The morality of self-employment
The self-employed contract is morally superior to the employment contract.
A stimulating time.
In mid-December 2024 I took part in a specialised, academic research workshop in Madrid Spain. The event was a collaboration between Universidad Francisco Marroquin (Spain) and The University of Buckingham (UK). The workshop organisers had issued invitations for researchers to present papers on the topic of Advancing A Classical Liberal Understanding of Agenda for a Free Society. I was encouraged to make application and was accepted.
I found the workshop highly stimulating. This was a free-wheeling, active discussion and debate built around the papers presented. A selection of the papers presented will be considered for publication in the preeminent international journal Economic Affairs. In subsequent Substack posts I’ll reflect on some of my learnings and ‘stimulations’ from the workshop. I really did get a lot from the workshop and came away ‘buzzing’ with new ideas; and a challenge to myself to properly understand those ideas.
The paper I presented is about the moral superiority of the commercial/civil contract, the contract through which self-employed people work, in comparison to the moral inferiority of the employment contract, under which most people work.
Below is an edited, shortened version of my paper for your interest. I see the issue I cover being of critical significance to the battle for freedom. The ‘morality’ of contract might seem to be a weird, narrow lawyers game, but it ‘blows out’ to impact how we operate as people and as societies.
To reflect more broadly on recent global events, we seem to be in a period where a dominance by woke and left political leanings has reached a peak and is in decline. The apparent rejection of woke/left by voters at the November 2024 US election is arguably a major turning point. What the Trump team now do will be interesting to observe. The implications are global. What we don’t want is the replacement of one form of totalitarianism with a different form of totalitarianism. That’s not to say that I’m prejudging the Trump agenda. But I’d argue that social structures and rules built around classical liberal, free market principles and practices is the way forward for human development.
Here's the shortened, edited version of my paper. Cheers
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The importance of self-employment and the commercial/civil contract as moral defenders of economic and social freedoms
Introduction
This paper is about morality. It is about the moral underpinnings of freedom found in the law of contract. It is about how these moral contracts deliver freedom to each of us in a very individual way.
This article praises the moral structure of the commercial/civil contract.
This article denounces the immorality of the employment contract.
Why do I talk of morality? I do so because if arguments supporting free markets in the economy and society fail to demonstrate their moral superiority, free markets and all that accompanies them will likely wither and die. Over the last few decades, the moral superiority of free markets has been forgotten, ignored, attacked and derided. In fact, the counter argument dominates asserting that free markets are morally bereft.
In considering this moral positioning I’m looking at one narrow ‘sliver’ of what is a social and political debate.
The ‘sliver’ I look at compares the moral qualities of the two most dominant contract forms used across societies and economies—the commercial contract (termed the civil contract in Roman law jurisdictions) and the employment contract.
My proposition is that the commercial/civil contract commands the high moral ground because its very structure and form secures freedom for individuals to make choices and decisions for themselves.
By comparison, in its very structure and form the employment contract is morally bankrupt because it strips the individual of choice and transfers control from the individual to another party.
This ‘fact’ of the comparative nature of the two contract forms that I assert here, is variously ignored, denied, or denounced—but mostly ignored. Such ‘ignorance’ plays to the advantage of totalitarian agendas and harms the defence and promotion of freedom. I seek to assert the moral superiority of the commercial/civil contract over that of the employment contract. This, I say, is a key underpinning of the morality of free markets and freedom in societies.
On ‘proof’
The ‘proof’ of my assertion about the two contract forms is found in the law. Be patient with me while I ‘walk you through’ a path of reasoning!
I draw for evidence on the International Labour Organisation (ILO).
The ILO is a division of the United Nations. It seeks to create global principles on labour issues and labour law. Its very structure reflects the class-based assumption that the work environment is one in which ‘workers’ and ‘bosses’ are inevitably ‘at war’. This class war assumption goes hand in hand with the employment contract.
