As we reported just a few weeks ago, Congress has begun to gather information and consider the “future of work,” with considerable emphasis on the role of the gig economy. Although this emergency economy is growing rapidly, tension is also growing within its ranks. In particular, gig workers are attracted to earning money while maintaining all the flexibility and control they can exercise in these arrangements. But they are not entirely comfortable with the concept of being an independent contractor (IC) if that means they have no fringe benefits, are not covered by the minimum wage, and have no protection from non-discrimination laws. In this way, and in a much truer sense, ICs are “on their own.”
Lawmakers have begun to hold a series of hearings to discuss the “future of work,” and it may be no surprise that the two political parties have differing ideas about how that should impact the gig economy. The House Education and Labor Committee held the first of three such meetings on October 23, aiming to ensure that the law keeps up with modern developments such as automation, artificial intelligence, and the gig economy. While Democratic lawmakers seem to want to increase restrictions on the industry, their Republican counterparts are looking toward more flexible options. According to an article by Jaclyn Diaz of Bloomberg Law, the working subcommittees will recommend specific legislation early next year. What might such legislation look like, and what chances of success might it have?
According to Bloomberg Law’s weekly “Punching In” column (an absolute must-read each week) that published today, some congressional leaders are not too pleased with the Labor Department after it published an opinion letter a few weeks ago confirming that certain workers for an unnamed gig economy company were properly classified as independent contractors. As we wrote about back on April 29 when the opinion letter was released, that letter offered up the federal government’s official interpretation on whether a certain business model or practice complies with the law, providing us with a solid understanding of how the current USDOL views the misclassification question and will approach it from an enforcement perspective. And the news was very good for gig businesses: “while not a magic bullet that will cure all that ails the modern gig economy industry, [the] development is a welcome one—and a preview as to how today’s USDOL will treat misclassification concerns that fall into their laps from gig economy (and other) businesses,” we said at the time.
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.
As if gig businesses haven’t had enough bad news to digest in the past few weeks... fresh off the heels of the California Supreme Court’s decision in the Dynamex Operations case, members of Congress are now focusing on increasing workplace rights for gig economy workers while handing them the ability to bargain collectively.
Last week was a big week when it comes to shining the spotlight on sexual harassment in the gig economy arena. On Thursday, Nathan Heller wrote a piece for the New Yorker that garnered a lot of attention entitled, “The Gig Economy Is Especially Susceptible to Sexual Harassment.” The premise of the article is that freelance workers of all stripes outside the sphere of protection that typically covers W-2 employees, noting that human resources departments, collective bargaining, and federal and state laws cannot offer coverage over most independent contractors. Because of that, Heller writes, “freelance workers are highly vulnerable [to sexual harassment]. They have little institutional support and few, if any, supervisors. They are transient and easily replaceable as well. Those who gig with algorithmic ratings systems must stay on the good side of capricious clients. Others, who depend on word-of-mouth referrals, are obliged to embrace any gift horses that come.”
Bad news out of Washington, D.C. late yesterday. Chris Opfer of Bloomberg BNA reports that the current version of the Senate tax reform bill, released yesterday, no longer includes the protection that had initially been proposed that would have prevented misclassification challenges against most gig economy companies. We discussed the proposal in a blog post last week with high hopes that we might start to see some movement on the federal regulatory front, but this latest development means that gig companies will be waiting longer for protection from the federal government.
Reports out of Washington, D.C. indicate that gig economy businesses could be in for an end-of-the-year treat in the form of game-changing legislation. Chris Opfer and Tyrone Richardson of Bloomberg BNA report that Senate Republicans will insert language in the upcoming tax reform bill that will “protect businesses that mistakenly classify workers as independent contractors.” Given the dozens and dozens of times we’ve talked about misclassification claims as the biggest scourge facing the industry today, this proposal could radically alter the industry as we know it.
Should the legislative branch of the federal government focus its efforts on regulating the gig economy at the present time, or should they stick to bigger picture topics to occupy their time (such as healthcare or updating the federal tax code)? Should Congress step in and develop a system to provide employee benefits to gig workers? And the million dollar question: should our federal representatives take a stab at revising the independent contractor misclassification test to account for the changes in modern society brought about by the advent of gig work? Due to the growth and sheer breadth of the gig economy, these are but a few of the issues that need to be resolved.
For years, businesses have struggled with properly identifying workers as either independent contractors or W-2 employees. The hundreds of thousands of jobs created by the gig economy has complicated matters even further. Over the years, administrative bodies have attempted to craft tests to be used in the classification process. These tests, in many respects, have not been helpful. Our courts, too, have attempted to solve the riddle, but have largely been unsuccessful due to inconsistent rulings. As a result, businesses that have attempted to properly classify workers in good faith have found themselves in hot water with the Internal Revenue Service and state taxing authorities, state employment departments, workers’ compensation boards, and the courts.