker an employee?”  The Fair Labor Standards Act (FLSA) states that an employee is “any individual employed by an employer.” 10  The primary thing this definition achieves is to inspire some occasional sarcasm: “Thank you, FLSA – that was very helpful.”

FLSA gives us another hint in the definition of “employ,” which is “to suffer or permit to work.” 11  But such a broad definition leaves us assuming that if anyone gives you permission to lift a finger under any circumstance, you are an employee.  Thus, we almost have to start with an assumption that all working people are employees, and work backward from there.

Statutes and case law have given us tests for determining who is not an employee, and there are five primary categories I’ll discuss here, and in much greater detail in the next section.  Note that we’re using our own words here, not the law’s words, to encapsulate the categories:

1)     People that do work for their own or mutual benefit = Proprietors/Partners/Principals

2)     People that do work for public/charitable/humanitarian benefit = Volunteers

3)     People that do work for their own educational benefit = Interns

4)     People that do work for others in an independent manner = Independent Contractors

5)     People that do “work” for others that is not legally classified as work

 The work arrangements of the sharing economy sometimes fit into the above categories.  For example the sharing economy is characterized by relationships where people:

1)     Work together as equals to benefit themselves (which can sometimes meet the definition of “partners”).

2)     Do work motivated by generosity or mutually supportive relationships (which can occasionally meet the definition of “volunteer”).

3)     Do work motivated by non-monetary reward (which can sometimes meet the definition of “intern”).

4)     Work independently and collaborate with each other on a limited basis (which can sometimes meet the definition of “independent contractors”).

5)     Lend a hand to others in their homes or in other personal projects (which is not necessarily seen as “work”).

The work that people are doing under many of these circumstances is designed to generate a benefit of some kind, but may not always be designed to generate a monetary income.  In that respect, doing work under the legal framework usually applied to employers and employees is not practical because it’s too expensive.  Paying even minimum wage, paying for workers compensation, and paying payroll taxes are often out of the question.  However, most regulations on employers and employees are automatic and they cannot be waived.  For example, a volunteer on a farm cannot simply sign a document waiving their right to be paid minimum wage.  The justification for this legal fact is that ability to waive a protection would likely result in more vulnerable workers doing so under coercion.

Many of the tests of who is an employee look at the “economic realities” of the situation – usually asking whether the worker is economically dependent on the person or entity for whom they appear to be working (the principal), asking whether the principal is in control over the work of the worker, and a variety of other related factors. 12

But it is time for an economic reality check.  The point of the sharing economy is that we are creating new relationships that give us more control over our livelihoods.  It should be an imperative for our legal system to allow us to do so.  The biggest difficulty we will face is that many relationships in a sharing economy appear, even with four categories of exemption listed above, to be employment relationships.

Illegal Grocery Cooperative Example

Example:  A group of 300 low-income people form a grocery buying cooperative. They rent a small warehouse, where they receive regular orders from a range of nearby farmers, food producers, and food distributors. They put the food on shelves so that members can come in and “shop.”  The purpose of the cooperative is not to make money, since the 300 members are the only customers.  The purpose is to get affordable access to good food and to support the local food producers.  Each member is required to spend three hours per month volunteering at the warehouse, receiving and organizing food shipments, helping to check out members, and handling other administrative tasks. Each 3-hour shift has a leader that assigns tasks to the volunteer members, and the co-op is managed by a board of directors elected by the members. 

It’s sad to say it, but a court could quite possibly find that the volunteers in this situation should be paid minimum wage and that all other regulations on employers and employees apply.  The members are not independent contractors, because they aren’t working independently. They are not likely partners, because most members have very little control over the day-to-day operation of the cooperative.  They are not interns, because they are not doing it for the purpose of learning a skill. They are not volunteers, because the legal definition of volunteers generally requires that they be working for charitable/humanitarian purposes.

In this example, people are working under the direction of others, albeit only for three hours per month.  They are also working for an economic benefit – the benefit of receiving inexpensive food.  How can a court distinguish this from a situation where a migrant farm worker is coerced into working on a farm for a few hours in exchange for a meal and water?  Unfortunately, courts haven’t really tried to distinguish the two; to play it safe, they have generally created a blanket prohibition on allowing people work under supervision, voluntarily, for a for-profit business.  Our labor laws have, in that respect, taken the cooperation out of cooperative – making it impossible for people to work for their own cooperatives.

