Embracing the Gig Economy: You’re Already a Player in It (Yes, You!)
The term “gig economy” has gotten a substantial amount of play and attention in the media and in daily life as of late—often provoking near Pavlovian mental images of ride-sharing platforms, people on bicycles frantically running errands in an urban environment, or other device-based apps and services that five years ago we couldn’t envision—and which now we cannot fathom a world being without. But that common depiction and definition of the “gig economy” is, in fact, far too narrow.
Because here’s the thing: whether you want to or not or whether you realize it or not, the stark reality is that all companies—old and new, large and small, public and private—historically, currently, or imminently are real players in the gig economy, or what some refer to as the “contingent workforce game.”
Put simply, the “contingent workforce game” or “gig economy” refers to the labor economic model of short-term work relationships or alternative, non-traditional work relationships in which workers (whether they be self-employed, employed through employment agencies, temps, consultants, contractors, freelancers, seasonal, or the all-encompassing “other”) accept assignments of various lengths from people and firms who demand their services—as opposed to the more traditional, full-time employment relationship.
While temporary employment or non-traditional working arrangements are certainly not a new concept in the U.S. economy, the ubiquity and efficiency of these arrangements today has increased the demand for new technologies and platforms to facilitate this growing human capital model. In fact, the Bureau of Labor Statistics estimates that, in 2017, as many as 40 percent of the U.S. workforce is considered contingent. This figure is expected to grow to 50 percent by 2020.
Here are five issues that all companies should be mindful of as they embark on their own journey of embracing the gig economy:
- Misclassification of Employees: Identifying whether an individual is an employee or an independent contractor continues to be the most confused and contentious issue for gig workers and employers alike. The stakes are due to the afforded rights, protections, and benefits under applicable law and employer policies provided to various workers.
The financial implications of misclassification have been known to the tech sector since at least 1997, when Vizcaino v. Microsoft Corp., 120 F.3d 1006 (9th Cir. 1997), served as a wake-up call. This decision held that freelance workers who worked for Microsoft between 1987 and 1990, and who had signed independent contractor agreements noting their ineligibility for benefits, were common law employees and eligible for benefits under Microsoft’s 401(k) plan and Employee Stock Purchase Plan, pursuant to the language of those plans.
A more recent and closely watched case is O’Connor v. Uber Techs, 82 F. Supp. 3d 1133 (N.D. Cal. 2015). In O’Connor, plaintiffs, who are individuals who worked as Uber drivers, allege that they are Uber employees and should be paid minimum wage and receive reimbursement for work expenses. Uber argues that it is a technology platform that merely partners with independent contractors to connect them with consumers who need a ride. On summary judgment, the court found that the plaintiffs had established a rebuttable presumption that they were employees, focusing on the amount of control that Uber exercised over its drivers through its interview process, unilateral determination of rates, and ability to terminate drivers who received low customer satisfaction scores. Ultimately, the question of whether the plaintiffs are employees or independent contractors was for the jury to decide. The case has yet to go to trial, and a proposed $100 million settlement was rejected by the California District Court last year. This remains a seminal case to track that will have ripple effects on the broader gig economy for years to come.
- Agreements with Independent Contractors: In light of the potential for misclassification claims, it is becoming ever more important for companies to clearly define their relationships with temporary workers at the outset and memorialize the details of the relationship in an independent contractor agreement. Employers must also be mindful of applicable state law that provides a means for clarifying the independent contractor relationship. For example, on May 15, 2017, New York City’s Freelance Isn’t Free Act(“FIFA”) took effect. Under FIFA, among other things, parties that retain “freelance workers” to provide services under a contract between them that is worth $800 or more must reduce the contract to a written agreement. Contracts with independent contractors or staffing agencies should also contain strong indemnification language to protect a company from liability should the independent contractor or temporary worker negligently or intentionally harm its customers, as well as require the contractor to maintain and furnish proof of insurance.
- Joint Employment/Co-Employment: The potential to unwittingly become a joint employer with a third-party entity that is acting as an intermediary and providing the workers (i.e., a temporary staffing company) is also ranked as a chief concern among employers. The joint-employer concept looks at whether two companies share or control the essential terms and conditions of employment for a worker. If a company is deemed to be a joint employer with another employer, that company can be found equally liable for any claims or legal issues (e.g., discrimination, wage-hour violations, etc.). Any agreement with a third-party entity should, at a minimum, contain a disclaimer on joint-employer status and clearly delineate responsibilities. Contractual strategies aside, the practical difficulties involved in balancing the requisite amount of supervision to be exercised over temporary workers with the legal standards of what constitutes a joint employer makes a finding of “no joint employment” increasingly challenging.
- Development of Company Culture: While the flexibility to hire individuals on a temporary basis can certainly prove beneficial, it can become increasingly difficult to cultivate a cohesive company culture in a workplace that leverages a revolving door of temporary workers, particularly in light of misclassification and co-employment risks. It is increasingly incumbent on employers to evaluate and manage their resourcing model and to assess whether the makeup of their human capital portfolio is properly balanced for their business and cultural needs.
- Susceptibility to Unionization: As the demand for portable benefits and wage parity for gig workers grows, more and more non-traditional work environments may find themselves targeted for unionization and organized labor as a means of providing protection and benefits to gig workers. As a recent example, the Huffington Post editorial workers voted to unionize in 2016 and recently voted to approve their first collective bargaining agreement with the Writers Guild of America East (“WGAE”), guaranteeing a minimum pay base for editorial workers and $16 per hour pay for comment moderators. WGAE has also approved union contracts for other digital content providers.
The rise of the gig economy has also resulted in the birth of nonprofits created to provide benefits for, and to lobby on behalf of, independent contractors, most notably the Freelancers Union (a strong supporter in the passage of FIFA, and one whose membership has surpassed 300,000).
In the end, whether you are a company that approaches the gig economy with open arms or with some resistance—make no mistake—this not-so-new normal is here to stay, and you are already operating in it. So embrace the reality, but do take caution along your journey.