The Gig Economy’s Political Reckoning Has Arrived
(Bloomberg) -- Around the globe, it seems like gig work, and gig workers, are everywhere: millions of people deployed, generally for piecemeal tasks, through smartphone apps created by technology startups. Companies such as Uber Technologies Inc. in the U.S. and Deliveroo Plc, based in the U.K., say the arrangement gives workers the freedom to be their own bosses and puts otherwise idle resources to use. A growing number of labor advocates say it’s exploitation in a new wrapper. Courts and legislatures are wrestling with how to fit this phenomenon into existing labor laws, or whether an entirely new approach is needed.
1. What is gig work?
It’s part of a broader trend of what’s sometimes called “fissured” work: People are making money for companies, and being subjected to their rules, without being considered their employees. Some are deemed to be someone else’s employees, like the content moderators who are officially hired by vendors instead of Facebook Inc. or the cashiers who get their paychecks from franchise owners instead of McDonald’s Corp. Others, in industries from trucking to teaching as well as app-based work, are classified by the companies they work for as independent contractors. Such arrangements have a long and contentious history. What’s new is the ability of so-called platform companies to mobilize decentralized workforces in a relationship entirely mediated by their apps.
2. What’s the fight about?
Under labor laws around the world, employees have more protections but are subject to greater control by their bosses, whereas independent contractors operate more freely but enjoy fewer legal guarantees. In the U.S., for instance, employees are covered by laws governing minimum wage, overtime, discrimination, sexual harassment and the right to unionize, which don’t apply to contractors. Contractors in the U.S. are also generally on their own when it comes to obtaining health insurance, and lack paid sick days even in jurisdictions that guarantee them to employees.
3. Where is this fight happening?
Virtually everywhere Silicon Valley-based gig companies or their competitors have spread. Pandemic lockdowns have boosted the demand for gig companies that make deliveries, while throngs of the unemployed have turned to such work as a way to make ends meet. In India, gig employment has soared in companies including Uber, Swiggy, Ola, Zomato, Flipkart and Amazon. In China, authorities in March arrested a labor activist who was trying to organize gig workers outside state-sanctioned unions.
4. What do the two sides say?
Gig economy executives argue that the flexibility they offer workers, like the freedom to start or stop work when they want, wouldn’t be possible if their companies were saddled with all the costs and strictures of employment law. (As it is, Uber lost $6.8 billion in 2020, while competitor Lyft Inc. lost $1.8 billion.) Instead, they would like to see the statutes adjusted to let them offer some additional benefits without being considered employers. Labor advocates counter that such “freedom” is a fraud, since gig companies use well-honed algorithms and incentives to make workers perform tasks when and how management wants them to. They also say that depriving those laborers of the minimum standards and organizing rights that other workers get will just encourage more companies to replace employees with so-called contractors.
5. How has this played out?
Consider California, home to such gig economy giants as Uber, Lyft, DoorDash Inc. and Instacart. Judges there in 2018 established, and lawmakers then codified, a new, broader definition of “employee.” At its heart is what’s called the ABC test. Under that three-part standard, workers generally can’t be deemed contractors unless, among other things, the work they’re doing falls outside the “usual course” of their company’s business.
|California’s ABC test|
|Workers should be considered employees unless|
|A. They do their work free of a company’s direct control|
|B. The work they do falls outside the usual course of the company’s business|
|C. They have independently chosen to go into business for themselves|
6. How did that work out?
With the ABC test on the books, the state sued hometown giants Uber and Lyft in 2020 for continuing to classify drivers as contractors. Uber, Lyft, DoorDash and Instacart, after trying unsuccessfully to secure a compromise that would shield them from the new law, instead bankrolled a $200 million ballot measure campaign. They scored a big victory with the passage of Proposition 22, an initiative exempting them from the ABC test. The measure deemed app-based transportation and delivery drivers to be contractors while providing a limited set of alternative benefits, such as minimum pay for their time on trips but not for their time waiting in between. In August, a state judge ruled that the proposition violated California’s constitution, but it’s remained in effect while its supporters appeal that ruling. In the meantime, the companies are pushing a similar measure in Massachusetts.
7. What’s next?
In the U.S., the House of Representatives passed a bill, supported by President Joe Biden, to change federal labor law to count more gig workers as employees. The uncertain prospects facing all sides on such proposals have spurred some executives and union leaders to discuss legislation on the state level that would extend some new benefits to gig workers and create some form of union representation for them without making them full-fledged employees. But there are steep hurdles. For one, federal laws restrict collective bargaining by contractors and also limit what states can do legislatively on union rights for employees. And both sides see outcomes to be anxious about.
8. What are the worries?
Labor advocates worry that creating an intermediate category would make it easier for companies that currently classify workers as full employees to shove their staff into that bucket instead. Following the passage of Prop 22, the grocery giant Albertsons Cos. announced it would replace drivers, who were classified as employees, with gig workers, reinforcing unions’ fears that the contract model will spread. A proposed compromise in Connecticut to create a system of gig worker “sectoral bargaining” over recommended industrywide rules, without making the workers employees, took fire from some companies and labor groups. It was opposed by Uber in part because it didn’t specifically designate the workers as contractors, and then was shelved after the AFL-CIO weighed in privately with concerns about how it could affect the group’s nationwide advocacy. A similar proposal in New York fizzled in June after some labor advocates objected to draft language restricting strikes and pre-empting existing protections, but its sponsor said she planned to work with the critics and develop a new version.
9. Is this just a U.S. fight?
No. In several countries, new laws and court rulings are chipping away at the idea that gig workers are self-employed. The European Union set out rules in December that would mean people working for food-delivery and ride-hailing apps can presume they are an employee regardless of what they are called in their contract. Uber has been told by U.K. judges to treat drivers as workers entitled to a minimum wage and rest breaks, and to shoulder the responsibility of contracting directly with passengers. China issued guidelines in November aimed at protecting the rights of ride-hailing drivers that order industry leader Didi Global Inc. and its smaller rivals to strengthen social insurance and adopt “reasonable” commissions. In India, parliament approved a bill seeking social security for workers in the informal sector and the gig economy. The government hasn’t yet implemented the contentious measures while it gears up for local elections in 2022.
The Reference Shelf
- A Bloomberg Businessweek article on how, after Prop 22, the contractor model is poised to spread.
- A Bloomberg story on how European laws are moving in the other direction. Another on Spain’s faltering effort trying to turn delivery riders into employees.
- California’s explanation of the ABC rule and the official voter guide summary of Prop 22.
- An article on how drivers for DoorDash try to game its algorithm to win better pay and working conditions.
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