In 1996, the ILO began a debate that proved to be the longest and most difficult in its history. It was not resolved until 2006. The debate, titled ‘the scope of the employment relationship’, was triggered because of the global rise of the use of independent contractors. Self-employment seemingly threatened (and still threatens) prevailing labour regulations because such regulations are almost totally predicated on the use of ‘employees.’
The key debates occurred in 2003 followed by 2006. Each debate involved a global gathering of 500 or so ‘experts’ and was held in Geneva each over three weeks. In preparation for 2006, the ILO Secretariat organised the only known global survey of the decisions of courts on the definitions of independent contractor (self-employment) versus employee. Published in 2005 the survey covered some sixty-plus ILO member jurisdictions across the globe. I assert that this stands as the most authoritative statement on the issue.
The 2005 90-page report identified that
“ … the concept of a worker in an employment relationship has to be seen in contrast to that of a self-employed or non-dependent worker.” (page 22)
The critical term in this quotation is ‘non-dependent worker’. In other words, the employment relationship is one of ‘dependency’. The self-employed relationship is one of ‘non-dependency.’ Here is the first ‘proof’ of the stark difference between the two and the nature of that difference.
The ILO consensus position asserts that there were two predominant labour contracts sitting within one overarching term. The ILO stated:
“The term worker is a broad(er) term that can be applied to any worker…”
“The term employee is a legal term which refers to a person who is a party to a certain kind of legal relationship which is normally called an employment relationship.”
“Self-employment and independent work based on commercial and civil contractual arrangements are by definition beyond the scope of the employment relationship.”
Report of the Committee on the Employment Relationship, (page 52)
That is, that an individual who is identified as
· An employee is an individual who earns income through the application of the employment contract as identified at law.
· A self-employed/independent contractor is an individual who earns income through the application of the commercial/civil contract as defined at law.
Further, that the issue rotates around the idea of ‘dependency’.
The result, based on the ILO’s global research, is as follows:
An employee is an individual who earns income through the employment contract such that that contract is one where the individual has a legal dependency on the engaging party (called the employer).
In stark comparison
A self-employed (independent contractor) is an individual who earns income through the commercial/civil contract such that that contract is one where the individual is not dependent on (or is independent of) the engaging party.
This then, gives us the definitions in a nutshell.
An important note: Do not confuse this discussion by thinking of the term ‘employ’ or ‘employment’ in the way the term is used generically. We are talking here of a ‘sliver’ in the understanding of markets. That ‘sliver’ requires a focus on the strict legal understanding of these two contract types and their differences.
The contract definitions and morality
Having reached this point of understanding—that the two contracts are distinct and operate around the idea of dependency or non-dependency—let us now look at my proposition about their comparative moral components.
Employment
The term ‘dependency’ in this context relates to the idea of ‘control’. Put simply, if, under a contract in question, the engaging party has the right or capacity to control the individual being engaged, the contract is an employment contract. The employee is said to be dependent on the employer. Other such terms used include ‘under the direction of’, ‘subservient to’ and so on. But in essence they all boil down to one issue—namely, ‘control’.
This is why I say that the employment contract is morally inferior. If a contract gives one party the legal right or capacity to control another party, that contract is a derived form of slavery. It is no accident that the term ‘wage slave’ exists, because that is an accurate reflection of the nature of the employment contract. And the fact that the employment contract is derived from the master–servant or master–serf relationship is evidence of the historical roots of near total dependency, even ownership, of one human over another. It is from this that the current employment contract has evolved.
Yes, I know that the modern use of the employment contract has been watered down from the work relationships of days gone by. Yes, firms (employers) make use of all sorts of ‘feel good’ human relationship practices and systems. Yes, employees, particularly in the knowledge economy and so on, rebel against being controlled. Yes, peak performance cannot be achieved where control suppresses creativity and ingenuity. But none of these things removes the legal fact of what the employment contract is. It is a contract of control that legally removes the individual worker’s control of themself. This is the essence of the employment contract’s moral bankruptcy. There’s no running away from this legal and operational fact.
