Data Compels Gig Economy to Get Ahead of Workforce Woes
News abounds of protesting and litigation over the labor practices of disruptive gig economy companies, who utilize contract workers rather than employee-status workers. Getting around payroll taxes, Affordable Care Act requirements, workers’ compensation, and more, those operating in this gray legal landscape are under increasingly steep scrutiny and should take heed of the current political environment before it takes heed of them.
Increasingly, legislatures are addressing the classification of workers. It’s only a matter of time until the U.S. Congress addresses concerns raised by the Department of Labor — and the way it does so may just be dictated by this year’s presidential election.
Another Wage Issue Sets the Stage
If you’re unsure what the tea leaves say about the flexible-workforce model serving as the framework for the gig economy, take a look at the country’s growing desire for action around a relatively similar socio-economic issue: raising the minimum wage. Elected officials at all levels have made clear that the government should do more to create a more protective economic structure for the most vulnerable labor sector.
The political tide is rising in favor of helping low-wage earners. Mayors from Jersey City, New Jersey to Seattle, Washington have taken executive action to raise the minimum wage, and relevant legislation has been introduced in all but five states this legislative session. Moreover, since the last step of the wage increase from the Fair Minimum Wage Act of 2007 took effect in the summer of 2009, there’s been an upward trend in the annual number of minimum-wage-related bills filed in Congress — peaking at 40 last year.
The nation’s desire to see new wage standards set for hourly workers alone doesn’t exactly mean the writing is on the wall for some sort of greater action, but it’s hardly the beginning.
Translating the Minimum Wage Fervor to the Gig Economy
Like the minimum wage issue, lawmakers and regulators at the city, state, and federal levels have been investigating the gig economy’s workforce status. Efforts in the states are already underway to classify the services performed via the gig economy.
Earlier this year, California Assemblywoman Lorena Gonzalez (D-San Diego) filed AB 1727, which would create the legal assumption in the state that any individual performing services that requires a business license is considered an employee and would be entitled to all the appropriate rights and benefits. According to FiscalNote data, Assemblywoman Gonzalez is one of the most effective California Assembly members on labor and employment legislation, having passed 13 of the 53 bills she authored.
Rather than forcing the gig economy to pick sides between classifying its workforce as either an “employee” or “contractor,” some are discussing the possibility of an entirely separate designation.
“Independent workers,” as they’re named in a policy proposal from the Hamilton Project, “are not independent contractors because some aspects of the methods and means of work — including the price of their services — are controlled by the intermediary and because they are integral to the business of the intermediary. Independent workers are, in some respects, like individuals working for others and in other respects are like independent businesses.”
To date, the Obama administration has been keen only to clarify the existing laws as they relate to the gig economy. In July, the Department of Labor published guidance to help ensure low-wage earners cannot be improperly classified as independent contractors. Last summer, Labor Secretary Tom Perez said his department would need legislative action from Congress in order to craft “a third category of employment.”
That message has resonated with some lawmakers on the Hill, like Senator Mark Warner (D-Va.) who called on the federal government to be more nimble in its classification of and protections for independent workers. Warner is currently in discussion with gig economy stakeholders to investigate how to construct legislation that would achieve this end. According to FiscalNote data, Warner has passed two of the 54 Labor and Employment bills he introduced in his Senate career.
It’s unlikely this Congress will be driven enough to provide the Labor Department with the mandate to provide a meaningfully different designation, leaving much of the policy shaping to the makeup of the next administration and Congress.
Republicans are poised to maintain control of the House and Senate in 2017 — the worst case scenario for the GOP would be for the chamber to change hands by a small margin. Whether the 115th Congress is red or purple, much of how a likely proposal shapes out is going to be heavily dictated by who takes the reins of the White House.
Presidential Impact on Independent Workers
Democratic presidential candidate Hillary Clinton appears to have an appetite for this discussion and could be amenable to thinking about the gig economy with new lenses.
“This ‘on-demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future,” she said in a July 2015 speech.
Under a President Bernie Sanders, we might expect independent workers treated much more closely to traditional employees, with greater regulation and ensured worker protections to this segment of the labor force. On his campaign website, Bernie asserts,
“Dwelling on [gig economy] companies too much distracts from the central features of work in America that should be prominent in the public discussion: a disappointingly low minimum wage, lax overtime rules, weak collective-bargaining rights, and excessive unemployment, to name a few. When it comes to the future of work, these are the aspects of the labor market that deserve the most attention.”
The Republican presidential frontrunners Donald Trump and Texas Senator Ted Cruz have intimated the opposite approach, having independent workers treated more like contractors and breaking down the same traditional employee safeguards Sanders would like to embolden.
Sophisticated gig economy companies should begin investing in candidate outreach and Hill strategies if they haven’t done so already. Begin by telling your narrative to the candidates and members of the House Education and Workforce and Senate Health, Education, and Labor committees to shape where this policy should be directed. Today’s political climate is thirsty for action to protect workers — traditional employees and independent alike — and you don’t want to be the one to come without the water.