The Future of the Gig Economy Is Still Contentious

Uber driver gig worker taking passengers in a rideshare
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The so-called “gig economy” may face a reckoning in 2021.

For almost two years, Democrats including President-elect Joe Biden have supported pro-union employee classification laws across the country. Republicans, business owners, and many independent contractors (ICs) have fought against them in a complex, heated legal battle. 

Now that Democrats control Congress and the White House, the battle lines could shift.

Key Takeaways

  • The “gig economy” is not universally defined, but legislators on both sides of a partisan fight have ramped up efforts to change that in recent years.
  • With a new Democratic-controlled Congress and White House, pro-union employee misclassification efforts have been thrust into the spotlight.
  • Republicans and business owners have deflected efforts to classify gig workers as employees with laws like Proposition 22 in California.
  • Independent contractors ranging from drivers to journalists fall on both sides of the fence, with many demanding complete freedom from traditional employment restrictions.

What Is the Gig Economy? 

According to available data distilled by Cornell University and Aspen Institute’s Gig Economy Data Hub, more than a quarter of workers participate in the loosely defined gig economy in some capacity, and more than one in 10 workers rely on gig work for their primary income. Historically, the gig economy has been defined as everything from hourly work to 1099 tax classification.

“There is no universally accepted definition of gig work,” said Erin Hatton, sociology professor at the State University of New York at Buffalo (SUNY). “People use it in many different ways. Sometimes it’s related to any temporary work or independent contract work, sometimes people use it when they’re just talking about technology like Uber.” 

The Final Rule vs. the PRO Act 

To address the ambiguity, the Department of Labor (DOL) drew up a “Final Rule” for gig workers, which was announced earlier this month. The rule allows businesses to hire independent contractors without giving them full employee benefits, so long as they pass an “economic reality” test. The test checks off the amount of skill required for the job, the degree of permanence of the job, and whether or not the independent contractor’s work is integrated into a business alongside that of regular employees. 

The rule is slated to go into effect on March 8, which means that it could be delayed by the  Biden administration. After a formalized process, the new administration could, in fact, delay it indefinitely. The rule is also considered interpretive, meaning that it is not legally binding.

Meanwhile, the Protecting the Right to Organize (PRO) Act passed the House of Representatives in February 2020 and is supported by key Democrats, including Biden. If the PRO Act passes the Senate in the new Democratic-controlled Congress, it would codify the right to organize and bargain under the National Labor Relations Act (NLRA). 

“We think everyone should have bargaining rights. Truckers should have bargaining rights, workers on app platforms should have bargaining rights,” said Kelly Ross, policy director at AFL-CIO, which is a leading force behind the PRO Act. “The legislation wouldn’t force them to bargain, but it would give them the right.”

The PRO Act and the ABC Test

The PRO Act has a better shot of getting passed with a Democratic-controlled Congress. It would need to be introduced and passed in a new session.

Under the PRO Act, employees who may organize under the NLRA would be defined using the controversial “ABC Test,” which is more restrictive than the DOL test. It only has three stipulations, including “prong B” which states that a service is considered independent contract work only if the service is performed outside the usual course of the business of the employer. This prong is satisfied, for example, when a store hires an outside plumber to repair a leak. If prong B is not satisfied, along with the other two prongs, the person must be considered an employee of the establishment.

“We’ve been very concerned about the misclassification of employees as independent contractors since forever,” said Ross. “This is something we’ve seen in a number of industries for a long time, and we think it’s gotten worse.”

Many independent contractors consider themselves casualties of the gig work fight. Particularly in California, new legislation has already affected a wide swath of companies from rideshare giants to newspapers. 

The ABC Test’s Proliferation

The ABC test was used in California’s Assembly Bill 5 (AB5) law, now AB2257, which passed in September 2019 and re-classified many independent contractors as employees. The law was revised after some industries said they were unable to work thanks to AB5; journalists and truckers filed lawsuits against the state of California, while musicians demanded and received exemption from the law.

The ABC test has cropped up often since 2019, making its way into AB5, the PRO Act, a law in New Jersey in 2019, a proposed budget in New York in January 2020, a sick leave act in the New York City Council in April 2020, and just recently, the New York State Senate's 2021 legislative session. The AFL-CIO is a vocal supporter of these laws.

Activist Maressa Brown is a left-leaning freelance writer and leader of the grassroots group California Freelance Writers United. She said she is not opposed to a universal benefits option and the right to organize in general, but she and her fellow group members want to remain independent so they can dictate their own schedules and be their own bosses. 

“I believe politicians have been learning as they go and making a lot of assumptions about what it means to be a gig worker, an independent contractor, or a freelancer,” said Brown. “It’s been a very black-and-white approach to dealing with a very nuanced issue, like using a sledgehammer instead of a scalpel.”

According to SUNY professor Hatton, employee misclassification laws are critical in preventing abuse by corporations. Those entitled to benefits should receive them.

“As long as we’re in an employer-based insurance system, people don’t get benefits unless they are categorized employees, or unless they’re very poor or very old,” she said. “If we’ve tied benefits to employment, then we need to bring as many people as possible into employment.” 

Hatton contended, however, that employment designation could hurt people who require schedule flexibility, such as mothers. 

“There are no social benefits for mothers who are employed,” she said. “If we could de-couple employment from benefits, it would free up this whole misclassification argument.”

The Apps and Proposition 22

Only 1% of workers use online platforms like Uber, Lyft, and TaskRabbit to find regular work opportunities, according to Gig Economy Data Hub, which consolidated studies from Freelancer’s Union, McKinsey Institute, and Pew Research. Yet, these jobs completely transformed the gig work debate. 

In November, California residents voted in favor of Proposition 22, which allowed businesses like Uber and Lyft to classify their drivers as 1099 independent contractors in California, in spite of the state’s misclassification laws. 

“We believe the apps have been misclassifying their employees,” said Ross. “They got themselves a carveout from labor and employment law in California, and that wasn’t justified.” 

The Service Employees International Union (SEIU) filed a petition on Tuesday in California Supreme Court to dismantle the law, saying that businesses were grossly overstepping their power.

Jan Krueger, a 62-year-old Lyft driver from Sacramento, said she disagrees with the SEIU’s approach. 

“The union is trying to say how bad this industry is, and why we need to be organized—but the wonderful thing about doing gig work is that we have so much freedom, which we especially need during the pandemic,” said Krueger. “We need flexibility, and I mean total flexibility. That means the ability to work for one place here and another place there for as many hours as you’d like, whenever you want. You can’t get that on a W2."

Cherida Smith, Lyft's Driver Advisory Council representative in the Pacific Region, campaigned in favor of Proposition 22. Along the trail, she said she spoke with gig workers on both sides of the fence.

“There’s a mix,” said Smith. “A lot of drivers held my opinion, which is that you can always sign up for a yellow cab if you want benefits and a schedule. But there’s also a lot of distrust of the app companies, and some people wondered if Proposition 22 was a way to exploit drivers.” 

Where We’re Headed

Hatton predicted that the gig economy probably won’t see massive changes on a federal level anytime soon.

“It’s hard to say what’s next. These things tend to move at a glacial pace,” said Hatton. “Proposition 22 fundamentally changed the structure set up in California—but generally, I don’t go around expecting sweeping change.”

With dissension being the only consistent factor in the gig worker debate, activist Brown implored government agencies to include independent contractors of all stripes in the conversation.

“My whole goal is to get a seat at the table,” she said. “With something this contentious, one would hope that nobody just rams legislation through with no discussion. But maybe I’m being optimistic.”