And perhaps this legal fact is further ‘proven’ by the way the employment contract has been subjected to vast amounts of government regulation. Those regulations do one core thing. They impose on the ‘employer’ behavioural constraints about how they control their employees. Instead of jettisoning the employment contract, we humans have chosen to retain this contract of control and instead impose government as an intervening middle manager of that control. In doing this, we’ve created complexity in a pretend game that governments can be arbitrators of the moral relationships of individuals in the work environment. This transfer of control of many aspects of the employment contract to the state is a major institutional driver against the interests of free markets.
Independent contracting/self-employment
Independent contracting/self-employment is the complete opposite of employment, structurally, legally and morally. Self-employment empowers the individual to assert and have control over the choices they have and the decisions they make in determining how, when and where they work. This individual empowerment is secured through the commercial/civil contract.
The commercial/civil contract is most readily understood in the business-to-consumer and business-to-business space. Most people would tend to think of a commercial/civil contract as something that is committed to in writing (usually by lawyers). But the written contract is only part of the story. The commercial/civil contract is something that is a living daily experience of every human on the globe. It is mostly unwritten and assumed. People engage in a commercial/civil contract every time they ‘buy their daily bread’. It is so common and ‘normal’ that none of us give it any thought when we ‘buy’.
The nature of the commercial/civil contract is revealed when courts are called upon to determine if a contract is commercial/civil or employment. This process of discovery by the courts brings into stark relief the commercial/civil contract’s true nature. Look at the process that all courts undertake when conducting this sort of investigation.
In arriving at a decision about whether a contract under investigation is one or the other, the courts investigate the behaviours of the parties. And it is from the totality of the behaviours that the courts make determinations. Boiled down to its essence, the courts are looking at who exercises ‘control’ in the contractual relationship.
In looking at the totality of the contractual relationship a raft of items is reviewed. This can include who provides tools, the ability to subcontract, fixed payment or payment on results, who sets hours of work and so on. Ordinarily, there can be up to 20 or so behavioural items viewed in evidence. But when each of these is examined, they are all indicators of who has control under the contract.
Take one example. If the engaging party determines when the ‘worker’ can take holidays, this indicates that the engaging party exercises control over the worker. If the worker can tell the engaging party when they are working or not working, the worker is exercising control of themself.
In all jurisdictions no single item in the package is determinative. The courts make a decision based on the balance of indicators. This is why the impression is often formed that the definition is ‘confused’. Often the balance of the indicators is finely tuned as a result of the particulars of each work contract. But put that aspect to one side and the ‘truth’ is quite clear and is as follows.
Where an individual exercises control of their own work and work situation, the individual is working under a commercial/civil contract.
Where someone other than the individual (the engaging party) exercises control over the work, the individual is an employee.
This is what was looked at in the ILO research discussed above. The ILO reviewed how courts across the globe undertook this contract investigative process. Yes, different jurisdictions use different language and may apply different emphasis in the package of indicators. But even after taking these differences into account, the ILO was ‘surprised at the amount of convergence’. And this convergence related both to the process the courts undertook and to the key end-result the courts were looking to discover. That ‘result’ is the nature of control under the contract.
Why are self-employed people and the commercial/civil contract under attack?
If this commercial/civil contract is so morally superior to the employment contract as I contend, why then is it so heavily criticised and attacked when applied in the work environment? The answer I believe is simple. There is a powerful assumption held in many quarters that the master–serf, master–servant, employment–control contract is and will always be the reality of the work relationship. This assumption is so heavily ingrained in the psyche of so many people that any idea that an individual worker can exercise control in the work environment is considered a con, a scam and a ruse to exploit workers.
Here, then, is the point at which the defence of the independent contractor/self-employed status is so important to the defence of free markets and freedom in general.
Free markets at their base are about enabling us as consumers to make choices about what we will buy. It is our right to decide what bread we buy each day, what house, what car, what holiday we take and so on. These choices, freely entered into, are the expression of our individuality. Whether we are a meat-eater, vegetarian, vegan or whatever, it is our decisions as individuals that matter. And as a collection of individual free decision-makers we are termed ‘a market’. Markets are nothing more than people—that is, us—making our life choices. And this freedom to choose as consumers is embedded at law in the commercial/civil contract.
