The notorious 1905 Supreme Court decision in Lochner v. New York has become a symbol of a clash between the State’s wish to protect people from inadequate working conditions and the freedom of businesses and workers to use contracts to regulate their relationships. While the protective regulation of the work arena has since become more prevalent and has been approved time and again by a post-Lochner Supreme Court, businesses on the hiring side have never ceased attempting to evade these regulations by using contracts and insisting on their enforcement in the name of the freedom of contact. Is contract law truly the nemesis of fair labor? Must it undermine workers’ minimum legal protections against a long list of evils such as safety hazards, exhaustive hours, meager pay, and discrimination?
Hanoch Dagan and Catherine Fisk’s forthcoming Article, Independent Contractors and The ABCs of Contract Law, answers those questions with a rigorous “no.” The UC Berkeley co-authors have combined their expertise in labor law (Fisk) and contract law (Dagan) to provide a powerful critique of the conventional belief that their respective fields collide. Their collaboration presents a compelling and, I would add, hopeful reconstruction of the relationship between workers’ rights and contracts.
As its title suggests, the article focuses on businesses’ strategic efforts to avoid commitment to workers’ rights by classifying workers as independent contractors. In response to this practice, many states have adopted some version of a test called the ABC test. The test classifies those who provide services for remuneration as employees eligible for a full spectrum of protections unless hiring parties can prove all of the ABCs that give the test its monicker: (a) they do not exercise control; (b) the work is done outside of their usual course of business; and (c) apart from this work, the hired people separately earn from similar activities. Dagan and Fisk explain that the ABC test generated a “heated debate” (P. 3), but they also identify a zone of agreement between proponents and opponents. Both sides believe the ABC test reflects and reinforces a fundamental conflict between work law and contracts: the former demands “a floor” (e.g. P. 27) of acceptable working arrangements, while the latter allows the exchange of work for money without adherence to any imposed minimum. The authors challenge this consensus, depicting it as both “misguided” and “possibly consequential” (P. 3.)
The article’s central claim is that the ABC does not threaten the purpose and usefulness of contracts nor defeat the essence of the contractual system. Instead, Dagan and Fisk seek to show that the ABCs protective model aligns with contract law because it prevents hiring entities from abusing contracts and the power to enforce them at the expense of “workers, their families, their communities, and the economy” (P. 3.) As a contemporary and known example of such abuse, the authors offer the economic, legal, and political investment of companies like Uber and Lyft to escape a net of workers’ rights by deeming their drivers independent contractors.1 This method, the authors posit, invites exploitative labor practices, enabling companies to extract profit from labor while disclaiming any responsibility for the workers’ wellbeing. Effectively, then, by defining the workers as “entrepreneurs rather than employees” (P. 17), the companies enrich themselves by charging the workers with much of the expenses of running their business.
Dagan and Fisk insist that such attempts to abuse contracts at the expense of workers not only justify the legal response captured by the ABC test but also contradict core principles of contract law. In their view, this creates alignment rather than tension between work law and contract law. The authors maintain that the erroneous conventional belief in a collision between workers’ rights and contracts is rooted in what they call a “spurious” account of contract law (P. 43). They further assert that the contradiction thesis loses its purchase once a more modern and liberal version of contract law is adopted. So, the authors dedicate much of the third part of the article to proposing such an alternative version, relying on a series of Dagan’s previous work in which he developed, in collaboration with Avihay Dorfman, a relational justice approach to private law in general and contract law in particular.2
The aspect of the relational justice approach that is most relevant to the evaluation of the ABC test emphasizes that parties to a contract owe each other much more than merely keeping their express promises. They also ought to treat their contract as “a joint plan” and thus have “interpersonal duties” (P. 23) that require them to respect each other’s “self-determination and substantive equality.” (P. 25.) And, because those duties are part of “the normative DNA of liberal contract” (P. 30), they cannot be relinquished by the parties, including not by defining workers as independent contractors. For that reason, when one party follows the words of the contract but disrespects its counterparty’s autonomy, contract law cannot simply enforce the expressed contract while ignoring the relational problem. Rather, because this body of law confers on people the power to enhance their autonomy by making commitments enforceable, it must also monitor how parties use this power. Therefore, contract law must intervene when one party exercises its power in a manner that undermines the autonomy of the other. Or, as Fisk and Dagan describe it, in such moments, contract law operates to “prevent abusing the idea of contract for a purpose that contravenes the telos of liberal contract” (P. 43).
Significantly, the preventive task the authors define is not only an aspirational view of contract law. While they admit that fully advancing relational justice is “a work in progress” (P. 26), they also present compelling evidence that our current contract law already resists the abuse of contracts, demanding a minimal level of other-regarding commitment. Such is the case, for example, with the principle of unconscionability that prevents enforcement of highly exploitative contracts and with the implied duty of good faith that calls on parties to align their performance not only with the wording of their contract but also with each other’s reasonable expectations and the spirit of their joint project.
Applying Dagan and Fisk’s contractual approach to the ABC test thus justifies, supports, and explains the test as an evolution of contract principles. Critically, this is not merely a theoretical move. The authors hope that by defeating the myth of conflict between the test and contracts, their work would empower more states to follow California and adopt the ABC test in its full form. They also believe that recognizing the alignment with contract law would inspire courts to interpret the test generously, thereby improving workers’ protection.
All told, the Dagan-Fisk article forcefully vindicates the ABC Test. But what if the test deems workers non-employees? I read the article as planting the seeds for offering such workers minimal immutable rights outside of the test by applying a relational justice approach to the contracts that cover their services. Under this understanding, contract law generally limits the abuse of contractual tools and demands some commitment to fairness. These principles apply to any type of contract and thus do not hinge on specific classification of the contractual relationship. For example, as I have recently argued, partly by drawing on relational justice, providers of goods and services in the open market who discriminate and humiliate their counterparties breach the contractual duty of good faith.3 Accordingly, they should be held liable even after the Supreme Court has made nondiscrimination protections inapplicable.4
Similarly, those found ineligible for labor law’s protection should deserve contract law’s help. In contractual relationships of all kinds, the duty to respect the other party flows from the parties’ indisputable shared humanity. Hence the immutability. Contract law must not allow parties to avoid this duty by relying on doctrinal limitations or manipulations. Moreover, when states operate their contract law, they have a duty to all their residents to prevent abuse of contracts—not only on behalf of weaker parties but also to maintain the contractual system’s integrity and foster its growth. Dagan and Fisk’s Article introduces a pioneering step in this direction.
- See also Veena Dubal, Wage slave or entrepreneur: Contesting the Dualism of Legal Worker Identities, 65 Cal. L. Rev. 123 (2017).
- See, e.g., Hanoch Dagan & Avihay Dorfman, Justice in Contracts, 67 Am. J. Juris. 1 (2022).
- Hila Keren, Beyond Discrimination: Market Humiliation and Private Law, 95 U. Col. L. Rev. 87 (2024).
- 303 Creative v. Elenis, 600 U.S. 570 (2023).