The state of Hawaii recognized this problem and passed a law making it legal for people to volunteer up to 25 hours per month for their own cooperatives or mutual benefit associations. 13

This offers a wonderful precedent for other states to follow, though this law may, unfortunately, conflict with federal employment laws.  In fact, a 1997 federal Department of Labor opinion, though not addressing the Hawaii law specifically, did address the role of volunteers in a consumer cooperative.  The opinion stated:

 “In this case, the cooperative members do not appear to be ‘volunteers’ within the meaning of the FLSA. This is so because the services volunteered are not for public service, religious, or humanitarian objectives as required by the FLSA; rather, the services are being donated for commercial business purposes. It is, therefore, our opinion that the cooperative members would be considered ‘employees’ within the meaning of the FLSA, and would be subject to the minimum wage and overtime provisions of the Act.  This determination would not change even if member employees were not given discounts, or if they performed tasks of their own choosing and worked anytime they chose.” 14

 Thus, it may be necessary to change both federal and state labor laws in order to allow people to volunteer on a limited basis for their own cooperatives.  Note that, in conjunction with changing the law, it will be important to address the requirement or the option to carry something like workers’ compensation insurance for member/volunteers under certain circumstances.  A cooperative like the one described above could likely not afford to carry regular workers’ compensation insurance for each of its 300 volunteers.  Ideally, however, states could offer more tailored and economically feasible insurance options to enable cooperation and compensate injured parties under such circumstances.

Why the Cooperative Example Should Give Us Pause

It may be tempting to dismiss the grocery co-op example as a single anomaly – an isolated example of labor laws preventing a beneficial activity.  But our communities would be wonderful if many more of our “businesses” were run in this way.  Laundromats or gyms owned by their patrons, requiring members to do a little work when they come in to wash clothes or work out; housing cooperatives that allow residents to volunteer for the co-op in exchange for lower rent; cafés operated partially by their patrons, and so on.  Such arrangements allow goods, services, and housing to be put back into hands of our communities, and not “outsourced” to chain stores and absentee business and housing owners.  Many non-chain restaurants and other businesses close down soon after opening, usually because the owners found that the expenses of operating the business are too great in comparison to the income it generates. They cannot compete with larger chains that have benefited from economies of scale and access to large amounts of capital, which drives prices down.

But what if a restaurant could operate by some of the agreements listed in Part 1?  A community-supported café, for example, could have members that agree to buy a certain number of meals per month and participate some of the governance of the café.  They would receive periodic free meals in exchange for putting in a few work hours per week or per month.  Members would be motivated to work not just for the free food, but for the experience of working alongside friends and learning about food.  A café like this is very likely to thrive and not go out of business as many new cafes do.  Our local economies would benefit immensely if there were a legal space for such arrangements.

Community Farmer Example

Let’s look at another example of how employment laws limit collaborative work relationships. This is an issue that the Sustainable Economies Law Center has been working on:

Example: In and around Fresno, California, there are over 1300 small farm businesses owned by Hmong and Lao refugees. Most of these farms cultivate between 1 and 10 acres, and they are farmed usually by a single household. Most of these families live very humble lives – growing food for themselves and their community, and selling enough vegetables to earn a very modest income.  In that respect, many Hmong farmers are semi-subsistence farmers. 15  All told, many do not ultimately make the equivalent of minimum wage in dollars.  Many of the crops they grow have special labor requirements: green beans, for example, generally cannot be mechanically harvested, and they must not be allowed to stay on the plant for a day or two after they are ready to be picked.  This means that many hands are needed on the harvest day in particular.  The family from one farm is likely to show up on a friend’s farm to help out, and vice versa.  There is a culture of reciprocity, lending a hand here and there, because it means receiving a hand when needed.

In the case of the Hmong and Lao farmers, there is no exemption to allow them to perform these reciprocal favors for one another, and farmers are told repeatedly by regulators that anyone helping in their fields must be treated as an employee.  The farmers can’t even quietly get away with it; the California Department of Labor Standards Enforcement regularly shows up and issues citations when they see groups of people working in a field.  For example, there is a $1500 per worker fine in California for failure to provide workers compensation for a worker.  However, given that the cost of workers’ compensation insurance can run between $.50 and $2.00 per hour for a farm worker, and given that it’s hard to get a policy for less than three months, carrying such insurance is impossible for a farmer that only needs outside help a few days per season.  Since the Hmong and Lao farmers earn a very small monetary income, asking them to jump through such legal hoops would simply put them out of business and destroy the livelihoods of 1300 families.

