Congress Needs to Empower Gig Economy Workers
For many millions of Americans who work in the gig economy, connecting to customers through platforms like Uber and Airbnb, the COVID pandemic has brought severe financial hardship and uncertainty. On top of that, employment laws — which deter gig companies from providing hazard pay, cleaning supplies, or other benefits to their contractors — aren’t helping. As Congress debates another relief bill, common-sense protections should be included for these vulnerable workers.
The problem is simple. The laws that determine independent contractor and employee status usually hinge on the question of how much control workers have over their work. If the employer directs the outcomes of the work but not how it gets done, the worker qualifies as an independent contractor. When the employer begins to exert control over schedules, methods, and processes, employee status may be more appropriate.
Since platforms like Uber, Airbnb, and Instacart focus on connecting workers with customers and leave the details to workers themselves, gig economy workers are considered independent contractors rather than employees.
This classification lies at the heart of the gig economy’s viability. Analysts estimate that redefining Uber and Lyft drivers as employees in California alone would cost the two companies an average of $3,625 per driver per year, boosting the two companies’ combined annual operating losses by nearly $800 million. To absorb these costs, platforms would be forced to cut back on services or raise prices — which would hurt consumers and reduce opportunities for workers.
Besides, gig economy workers value the flexibility independent contracting provides in selecting when and how to work. Data from the Bureau of Labor Statistics show that 79 percent of independent contractors preferred their arrangement over a traditional job. That helps to explain why the number of Americans engaged in the gig economy — nearly one-quarter of U.S. adults, according to a 2018 estimate — has grown rapidly.
The COVID pandemic, however, has made it difficult for platform companies to expand support for their workforce without establishing an employer-employee relationship and facing costly regulations. As a result, gig economy workers are getting hurt.
In June, for example, Lyft opened an online store where its drivers can purchase hand sanitizers, face masks, and other personal protective equipment. But while the company has priced these products at cost, it can’t distribute them to its drivers for free without exposing itself to legal challenges that it is controlling its drivers’ activities too closely.
Similarly, Handy, a house-cleaning platform, doesn’t offer cleaning supplies — or even advice about how to clean — to its workers for fear of running afoul of employment classifications. This has made it harder for gig economy workers to obtain health and safety supplies, as well as guidance on how to keep themselves and their customers safe.
The same goes for certain forms of compensation. As Republican members of the House Committee on Labor and Education have pointed out, under current law, platforms may expose themselves to employer-employee liability by offering paid leave, hazard pay, or other COVID-related benefits to their workers.
Numerous major U.S. companies — including Kroger, Wal-Mart, and PepsiCo — have taken steps to help their employees during the pandemic, including supplying protective equipment, strengthening emergency leave, and expanding other benefits. Preventing gig economy platforms from providing similar assistance to their millions of contractors is inconsistent and counterproductive, particularly as the precarious job market drives more Americans to seek side jobs and temporary gigs.
Congress should establish basic protections to empower platforms to expand health and safety-related equipment and benefits to independent contractors without triggering additional regulatory burdens and without depriving these workers of the flexibility and autonomy they value.
Liam Sigaud writes for the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.