This commercial/civil contract is a wonderous thing. I ran my own small retail businesses for over 20 years. I have spent hours serving customers. Every time a customer purchased something from me, the customer and I engaged in a commercial/civil contract. I had goods/services on offer. If the customer wanted to purchase any of my goods or services, they accepted my offer. If they chose to buy, there was ‘consideration’ (payment). Those key elements of contract: offer, acceptance and consideration played out each time.
What was and is wonderous about these commercial/civil contract transactions is that no-one is forcing anyone to do anything. I chose to make offers. The customer chose to accept. And in the moment of the commercial/civil transaction we do not care about each other’s sexual orientation, religious beliefs, cultural or ethnic background and so on. We do care about respecting each other. If either party is rude, offensive, violent or dishonest, the transaction breaks down. These are the moral underpinnings of the commercial/civil contract. It civilises us as humans. It requires us to treat each other as individuals respectfully. And we humans engage in this across the globe an almost infinite number of times every day.
Yet when it comes to the work environment, there is a history, culture and belief amongst many that this contract of civility, this contract that draws out the best of human behaviour, is not and cannot be applied in the work environment.
This clash of beliefs in the work environment is at the cutting edge of the clash of beliefs over free markets and freedom in general.
How the self-employed and the commercial/civil contract are under attack
This hard-held belief by many—that the work arrangement is always one of oppressive class warfare—has resulted in many jurisdictions seeking to negate or circumscribe the commercial/civil contract as a legitimate work engagement contract.
I think it’s fair to describe what has occurred (and continues to occur) as an academic, legal, statutory, philosophical and political ‘war’ between opposing sides. On one side there are those who support the freedom of the individual embedded in the commercial/civil contract. On the other side are those who deny that such freedom exists and so seek to destroy it through legislative fiat.
At the heart of these anti-independent contractor legislative constructs is the idea of a third category of worker. That idea holds that a person who may be self-employed at common/civil law is also somehow an employee of sorts. It requires the creation of a legislative form of ‘contract’ that defies the common/civil law ‘fact’ that there are only two possible contracts: the commercial/civil or employment. The jurisdictions that do this reject the ILO determination that:
“National policy for protection of workers in an employment relationship should not interfere with true civil and commercial relationships…”
Conclusion
In this article I have sought to advance an understanding of economics through a consideration of a vital institutional underpinning of a free society. That is, that the commercial/civil contract embeds within it, and delivers to the individual, the capacity to exercise freedom of choice.
Opposing this choice is the employment contract which removes from the individual their right and capacity to exercise choice in their work. Control is delivered to the employer. If we remove from consideration statutes and human resources practices that seek to countervail and limit employers’ power, then the employment contract is exposed for what it is—a contract of control of one party over another.
I argue that the commercial/civil contract is morally superior because it delivers freedom to the individual to exercise choice about their life’s decisions. Contracts that deny that freedom (employment contracts) and do the opposite are morally bankrupt.
If there is one thing I hope will emerge from this article it is the recognition of the importance of the independent contractor and of self-employment in a free society. Further, that this is dependent on the commercial/civil contract in the application of economic principles in practical, real life, everyday ways. This is not some dry theory. Rather it is lived experience. I would like to consider this article a call to action. The defence of self-employment and of the commercial/civil contract are central to our freedoms.
If you’re interested in my other writings you’ll find them under the following groups
Modern Marxism Articles, posts looking at my deep study into the operations of marxists active in the Australian political and social scene.
Aust Work Issues : My study/commentary on the ‘revolutionary new labour laws of 2022-2024. Plus the strange happenings with the radical construction union the CFMEU.
This recent article Woke. Its all Freud’s Fault has attracted quite a bit of interest.
I had a take on this, a while ago.
https://open.substack.com/pub/tonymartyr/p/self-employed?utm_source=share&utm_medium=android&r=2jswp