In a world where it is hard enough for micro-entrepreneurs to get by, we should make legal space for them to “get by with a little help from [their] friends.” 16 In the refugee farmer case, a solution within the current legal framework may be for farmers to form small cooperatives to harvest and sell vegetables together under the same business umbrella.  However, this solution will not work for many of the farmers for practical reasons, and it actually removes an incredibly valuable factor of the economic equation: generosity and gift.  These practices and sentiments exist in every culture and act as a form of social glue.  If we have a neighbor over for dinner, she does not offer us money at the end of the meal.  In fact, this would be bizarre behavior, as bringing money into the picture would make us feel more like a business and less like a giving friend.  It’s quite possible that many neighboring farmers that help each other out do so with similar feelings, and formalizing the relationship – either through payment of wages or through business co-ownership – removes the important role of gift and generosity in their economy.  If we force Hmong and Lao farmers to stop farming in this way, we not only destroy their livelihoods, but also an important part of their community and humanity.

The Difficulty of Distinguishing Between Work and Life

Because they are semi-subsistence farmers, another difficulty the Hmong and Lao farmers face is demonstrating a distinction between the work of growing food for sale and for personal consumption.  Generally, if family members all work together in a garden to grow food for themselves, they are not seen as employees.  However, the fact that the Hmong and Lao farmers also grow food for sale means that an assumption of employment exists any time people are working in the field.  One farmer met by Janelle Orsi was fined $1000 for not paying minimum wage to his live-in uncle.  When the Department of Industrial Relationships (DIR) visited the farm, the uncle was helping out in the garden, tending to food that the family planned to eat.  On appeal the farmer was unsuccessful in persuading the DIR commissioner that the uncle was not working for the enterprise.

Why the Hmong Farmer Example Should Give Us Pause

It may be tempting to dismiss the example of the Hmong and Lao farmers as another isolated case of employment laws interfering in a unique enterprise.  But if those 1300 farmers are put out of business by employment laws, then the rest of us should have little hope that we can ever take control of our livelihoods and survival.  A “semi-subsistence” livelihood is not the ideal to which modern society has taught us to strive, but it is, in fact, how an enormous number of people on this planet already thrive.  As we watch industrialized economies around the world stumble (such as in the U.S.) and even crumble (such as in Greece), we need to find other ways to ensure that we can meet our sustenance needs.  It won’t work if we live in the woods and forage for ourselves and it won’t work if we each get our own little house on the prairie and farm for ourselves.  But it will work if we produce some of what we need, allow other members of the community to give us what we need, and then sell, buy, exchange, and barter for everything else.  The sharing economy allows us to make rewarding and abundant livelihoods through semi-subsistence enterprises.  Such livelihoods necessarily involve people working together and fewer dollars changing hands.  Such livelihoods cannot afford to pay minimum wage, but they can provide the sustenance that seven billion people will need to survive in a world of increasingly limited resources.

The Unfair Competition Argument

Note that prevention of worker exploitation is not the only thing leading to the across-the-board application of employment laws.  The other justification often put forth is the idea that carving out special exemptions would create circumstances of unfair competition.  Some argue that if one farm receives volunteer help from friends, then it is unfairly competing with a farm that pays workers minimum wage.  We should abandon this consideration in the labor law context, because the circumstances of businesses are far too variable to compare.  If we are worried about unfair competition, we should point out that a farm that purchases large machines to do harvesting is unfairly competing with small subsistence farmers that harvest by hand.  Or a farm that uses chemical pesticides is unfairly competing with a farm that uses organic methods.  Large businesses with access to large amounts of capital do not operate on an even playing field with humble “mom and pop” businesses and small cooperatives.  Any re-consideration of employment laws should focus on 1) the need to protect individuals and 2) the need to enable small and cooperative enterprise, and not on the need to preserve some guise of fair competition.

