By: Domenick Pesce
The convenience of tapping an app on your iPhone to order a ride as a quick pick-up, to order lunch to the entrance of your job, or to order groceries for the week to your apartment door, has become the norm in 2018.[1] For many consumers around the globe, the utilization of on-demand, app-based businesses and services have become increasingly popular.[2] The so-called gig economy that fuels industries like Uber, Lyft, Grubhub and Instacart, is a large economic force motivated by swiftly advancing technology that continues to rapidly expand.[3] In May of 2017, Intuit CEO Brad Smith said that “[t]he gig economy…is now estimated to be about 34% of the workforce and expected to be 43% by the year 2020.”[4] Why are so many individuals attracted to the idea of gig economy jobs? Researchers suggest a multitude of answers including the ability to be your own boss, work on your schedule, and achieve a healthier work/life balance.[5] The unassuming consumer of the fruits of the gig economy may think nothing more of the industry other than the on-demand, affordable conveniences it provides them. There are however, a myriad of legal issues facing employers of gig economy workers regarding their worker classification, pay, benefits, and more.[6] The gig economy is large already and rapidly expanding, which is causing the legislative and judicial bodies to face legal challenges and calls for reform.[7]
An individual working as an Uber driver or Instacart shopper might call themselves an employee of these companies, however that term is not legally precise.[8] When these companies are not calling the individuals that work for them drivers[9] or shoppers[10] in advertising and business communications they are sure to call their workers independent contractors in all legal terms[11] and contracts,[12] never calling them employees. An employee and independent contractor are two separate labor classifications that are legally afforded different legal protections.[13] Workers classified as employees are entitled to protections provided by the Wages and the Fair Labor Standards Act (“FLSA”), which includes minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.[14] Alternatively, workers deemed as independent contractors, like most gig workers, are not afforded any of these FLSA protections.[15] For example, Uber has argued that they are a technology company the provides a service of connecting drivers and riders and not a transportation company.[16] Uber reasons they simply pair their drivers, who drive their personal vehicles under their personal insurance, up with passengers in need of rides.[17] In December of 2017, Europe’s top court, the European Court of Justice (“ECJ”) “rejected that argument in its landmark decision, ruling that Uber is at its heart a transportation company and should be regulated as such.”[18] Alternatively, in April of 2018, the United States first federal ruling on the gig economy was decided and U.S. District Judge Michael Baylson “ruled that limousine drivers for Uber Technologies Inc […] are independent contractors and not the company’s employees under federal law.”[19] The judicial rulings in the United States are vastly different than in Europe.
Unfortunately for gig workers in the United States, the judiciary must apply outdated state and federal labor and employment law to a new, rapidly expanding, technology-induced category of work.[20] In the recent case, Lawson v. Grubhub, “the U.S. District Court for the Northern District of California succinctly noted: ‘Under California law whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition.’”[21] This clearly indicates the bind a court is trapped in when deciding issues of employee classification. The Court called upon the California “…Legislature to address the dated, bifurcated system of employment classification: ‘With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the Legislature may want to address this stark dichotomy.’”[22] It is apparent that the legislature should prevent gig economy employers from skirting around outdated labor and employment laws, as well as assist workers of a rapidly growing U.S. job sector.
The most practical solutions to resolve this gap in worker classification and benefits falls to a deeply divided and dysfunctional Congress that is unlikely to make headway on these issues before midterms this fall.[23] Updating the FLSA to include the gig economy in some capacity is the dream of gig workers, and nightmare of gig employers because of the financial burden it would have on businesses.[24] Despite the ineptitude and lethargy of the current Congress, there is a collective effort on the part of gig economy businesses, unions, and public policy groups to tackle these issues.[25] In January of 2018, Uber CEO Dara Khosrowshahi signed onto a letter with Service Employees International Union (“SEIU”) 775 President David Rolf, and Seattle investor and workers’ rights advocate Nick Hanauer urging the state of Washington “to develop a ‘portable benefits system’ to give contract workers in the so-called gig economy access to health care and retirement planning accounts.”[26] In proposing these first steps to remedy the situations of independent contractors, the group also recognizes the difficulty of achieving these goals, stating “there are numerous ‘legal, policy and political hurdles’ why companies like Uber haven’t been able to offer contract employees benefits on their own.[27] ‘These hurdles will only be overcome when parties are willing to sit down, put aside historical differences, and work together to develop a solution[.]’”[28] Despite these calls from private businesses, unions, and interest groups, change rests on Congress to legislate on the issue by updating the FLSA or by providing supplemental legislative relief, such as portable benefits, for the independent contractor gig workers. Until then, independent contractors will continue significantly contributing to the U.S. economy, while reaping none of the protections provided to traditional employees.
