The Gig Economy’s Political Reckoning Has Arrived
(Bloomberg) -- In the gig economy, who’s the boss? Gig work refers to jobs done by workers who aren’t employees, at least according to the companies they work for. The term is most often used to describe people deployed for piecemeal tasks through smartphone apps created by tech startups, such as Uber Technologies Inc.’s ride-hail and delivery drivers. Such arrangements are a linchpin of the field that used to be called the sharing economy, before sentiment toward it grew more skeptical. Policymakers -- and judges -- are wrestling with how, and whether, to fit such work into the existing framework of labor law, and President Joe Biden has pledged to weigh in at the federal level. How gig work gets defined will affect the lives of millions of Americans in jobs far removed from Silicon Valley.
1. Where did gig work come from?
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 employed by staffing agencies, like the companies that provide Facebook Inc. with content moderators, or by franchise owners, like McDonald’s restaurant owners who hire cashiers. Others, in industries from trucking to teaching as well as app-based work, are classified by the companies they work for as independent contractors. Technology has helped spread these sorts of arrangements, but they’ve existed, and been fought over, since long before the internet.
2. What’s the fight about?
U.S. federal and state laws distinguish between employees, who are subject to more control by their bosses and entitled to more protections, and independent contractors, who can operate more freely but enjoy fewer legal guarantees. Employees are covered by minimum wage, overtime, nondiscrimination, sexual harassment and unionization laws from which contractors are excluded.
3. 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.
4. How did we get here?
The debate has been roiling for years but has come to a head in California, where judges 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|
5. 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 Inc. 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 in November with the passage of Proposition 22, an initiative exempting them from the ABC test. The measure deemed app-based transportation and delivery drivers 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. Some drivers and union leaders are now trying to overturn that referendum in court.
6. What’s next?
Biden pledged during his campaign to push for legislation adding an ABC test like California’s to federal workplace laws. Democrats’ control of the U.S. House and Senate makes that idea a threat for the companies to take seriously, but even some Democrats are hesitant about that approach. Gig companies have urged the new administration to consider models more like Prop 22, but that’s fiercely opposed by organized labor. Biden’s appointees at federal agencies could work to expand gig workers’ rights by interpreting the definition of “employee” under existing laws more broadly and punishing companies that continue classifying their workers as contractors, though such moves would likely be challenged in court.
7. Could there be a compromise?
The uncertain prospects for all sides have spurred some executives and union leaders to talk through a potential deal -- state legislation 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 Prop 22, the grocery giant Albertsons Cos. announced it would be replacing 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.
9. Is this just a U.S. fight?
No. A similar gap between the rights of employees and contractors exists in many countries. In Canada, gig companies have been courting unions and local governments about a potential compromise. In the U.K., Uber announced in March, after losing a Supreme Court ruling, that it would reclassify all its drivers as “workers,” an intermediate category there that entitles them to minimum wage and vacation pay. Labor advocates say the company’s reforms fall short of what the judges ruled workers were owed, because drivers still won’t be paid for waiting time.
The Reference Shelf
- A Bloomberg Businessweek article on how, after Prop 22, the contractor model is poised to spread.
- A 2020 proposal for “concentric circles” of legal protection, under which rights like a minimum wage wouldn’t depend on employment status, co-authored by the interim head of Biden’s Labor Department policy office.
- A 2015 Hamilton Project proposal for putting gig workers in an intermediate category with antidiscrimination protections but not a minimum wage.
- 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.
©2021 Bloomberg L.P.