A Few More Examples

Here are a few more examples of situations where people are prone to violating employment laws through their work arrangements:

a)     Volunteering for a social enterprise:  When a privately owned business does work aimed at helping people or making the world a better place, people feel drawn to volunteer.  Sometimes people volunteer at private nursing homes, for example, or they feel drawn to volunteer for companies that work in the realm of sustainability.  As a general rule, people cannot volunteer for a for-profit business, and we will examine this more below, and explore the possible arguments that will allow someone to volunteer for a for-profit business.

b)     Worker collectives: In the case of a 15-member worker-owned collective, it may be difficult to determine whether the workers should be treated as employees.  In a collective, decisions are made as a group, often by consensus, which gives each member a great deal of power to influence decisions about the business and about the day to day work.  This might lend to the argument that the workers are not employees, and points to the fact that the collective is in a grey area. For a new worker cooperative that does not yet have significant cash flow, paying minimum wages to workers can be a huge financial burden, and it may require that the cooperative raise start-up capital, rather than boot-strap the business. Many cooperatives will not have access to outside start-up capital, which means that payment of minimum wage from day one would be impossible.

c)      Housing cooperatives:  In housing cooperatives owned by a nonprofit or cooperative corporation, many residents are assigned chores, maintenance duties, or other tasks to lower the cost of operating the cooperative.  Depending on the size and management structure of the cooperative, this could be seen as creating an employment relationship between the residents and the entity that owns the housing.

d)     Compensating people in forms other than dollars:  Although dollars are useful and in high demand, many people are willing and excited to work in exchange for other forms of compensation, such as food, housing, or credits that can be redeemed for goods and services.  For example, many groups have proposed the creation of food currencies, which are points that people accumulate by volunteering at a food business, and which can be spent within a network of food businesses to purchase food.  Unfortunately, law requires that minimum wage be paid in cash (which most likely means dollars), and under only very limited circumstances, in lodging, board, and other facilities. 17  This makes the food currency described here illegal under current law, since the participants could not volunteer at food businesses. The payment of employees and volunteers in non-dollar currencies and benefits is discussed in on this website:

Enabling Cooperation and Managing Risks

Employment laws are designed to prevent harm to vulnerable individuals, and it’s important to recognize that harm is still possible even in many of the arrangements described above.  People could get injured while volunteering for their cooperative, or unequal power dynamics within a group could leave certain individuals with less control over the way they work or benefit from the arrangement.  In carving out a legal space for cooperative work arrangements, we must be mindful of those risks.  As a general rule, there will be far less risk of exploitation or harm when:

  • No single individual or group is benefiting from a significantly greater share of the profits of an activity;
  • Members of a group have an equal vote on decisions about the activity;
  • Decision-making processes allow everyone to have a voice, bring up tensions, and make proposals;
  • Each individual has a large amount of choice in how and when he/she works;
  • Members of a group have close pre-existing relationships with one another, through family ties or friendship;
  • Members of the group have an agreement about how to share risks and compensate members that are injured;
  • People work on a project for less than 10 hours per week, which indicates that the activity is not their sole source of sustenance; and/or
  • People work primarily with the intent to earn non-material benefit, such as socializing, fun, or learning.

Wait, What If Jobs Disappear?

When 92% of working adults currently choose employment as their primary source of livelihood, it can be hard to even picture what will happen if the various enterprises described above begin to replace those commercial businesses that provide conventional employment.  A member-owned grocery cooperative, for example, takes business away from a large grocery chain, which means that chain will offer fewer jobs.  If we rely less on conventional commercial businesses to meet our needs, there will also be fewer conventional job opportunities.  This fact points to something quite powerful: If consumers have the ultimate power to remove jobs from the marketplace, then we also have the ultimate power to create a marketplace of new livelihoods.  We have the power to direct our resources – monetary or otherwise – to directly support ourselves, others, and our community.

Think about the life of a dollar bill.  A dollar we previously would have spent at a grocery chain will now be available to give directly to a local farmer or food producer.  That dollar will not line the pocket of a rich company and its executives, and it is unlikely to even leave our community.  In a localized sharing economy, that same dollar will likely be spent to purchase another good or service, likely from another community-member.  If that dollar keeps circulating in the community and changes hands 100 times in a year, it is actually worth 100 dollars to the community.  If we had spent it at a large grocery chain, only a fraction of it would have stayed in the community to pay the wages of a grocery store employee.  In sum, the transition to a sharing economy may diminish traditional employment opportunities, but it multiplies the wealth we have to create livelihoods in our communities.

Working Together in Outside of Employment Relationships

Short of changing the laws, there are still many things that we can do to reshape work relationships in ways that fall outside of employer/employee relationships.  We will primarily examine four types of non-employees in this resource library: Partners, Volunteers, Interns, and Independent Contractors.

