In 2011, Joseph Otis was ready for a new job. He’d been selling insurance for a while, which meant he had to drive a lot around Atlanta, where he lived, and he spent a ton of money on gas. Then a friend told him she’d found a job that let her work from home. The idea ubeappealed to him, so he started looking around for companies that would let him do that. Before long, he discovered Arise Virtual Solutions.

Arise offers outsourced call center services to big companies like Disney, Carnival Cruises, and AT&T. So when you call about your phone bill, for example, you might be talking to one of more than 10,000 people working from home, through Arise.

The company promised Otis flexible work hours; they talked about him like he’d be an entrepreneur, building a business by working when and how he wanted.

“I really believed they were a trustworthy company,” Otis says.

Arise hired Otis as an independent contractor. He didn’t work directly for the company. In fact, Arise wouldn’t even contract with him directly — he had to form a business in order to get paid. So on paper, Otis ran a business called Ready Plan that provided telephone customer service, and Ready Plan signed a contract with Arise to provide that service to Arise’s clients.

Before he could start, though, he had to get a few things. He estimates he spent close to $1500 on equipment Arise required to use their system, things like computer monitors, high-speed internet, and special headsets. Arise also required him to complete company-specific training. The schedule was intense: four hours a day of online class, followed by four hours of homework, five days a week, for two and a half months. Otis says he paid about $275 for the training, and he didn’t get paid for the time. He was living off of his savings.

Finally, he started working for a client: AT&T. His phone started ringing. And the work was not what he’d expected.

“It was pretty discouraging,” he says. “You realize that the training didn’t prepare you to actually perform on the phone. And I felt kind of like I had been duped.”

AT&T had a handbook for how customer service providers were supposed to handle their calls, but Otis says a lot of what was in there hadn’t been part of the training — he was supposed to learn it on the job. So when a person called, he’d be sitting there at home, leafing frantically through the book, looking for ways to stall.

“This would be a typical script for me,” he says, putting on his customer service voice. “’I apologize for the wait, I appreciate your patience, thank you so much for understanding.’”

Otis says the whole situation was even more stressful because Arise had a rule: calls couldn’t last longer than ten minutes. They also couldn’t be shorter than three minutes. “So you’d be in danger of getting terminated because people hung up on you because you didn’t know what you were doing,” he says.

He left Arise in 2014. Looking back, Otis says he thinks people were set up to fail — the company would charge them for training, make their work impossible to do, fire them — and then hire more people, and collect more money for training.

“I feel that they’re hurting individuals, hurting the economy, taking advantage of thousands of people a month,” he says. “And I would like to stop that.”

So he got in touch with someone he thought could help: lawyer Shannon Liss-Riordan. And this was familiar territory.

“It’s one of the oldest tricks in the book to try to deny that you are the employer of your workers and thereby save a huge amount on labor costs,” she says.

Under federal law, employees are entitled to things like minimum wage, unemployment, workers compensation, and Social Security. Independent contractors don’t get any of that, so they’re a lot cheaper. It’s very common for employers to misclassify the people who work for them — Liss-Riordan actually says it is rampant. She’s represented cable installers, truck drivers, FedEx deliverymen, housecleaners, cab drivers, and strippers. And after she heard Joseph Otis’ story, she agreed to represent him too.

Contractor or employee?

Courts decide misclassification cases based on something called the economic realities test. Boiled down, it means that just because you sign something saying you’re an independent contractor doesn’t mean you actually are one. The test includes questions like: how much control do you have over how you do your work? Do you need extensive training, or do you come in already knowing how to perform the service the company wants? How possible is it for you to take on other clients, or work additional jobs? Courts weigh these factors differently, and no one necessarily outweighs the others.

Liss-Riordan says Arise fails every test. For example, she says, the businesses workers form, like Otis’ Ready Plan, are really just technicalities – she describes them as “pass-throughs” that allow people to get paid. Then there’s the fact that Otis wasn’t providing call service to any other companies except Arise – he says he couldn’t, because of the way the scheduling worked.