[1] See Abha Bhattarai, Side hustles are the new norm. Here’s how much they really pay., Wash. Post (Jul. 3, 2017), https://www.washingtonpost.com/news/business/wp/2017/07/03
/side-hustles-are-the-new-norm-heres-how-much-they-really-pay/?utm_term=.4780c4759c3f.
[2] Charles Colby & Kelly Bell, The On-Demand Economy Is Growing, and Not Just for the Young and Wealthy, Harvard Bus. Rev. (Apr. 14, 2016), https://hbr.org/2016/04/the-on-demand-economy-is-growing-and-not-just-for-the-young-and-wealthy.
[3] See id.
[4] Patrick Gillespie, Intuit: Gig economy is 34% of US workforce, CNNMoney (May 24, 2017), http://money.cnn.com/2017/05/24/news/economy/gig-economy-intuit/index.html.
[5] David Hale, Here’s Why People Are Flocking To The Gig Economy, HuffPost (Dec. 3, 2015), https://www.huffingtonpost.com/david-hale/heres-why-people-are-floc_b_8683182.html.
[6] Yuki Noguchi, Gig Economy Renews Debate Over Whether Contractors Are Really Employees, NPR (Mar. 7, 2018), https://www.npr.org/2018/03/07/589840595/gig-economy-renews-debate-over-whether-contractors-are-really-workers.
[7] Id.
[8] Michael Marr, Independent Contractor or Employee: Do You Pass the “Economic Realities” Test?, LexisNexis Legal Newsroom (Aug. 12, 2015), https://www.lexisnexis.com/
legalnewsroom/labor-employment/b/labor-employment-topblogs/archive/2015/08/12/
independent-contractor-or-employee-do-you-pass-the-economic-realities-test.aspx.
[9] Uber | Driver requirements | How to drive with Uber, https://www.uber.com/drive/requirements (last visited Apr. 18, 2018).
[10] instacart | Get paid to shop!, https://shoppers.instacart.com (last visited Apr. 18, 2018).
[11] Uber | Legal | United States Terms and Conditions of Service, https://www.uber.com/
legal/business/usa/en-US (last visited Apr. 18, 2018).
[12] instacart | Contracts | United States of America | Independent Contractor Agreement, https://shoppers.instacart.com/contracts/2017 (last visited Apr. 18, 2018).
[13] Marr, supra note 8.
[13] Uber, supra note 9.
[14] Id.
[15] Id.
[16] Ivana Kottasová, Top court: Uber should be regulated like a taxi company, CNNtech (Dec. 20, 2017), http://money.cnn.com/2017/12/20/technology/uber-taxi-company-europe/index.html.
[17] Id.
[18] Id.
[19] Daniel Wiessner, U.S. judge says Uber drivers are not company’s employees, Reuters (Apr. 12, 2018), https://www.reuters.com/article/us-uber-lawsuit/u-s-judge-says-uber-drivers-are-not-companys-employees-idUSKBN1HJ31I. “Uber does not exert enough control over drivers for its limo service, UberBLACK, to be considered their employer under the [FLSA]. The drivers work when they want to and are free to nap, run personal errands, or smoke cigarettes in between rides.”
[20] Todd B. Scherwin & Andrew J. Hoag, GrubHub Driver Found to Be Independent Contractor, Not Employee, Soc’y for Human Res. Mgmt. (Feb. 14, 2018), https://www.shrm.org
/resourcesandtools/legal-and-compliance/employment-law/pages/court-report-grubhub-driver-not-employee.aspx.
[21] Id.
[22] Id.
[23] Sheryl Gay Stolberg & Nicholas Fandos, As Gridlock Deepens in Congress, Only Gloom Is Bipartisan, N.Y. Times (Jan. 27, 2018), https://www.nytimes.com/2018/01/27/us/
politics/congress-dysfunction-conspiracies-trump.html.
[24] Megan Rose Dickey, Judge rules Grubhub properly classified delivery driver as independent contractor, TechCrunch (Feb. 8, 2018), https://techcrunch.com/2018/02/08/grubhub-v-lawson-ruling/. “In 2015, a Recode analysis estimated it would cost Uber $209 million to reclassify 45,000 drivers in California. As companies like Uber, Lyft and Postmates are still trying to reach profitability, the costs of reclassifying their workers could have a negative impact on their respective bottom lines.”
[25] Ali Breland, Uber CEO calls for new benefits system for gig economy workers, The Hill (Jan. 24, 2018), http://thehill.com/policy/technology/370506-uber-ceo-signs-letter-calling-for-portable-benefits-to-help-gig-workers.
[26] Id.
[27] Id.
[28] Id.
The L•E•Jer 