The new administration’s efforts to reverse course on many of the gains that gig economy businesses achieved under previous White House leadership took another step today as the Department of Labor (DOL) withdrew a guidance letter that indicated typical gig workers are independent contractors. By scrapping the April 29, 2019 letter, the Biden DOL sent yet another signal to businesses that they will have an uphill battle in classifying workers as contractors for at least the next four years. What do businesses need to know about today’s activity?
A federal appeals court just resurrected a pivotal gig economy battle that at one time seemed to be the center of the legal universe – but for a variety of reasons seems much less important these days. The 9th Circuit Court of Appeals issued a brief administrative order on January 28 that took the landmark Lawson v. Grubhub case out of suspended animation and placed it back on its active docket, ready to be argued and eventually decided. But thanks to a recent California Supreme Court decision and a critical ballot measure outcome, the outcome seems fairly predictable while the overall stakes seem much lower. What do gig economy employers need to know about this recent activity?
Joe Biden made no secret about his position on the gig economy when he was in campaign mode. “Employer misclassification of ‘gig economy’ workers as independent contractors deprives these workers of legally mandated benefits and protections,” his campaign website said. “This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts.” And the first few steps he has taken since assuming office have demonstrated that he’s serious about taking on gig businesses: mere hours after being sworn in, he froze the Labor Department rule that was about to make it easier to classify workers as contractors. Not to mention that he nominated Marty Walsh to the top position at the Labor Department, a staunch union advocate who will no doubt take up Biden’s charge to render it even harder for gig economy companies and other businesses to retain independent contractors. But when it comes to Biden’s loftiest ambition in this arena – passage of federal legislation to ensure as many gig economy workers as possible are classified as employees – he may run into an expected roadblock: his own party.
Just two months after 58% of Californians voted it into effect and not even one month after it became law of the state, a group of workers and a major union have filed suit to overturn the results of Proposition 22, the ballot measure that ensured that app-based rideshare and delivery drivers could be classified as independent contractors. The Service Employees International Union (SEIU) joined with a group of rideshare drivers to go straight to the California Supreme Court on January 12 and ask it to invalidate the new law as being unconstitutional and otherwise unenforceable.
If it had been released at some other point in time and under different circumstances, perhaps gig economy businesses would be celebrating the release of a federal rule that makes it easier to classify workers as independent contractors. But the fact that it wasn’t formalized until the waning days of the current administration means that the rule faces long odds of ever taking effect. We wrote about the rule in our Legal Alert that can be found here – feel free to check it out if you want the particulars of what the rule could bring to the table when it comes to establishing a worker classification standard. The Alert also provides details regarding the roadblocks the rule faces: the impending “midnight” memo to be released on January 20 that will temporarily freeze this rule and prevent it from taking effect on March 8 as planned; the probable litigation that will be filed to block the rule from taking effect on a permanent basis; an incoming administration that will almost certainly take additional steps to shelve the rule; and a possible replacement rule that would almost certainly be worker-centric. Add to that the recent news that Marty Walsh will soon head the Labor Department – his labor background makes it all but certain that he will oppose this rule – and you can see why it seems unlikely that the rule will ever become the law of the land.
It’s typical as the year winds down to turn our attention to the upcoming new year to try to figure out what’s in store for us. And like no other time in most of our lives, we’re looking forward to putting the past year in the rearview mirror and flipping our calendars to start anew. As we begin to ponder what 2021 might look like for us, we’re particularly interested on this blog to forecast what the new year will bring for the gig economy industry. Here are our top three predictions for the new year.
With only a few weeks left in 2020 and a new administration set to take control of the Department of Labor a few weeks later, companies that rely upon a gig economy business model may be in store for a nice gift this Christmas season. According to Ben Penn and Bloomberg News, the Labor Department is planning on releasing its final misclassification rule – that will make it easier to categorize workers as independent contractors – before Christmas. Under this schedule, it will be set to take effect two months later. By then, however, there will be new leadership in the White House and at the Labor Department. Will that changeover mean that this gift for businesses will eventually turn into a lump of coal?
Delivery and rideshare drivers who work in the gig economy should get priority access to the COVID-19 vaccine, according to Uber CEO Dara Khosrowshahi. In a December 10 letter sent to governors in all 50 states, Khosrowshahi notes just how reliant Americans have become on gig workers during the pandemic, earning them a spot near the front of the line. What do you need to know about this development?
In a recent op-ed penned in Business Insider, DoorDash co-founder and CEO Tony Xu laid out a three-step plan necessary to ensure that our nation’s workplace laws stay current to address the ever-growing gig economy by creating a hybrid model of worker somewhere between employee and independent contractor. The November 29 piece also discusses some of the ways in which his company and similar businesses have been instrumental in providing needed services to consumers and all-important compensation for workers looking to manage through the pandemic and ongoing financial crisis.
The federal government has taken another step to further incentivize highly skilled workers to join the gig economy: it has proposed rules that would permit publicly held gig companies to offer equity compensation to their employees as payment. The rules, proposed by the Securities and Exchange Commission on November 24, would allow these companies to pay workers in stock during a five-year pilot period. “As our economy and work arrangements evolve, we must be willing to experiment with concomitant changes to our regulations,” commissioners Elad Roisman and Hester Peirce wrote in a statement that accompanied the release. However, there’s a good chance the rules may never get off the ground at all due to the impending changes in Washington, D.C. What do you need to know about this recent announcement?