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Are Gig Workers Employees or Contractors?

gig workersIn the decades before the gig worker boom, labor law concerned itself almost exclusively with people working either as employees or independent contractors. Those categories define how workers are regulated, taxed, what protections apply to them and the products of their efforts, and other such concerns that affect everybody getting a check. But with the rise of the gig economy, a third category of worker—the gig worker—has come into being. The past several years have seen contentious debate over how to treat gig workers and where they fit into the traditional breakdown.

California has often found itself at the center of this debate. In 2018, the Dynamex [1] ruling in California declared that workers are employees unless they pass the “ABC test,” meaning that they answer “yes” to the following:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business;

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

If any of those answers are “no,” then the worker is an employee. Many gig workers were included under the scope of this ruling and became employees overnight. In some cases, they feared that this would reduce their ability to work on their own terms. The state legislature has taken steps to limit the ruling by placing freelance writers, photographers, doctors, and other white color professionals outside the ruling’s scope.

Recently, Prop 22 [2], a ballot initiate backed by companies such as Lyft, Uber, Instacart, and others reliant on gig work, was put forth to offer Californians the option of further changing the law to designate drivers as contractors with certain employee benefits. Prop 22 passed on November 3, which was widely seen as a victory for the app-based companies but a mixed bag for workers.

Prop 22 is viewed by some as a cynical attempt by rideshare companies to work around the new rules or as a way to correct for an overreaching court ruling [3]. With Prop 22, workers are no longer given employee benefits like health insurance and paid sick leave, but they have more flexibility in terms of when and where they work. What’s clear is that we’re in uncharted waters with these new state rules, using maps drawn up long ago.

It’s obviously in the interest of some companies to declare gig workers to be independent contractors, and many gig workers are happy to be treated as such. But it’s unsatisfactory for many others and stretches the definition of “independent.” The limitations placed on gig workers by the companies they work for bring gig workers to a strange place where they’re at once more independent than the typical employee but not quite as much as those historically dubbed “independent contractors.”

At present, many companies give gig workers fewer protections than employees while leaving them in situations without the liberty of contractors. This is a situation that will likely lead to further ad-hoc attempts—similar to Prop 22—to correct for outdated law. While recent actions [4]by the Department of Labor show an interest in changing the definitions of employee and contractor, perhaps we should consider changing our understanding of what it means to be an employee, gig worker, or an independent contractor in a way that clearly defines all three. After all, what is a person who passes two of the three items on the ABC test? What if they nearly pass all three, but there is some debate over the details?

The present lack of clarity has far-reaching consequences. The recent attempts at economic stimulus encountered difficulties in getting money to everyone who needed it because gig workers—still functioning as independent contractors—were unlikely to qualify for unemployment insurance without the aid of specific legislation allowing them to do so. If our definitions were more accurate, this problem likely could have been solved. Gig work isn’t going anywhere, and the benefits it offers to many people can be undercut by improperly defining it. It isn’t enough to work around the edges anymore; we need to develop a new way of thinking about the gig economy if we want it to work for everyone.