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The legal debate over the gig economy and its workers

Given the incredible demand for gig services we have seen over the past two years, and an increasing number of workers leaving their permanent jobs to join the gig economy, the next generation for this economy may look quite different.

The legal debate over the gig economy and its workers
[ josephsjacobs, SFIO CRACHO/Adobe Stock]

When it comes to the gig economy, all eyes will be on Massachusetts over the next several months. A legal debate is underway there as the result of a ballot initiative on how to classify gig economy workers, and it’s possibly headed for a vote this fall.

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The issue is how to categorize gig workers—as independent contractors, employees, or agents—under Massachusetts labor law. This initiative is similar to the recent independent contractor law in California, and it’s something that all states are expected to address in the coming years. Here are some of the major takeaways from this ongoing discussion.

WHY CATEGORIZATION MATTERS TO THE GIG ECONOMY

At the heart of this legal debate is a rather straightforward question: How should gig workers be categorized? For the most part, companies like Uber, Lyft, and DoorDash want their workers categorized as independent contractors rather than employees. Some unions and those on the other side of the debate want gig workers categorized as employees of the companies for which they perform services, while a majority of gig workers prefer to maintain their status as independent contractors.

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The debate over the legal definition of work and employees is nothing new: Employment law discussions go back more than a century. But the gig economy is a different beast, in part because of the dependence that exists between workers and the companies for which they operate. It blurs the lines between employee and independent contractor. As the legal debate continues, another important question will be addressed: Can these businesses operate profitably with legal constraints placed on the employee model?

WHAT GIG COMPANIES WANT

Gig companies like Uber and Lyft have been spending millions of dollars in Massachusetts on an initiative that would categorize their workers as independent contractors. In general, such contractors receive far fewer rights and benefits than employees. Those in favor of this initiative say it helps preserve the flexibility of the gig economy for workers and, since the companies already categorize these workers as independent contractors, the ballot initiative basically reinforces their legal status. Another part of the debate is the economics of the gig economy companies and whether they can operate profitably under the employee model.

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WHAT UNIONS WANT

On the other side of the debate, some labor unions are emphasizing that independent contractors don’t receive the same benefits as employees. With the gig economy growing at a substantial rate, in part because of the increased demand for services from the pandemic, some argue that now is the time to categorize gig workers in a fairer manner that provides them better benefits. If the unions get what they want, they’ll have effectively grown their market share of workers eligible to be unionized by a larger number than they ever have before.

WHAT GIG WORKERS WANT

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What gig workers want is right in the middle of the debate. They enjoy the flexibility and autonomy provided to independent contractors, but want some protections that reflect the nature of their work and the dependence they have on these companies to survive.

There are several key factors to watch as this debate plays out:

• Hours worked: Do hours accumulate only when a driver is making deliveries, or also when they are waiting?

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• Guaranteed minimum wage: Should gig workers be guaranteed a certain amount while performing services?

• Benefit stipends: What will be the minimum hours one must work for a gig company to be included in benefits such as healthcare? How much will the stipend be? Is the stipend sufficient to cover what it is intended to?

• Areas of responsibility: Are gig companies responsible for making sure those performing services receive a living wage and, at the same time, that supply reaches the demand of the market?

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• Competition: Will additional constraints on gig companies make it difficult for multiple apps to survive?

I would argue that the competition at the moment is the single biggest factor helping gig workers. There is increased demand for delivery and other services, which means gig workers have opportunities to pick and choose the schedules that work for them. Additional constraints could make it much more difficult for a gig worker to provide services for multiple apps.

As the debate over the gig economy and the classification of workers continues across the country this year and beyond, it looks like we will soon see the gig economy exist in some sort of dual state. There will be states that go one way in classification and states that go the other. It will be interesting to see, perhaps in five years, what happens in various states.

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Given the incredible demand for gig services we have seen over the past two years, and an increasing number of workers leaving their permanent jobs to join the gig economy, the next generation for this economy may look quite different.

Massachusetts has an opportunity to categorize gig workers under its labor law. While the opportunity fizzled out in California, if Massachusetts approaches this correctly, it could be the blueprint for every other state.


Matthew Spoke is the Founder and CEO of Moves—the only all-in-one financial app helping gig workers manage their business and get ahead.

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