“Even though people are working from home, the company has very detailed control over their work,” says Liss-Riordan. Workers can’t choose their own hours — they have to select from hours Arise makes available, and they can only make those choices at very specific times. Furthermore, she says, “the company records their calls, supervisors listen in on their calls and grade them, if their grades aren’t high enough they can be fired.

Liss-Riordan also points to the fact that workers have to be at their phones the whole time they’re scheduled, even if no calls are coming in. Otis says even going to the bathroom put him at risk of termination.

Arise declined to comment for this story. In court documents, the company argues that everyone it worked with, including Joseph Otis, was a totally independent business owner, and that Arise did not control their work.

The gray area

Not everyone who’s a contractor feels like they’re being exploited. Harry Campbell drives for both the car service company Uber and its competitor Lyft, and he runs a blog and podcast called The Rideshare Guy.

“’The Ride Hail Guy’” or ‘The Glorified Taxi Guy’ just didn’t have the same cachet,” he says, laughing.

He used to have a day job as an engineer, but when we talked he’d just quit, to focus on the rideshare stuff.

Campbell’s fellow drivers are suing both Uber and Lyft right now – Shannon Liss-Riordan is the lawyer in both cases. Campbell’s not part of the suit, but he says he gets where his fellow drivers are coming from.

“I think it’s kind of a double-edged sword,” he says of the freelance work. “The biggest problem is that you’re basically at the mercy of these companies.”

But Campbell says the work still has its perks. And he worries making drivers employees would make that work a lot less appealing.

“If I wanted to go drive right now, I could turn my app on and I could do one ride in and be done for the day, or I could go drive 12 hours right now if I wanted,” he says. “I could take a month off or I can work a month straight. There aren’t many jobs that allow you to do that.”

Dan Lavoie, Director of Strategy for the Freelancers Union in New York, says there are more and more people like Campbell. “It really wasn’t that long ago that a lot of people would see work as an on-off switch,” he says. “That you either had a job or you didn’t.” But it’s not that way anymore.

“It’s not an on-off switch, it’s a dimmer switch,” he says. “And you’re moving back and forth between you know sort of traditional nine to five work with freelance work, sometimes doing both at the same time. You might be crafting on Etsy and renting your spare room on Air BnB and designing websites for some friends and singing in a band all at the same time, and using all those different streams of income to make the life that you really want.”

Lavoie says around 14 million people work this way. And so far, labor law isn’t keeping up.

A third category?

“It seems to cry out for the law to create a new category which would give these people some protections,” says Wilma Liebman, former chair of the National Labor Relations Board. “Particularly the protections of minimum wage and overtime, and some protections under labor laws.”

Liebman says she saw a lot of clear-cut misclassification cases during her time on the board, where companies claimed workers were independent while controlling everything they did. But she also saw an increasing number of cases that didn’t quite fit that mold.

“The rigidity of these classifications is becoming more obvious to some people,” she says. “So people are talking about a third category.”

This, she says, would be something between employee and independent contractor, a designation that would acknowledge situations like Harry Campbell’s, for example, and build in protections for people like him. One term for this could be “dependent contractor” — Liebman suggested that in a case she heard where independent newspaper carriers worked primarily for one company. There are similar categories in some European countries; for example, Germany has something called an “employee-like person.”

What happens next

Joseph Otis had his arbitration hearing in March. Liss-Riordan has already won a separate case against Arise, and gotten her client more than $11,000. She’ll get a ruling in Otis’ case later this spring. In most situations like this she’d file a class action lawsuit, and try to get a lot of people in Otis’ situation to sign on. She can’t do that, though, because Arise has its contractors sign an arbitration clause, which means any disputes have to be settled out of court. So she’s bringing the cases one by one — she’s got 50 lined up for this year. She also says the National Labor Relations Board has been in touch. Arise is on their radar now too.

Meanwhile, the idea that we might need to think more broadly about employment is starting to make its way into the courts. The judge hearing the Lyft driver lawsuit recently decided that the case should go to trial (as will the Uber case). In deciding whether the drivers are employees or contractors, he said the jury “will be handed a square peg and asked to choose between two round holes.”


This story was reported by Casey Miner, edited by Ann Heppermann and produced by Kaitlin Prest.

Special thanks to Ajay Mehrotra for his scholarship and support on this episode.