The gig economy has become so prevalent in today’s society that it is not likely many people will still wonder “what IS the gig economy?” However, if someone does still have that question, they are in luck. Merriam-Webster recently announced that it has officially added “gig economy” to its dictionary. The phrase is now formerly defined as “economic activity that involves the use of temporary or freelance workers to perform jobs typically in the service sector.”
There’s no way to sugarcoat this one. Today the 9th Circuit handed a big loss to gig economy companies by concluding that last year’s Dynamex decision from the California Supreme Court and its wide-reaching ABC test should be applied retroactively. That means that the ABC test – which makes it very difficult for gig economy businesses to properly classify their workers as independent contractors rather than employees – will be applied to federal cases when evaluating relationships that businesses thought were to be adjudged under a much more flexible standard.
In a major positive development for gig economy businesses, the U.S. Department of Labor today issued an opinion letter today confirming that certain workers providing workers for a virtual marketplace company are, indeed, independent contractors.
The confusion surrounding worker classification is not a new topic for any gig economy employer. Whether gig workers are classified as employees or independent contractors is a constant battle businesses face both in the legislature and the judiciary. But independent contractor classification may have just gotten a little simpler in Texas thanks to the Texas Workforce Commission. The agency responsible for determining whether workers are properly classified and assessing unemployment taxes just adopted a rule on April 9 classifying workers hired for jobs through a digital app as independent contractors for unemployment insurance purposes. The TWC reasoned that its adoption of the rule provides employers with more stability in this growing sector of the economy.
Great news for gig economy businesses from an Illinois federal court: a judge recently ruled that Grubhub’s delivery drivers were not operating in “interstate commerce,” and therefore were not excluded from the company’s mandatory arbitration agreement. The March 28 ruling is one of the first decisions on this subject following January’s Supreme Court ruling casting this issue into doubt. While the fight is not over, round one goes to gig economy companies.
If you have been keeping an eye on growing trends in the gig economy, you know that around a third of workers reportedly use contract or freelance gigs as their primary source of income, and that this number is only expected to grow in 2019 and beyond. You may even be managing one of these workers as you read this. If not, odds are that you will be soon. So what are the rules in this context? And more importantly, how can you most effectively manage and lead a workforce blended with both full-time workers and freelancers?
Last week, we shared with you the news of Uber’s proposed $20 million settlement to resolve a long-running misclassification claim – the parties agreed to the deal, and they just needed the approval of a federal court judge (read the entire post here). Of course, nothing is finalized until it’s signed, and the parties to this particular claim know that all too well; after all, they thought they had a $100 million settlement in place in April 2016 before the same judge nixed the proposed deal as not being “fair, adequate, and reasonable” to the class of drivers. This week, that judge signaled there could be another fly in the ointment, and its name is Dynamex.
Lyft recently filed for an initial public offering with the hopes of raising as much as $2.1 billion. As part of its registration statement for its IPO, Lyft acknowledged the company could be negatively impacted by several potential business risks. The filing acknowledged not only increased and intense competition from competitors, but also the specter of litigation across the country as drivers contest their classification as independent contractors and the applicability of Lyft’s arbitration agreement. Within its S-1, Lyft cited lawsuits disputing the employment status of its drivers – as well as new municipal regulations – as potential risks that investors should consider when evaluating the company.
The $100 million settlement announced Monday by a transportation company to resolve a long-running misclassification claim might be the direct result of a January Supreme Court decision, and might be a troubling harbinger of things to come for many gig economy businesses. Swift Transportation paid the massive sum to a group of drivers who claimed they were improperly classified as “owner-operator” contractors when they should have been treated as employees, but only agreed to the deal after it became clear that recent legal precedent from the SCOTUS meant that they could not resolve the dispute in arbitration. What does this settlement signal for gig economy businesses in general?
When the news broke today that Uber had agreed to pay a group of drivers $20 million to settle a long-running misclassification claim, you could be forgiven for thinking that the deal sounded like a massive blow to the gig economy giant. After all, $20 million is a substantial sum – no matter how large a company is – and in most cases would be an indication that the paying party had given in to the exorbitant demands of the claimants. But this settlement is different. It resolves a claim that Uber had originally agreed to settle for $100 million – five times the amount of the final total. How did Uber get such a bargain?