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How the Gig Economy Hurts Workers and Consumers

Freelancers are not subject to traditional worker protection and accountability laws, and operate largely outside the social safety net.
How the Gig Economy Hurts Workers and Consumers
Image credit: Shutterstock

“Whatever happened to predictability? The milkman, the paperboy, evening TV?” Much has changed since the 90s sitcom Full House was released, but the lyrics to its theme song ring true now more than ever.  

We live in the gig economy, and unpredictability is the reality of everyday life for many workers. The number of “gigs” available is growing, and this booming economy has changed the workforce, as well as the makeup of the labor market. According to a 2015 U.S. Government Accountability Office (GAO) report, 40 percent of the workforce now has nontraditional employer-employee jobs.

Related: Gig Economy Platforms Are Creating a New Class of Entrepreneurs

Why are people gigging? The Pew Research Center released a survey late last year stating that it served as an income gap filler and allowed flexibility and control over work schedule. The same source also reported that millennials surpassed Generation X to become the largest share of the American workforce in 2015. As Joel Stein stated in the Time magazine article “Millennials: The Me Me Me Generation,” millennials may have created their own fate. In exchange for demanding free time, flexibility and more control over their work, they have had to forgo medical coverage, retirement benefits and many other securities that contribute to a social safety net that was spurred by the Great Depression.

The power shift

The Great Depression seems a fanciful tale of woe from long ago, but the recent recession from 2007 to 2009 was a wakeup call for those with the most economic vulnerability. The aftermath of that recession forced many people to accept work where they could find it, and gig jobs were often all that was in reach. As reported by the 2015 U.S. GAO report analyzing the contingent workforce, gig jobs are disproportionately held by younger, less educated, low-family-income individuals.      

Gig jobs do not come with paid sick leave, vacation days or parental rights. There is no workers’ compensation coverage to help provide medical care to workers injured, or death benefits for families of workers killed on the job. There is also no protection against work-related discrimination or wage and hour violations, or effective means for collective bargaining to contract for fairer compensation.

Related: How the Gig Economy Is Changing Work for Women

Decades of litigation, legislation, social movements and labor marches had leveled the playing field for the majority of the workforce. Now, in a blink of an eye, the scales are loaded in favor of the economically powerful corporations in the gig economy, helping them pay less overhead, avoid payroll taxes, retirement plan contributions and unemployment benefits. The profit from less overhead alone may be the impetus that is driving the expansion of the gig economy. Cost savings for the employer means cost savings for the consumer, but what is the cost to the worker and to our society?

Worker safety

Employers are regulated by the Department of Labor and have to comply with state and federal labor laws. They also have to meet minimum worker safety standards outlined by the Occupational Safety and Health Administration. These laws and regulations help protect workers by imposing safe workday time limits, mandatory rest breaks and mandatory accident reporting. Employers who violate these regulations are subject to serious penalties -- which, for the most part, keep employers motivated to keep their workers safe.

Gig workers do not have those same safety protections. There are no workday time limits and no rest breaks, which can expose gig workers to fatigue and exhaustion. Gig workers are also often untrained because “employers” do not want to exercise too much control over them for fear that the worker will be reclassified as an employee. This lack of training often leads to unsafe work environments.

Related: How to Avoid Regulatory Fire in the Gig Economy

Public safety

Consumers are relying on the gig worker to perform skilled tasks with little to no training. We’ve all been in a ridesharing situation questioning how the driver behind the wheel received a license, let alone approval to carry consumers commercially. We’ve also heard of the terrifying assaults that have taken place on passengers due to insufficient background checks.

Grabbing a rideshare to the airport for a 5 a.m. flight might seem safe, but there are no industry regulations that limit the number of hours an individual can drive for rideshare companies. Even though some rideshare apps lock their drivers out after a certain number of consecutive driving hours (and kudos to them), there is nothing stopping the driver from switching over to another app. Most rideshare drivers display multiple rideshare badges and drivers can switch back and forth between the apps with no limits in place to protect the public. Stories of rideshare drivers who work 20 hours straight are common. Under these circumstances, the dangers to drivers, passengers and the public are clear.

Related: Is the Gig Economy Sustainable?

Why labels matter

Employers classify workers as “independent contractors,” “freelancers,” “consultants” and “temporary employees” to make them gig workers and not traditional “employees.” But, it’s not just up to the employer to decide; there are laws that outline who is and isn’t an employee.

The seminal legal case on employee classification came out in 1989, the same year Full House became the most popular Friday night show. The case, S.G. Borrello & Sons, Inc. v. Department of Industrial Relations, analyzed whether agricultural laborers were employees or independent contractors, and in doing so, the decision outlined criteria for establishing the employment relationship -- known as the Borrello factors.

Related: Don't Sell Yourself Short in the Gig Economy

The Borrello factors consider who has the right to control the details of the work, who supervises, who supplies the job tools, what the length of service will be, method of payment, agreement of the parties and whether the work is part of the regular business of the principal. The Borrello factors can be thought of as “a bundle of sticks,” as coined by Kevin Lancaster, a prominent San Francisco lawyer, and answering the question of who has more sticks in their bundle, the worker or the employer, will tell you whether the worker is a traditional employee or an independent contractor. If the worker has more sticks, she's a gig worker. If the employer has more sticks, the worker is an employee.

The future of gig workers

As gig opportunities and technology expand, the employment sticks are changing and there are many questions to ask, such as:

  • Is the app a tool supplied to perform the job?
  • Who supervises the work?
  • What is the regular business of the principal? Hosting platform or ridesharing company?
  • Who sets the rate of pay? The worker or the app?

These questions, and others, are under dispute in two class action cases that might reshape the sticks in classifying workers -- O’Connor v. Uber Technologies, Inc. and Cotter v. Lyft, Inc. These cases are important in bringing to light the seminal issue of whether large tech companies are employers of the workers or not. The former could represent a return to the pre-gig economy balance of power between workers and companies as well as preserve our social safety net.

However, if the latter prevails, then it presents society with a new set of challenges in determining if and how we can continue to provide a social safety net to our citizens in the context of this new economy.