Bloomberg Law’s Jaclyn Diaz wrote a very interesting story earlier this week asking whether the U.S. Department of Labor (USDOL) would soon issue an opinion letter to aid gig economy companies with commonplace labor and employment issues—namely, the ever-present threat of misclassification. Unfortunately, the story seems to indicate that such a letter is not on the horizon anytime soon, but it does describe the current atmosphere as one that could soon support such an opinion.
During Fortune’s Most Powerful Women Summit earlier this week, Uber’s CEO Dara Khosrowshahi dropped a bombshell: the company wants to soon provide benefits to its drivers in an effort to close the gap between what is received by its contractor fleet and its employee workforce. If this comes to fruition, it could revolutionize the way that gig workers are compensated, could lead to even more people jumping into the gig worker pool—and could spark a renewed misclassification battle over contractor status.
We’ve been waiting for something like this since the gig economy was established: a set of rules and regulations, adapted for the modern era and with the gig economy in mind, addressing the issue of independent contractor classification. And yesterday’s news may mean we may actually have our wish granted.
It was just a matter of time. After the Supreme Court cleared the way for businesses to use class waivers with their employees and contractors with the Epic Systems ruling this past May, many observers expected that the decision would come back to haunt a class of Uber drivers who wanted to litigate a class action misclassification case against the ride-sharing company in court. Earlier today, sure enough, the other shoe dropped.
When the Supreme Court decided this May that businesses were permitted to enter into class waiver agreements with employees and contractors, forcing them into individual arbitration proceedings over workplace disputes rather than having to be subjected to bloated and costly class action litigation, we called it a “monumental” decision that “saved employment arbitration as we know it.” For businesses in the gig world, we now have a definitive example of just how valuable the SCOTUS’s new standard can be when it comes to misclassification cases.
While businesses, chambers of commerce, local leaders, and others have put the full-court press on the California legislature to take action to somehow lessen the impact of the new ABC Test for determining misclassification in light of the state Supreme Court’s recent Dynamex decision, it appears there is no relief in sight. For the foreseeable future, California employers need to adjust to the new reality and assume things aren’t going to be changing.
We can safely say that one of the biggest supporters of the gig economy is Virginia Senator Mark Warner (D). Back in 2016, he advocated for the Labor Department to update its statistics to help us get better insight into the size of the gig economy. In 2017, he crafted a concept and introduced a bill to assist local governments with funding and development of portable benefits for gig workers, then followed that up with a proposal designed to tackle tax issues that arise for gig workers. He’s at it again.
We’ve been asking for increased regulation of the gig economy, and we got it – just not the kind of regulation businesses were hoping for. While gig businesses are craving a modern regulatory approach to misclassification issues, the New York City Council yesterday instead issued a series of new laws that could serve to cool off the growth that we’ve been seeing for the past few years. Among the new laws, ride-sharing drivers will soon be entitled to what appears to be the nation’s first minimum payment wage rates, and the number of licenses for permissible ride-sharing drivers will be artificially capped for the first time.
Although the document itself is fairly dense and complex, specifically focusing on the home-care registry industry, the Labor Department’s latest field assistance bulletin could provide a helpful clue to gig economy companies about how the agency could regulate the concept of misclassification on a broader scale. The July 13 document tilts the scales back towards an even playing field, which should be music to the ears of gig economy businesses across the country.
You remember the game-changing, earth-shattering, monumental decision from the California Supreme Court a few months ago that fundamentally changes the test to determine whether your workers are independent contractors or employees, don’t you? For those who had put it out of their minds hoping it was all just a nightmare, here’s the quick summary: rather than applying a balancing test that took into a number of factors, the California Supreme Court said that hiring entities need to prove that all of their workers satisfy the “ABC test” in order to properly classify them as employees.