The most important thing to remember about the rest of the information in this resource library is that employment laws show up not just in FLSA, but in a variety of different statutes at the federal and state levels.  Each statute has its own case history and its own interpretation of who is an employee.  Some courts have indicated that the definition of employee as determined under one statute will be persuasive in determining who is an employee under another statute. 18  At the same time, each statute was enacted with a somewhat different purpose, and it can be unsafe to rely on a court’s definition of employee under one statute and assume it will apply in the same way under another statute.  In fact, you may have cases where you ultimately conclude that for the purpose of one set of statutes, there is an employer/employee relationship, and for the purpose of other statutes, there is not. 19  The moral to the story is that you need to know the laws and court interpretations under your jurisdiction and for all categories of employment regulations (wage & hour, workers compensation, payroll taxes, OSHA, discrimination statutes, and so on).


  1. Department of Labor, “Entrepreneurship: A Flexible Route to Economic Independence for People with Disabilities,” August 2005, available at
  2. Jobs have also become the primary way in which people access health care, which is rather odd, if you think about it.  Why should our ability to access health care be almost entirely determined by how we choose to make our livelihood?  Why should access to this part of the social safety net be managed by employers?
  3. See United States v. Silk, 331 US 704, 713 (1947), stating that “the aim of the (Fair Labor Standards) Act was to remedy the inequality of bargaining power in controversies over wages, hours and working conditions.”
  4. Lochner vs. New York, 198 U.S. 45 (1905).
  5. West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).
  6. West Coast Hotel Co. v. Parrish, 300 U.S. 379, 391 (1937).
  7. West Coast Hotel Co. v. Parrish, 300 U.S. 379, 393 (1937).
  8. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-413 (1983)
  9. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-413 (1983), quoting United States Trust Co. v. New Jersey, 431 U.S. 1 (1977).
  10. 29 U.S.C. § 203(e)(1)
  11. 29. U.S.C. §203(g)
  12. Courts have actually acknowledged that there is no single “economic realities” test, and that it’s a different test depending on whether you are looking at partners or independent contractors.  For example, the court in Wheeler v. Hurdman, 825 F. 2d 257, 271 (10th Cir. 1987) examined a range of tests applied by courts, and ultimately said that “The foregoing survey of tests and factors offered by the proponents has been set forth in detail partly for purposes of our analysis, and partly to show the absence, rather than the presence, of any coherent standard of ‘economic reality’ for supposed application to partners.”
  13. See Haw. Rev. Stat. Ann. § 421C-33, which provides:

    “Volunteers exempted:

    (a) For the purposes of this section, “volunteer” means an individual who:

    (1) Is a member of an association;

    (2) Is not an employee of the association; and

    (3) Who volunteers and donates up to twenty-five hours of labor and services per month to the association.

    (b) Associations may accept labor and services from volunteers.

    (c) In addition to any exemptions granted to nonpaid labor, volunteers who acknowledge in writing that they are volunteers shall be construed not to be in the employ of the association, their labor and services shall be construed to not be employment, and they shall not be construed to be employees of the association, under title 21 or any other labor law.”

  14. U.S. Department of Labor, 1997 DOLWH LEXIS 1, January 21, 1997, Judge: Maria Echaveste, Administrator.
  15. See the European Network for Rural Development’s Background Paper “Semi-Subsistence Farming in Europe: Concepts and Key Issues.” (prepared for a conference in Sibiu Romania, April 21-13, 2010), page 5, which includes a definition of semi-subsistence farms as “agricultural holdings which produce primarily for their own consumption and also market a proportion of their output.”
  16. If only the Beatles made the laws.
  17. 29 C.F.R. 531.27(a)
  18. See, for example, Wheeler v. Hurdman, 825 F. 2d 257, 263, (10th Cir. 1987), noting that interpretations of the Fair Labor Standards Act could be used in interpreting the definition of employee under the Age Discrimination and Employment Act: “All parties acknowledge that nothing in the legislative history of these Acts explicitly addresses the definition of employee.  In general, cases construing definitions of one of the Acts are to be viewed as persuasive authority when interpreting the others.” See also Hyland v. New Haven Radiology Assocs., 794 F.2d 793, 796 (2nd Cir.1986), stating that “cases construing the definitional provisions of (the FLSA, Title VII or the ADEA) are persuasive authorities when interpreting the others.”
  19. See, for example, Clackamas Gastroenterology Associates, PC v. Wells, 538 U.S. 440, 453 (2003), where the business in question treated shareholders as employees for the purpose of ERISA and state workers compensation law, but where the Court held that the shareholders were not employees for the purposes of applying anti-discrimination statutes.