Recent Lawsuits Could Pioneer Gig Economy Reform

Unless you are an economist or financial analyst, the term “gig economy” might be foreign. However, the “gig economy” is growing readily more important in our daily lives with the prominence of mobile phone apps coupled with our desire for rapid convenience.,.

A gig economy is a free market system in which organizations and companies primarily contract with independent workers for short-term engagements. Non-profit business-research organization, Conference Board, defines gig workers as those who perform “non-core functions” that don’t require institutional knowledge but involve specific well-defined tasks where output is easily measured and monitored. Prominent companies that employ gig workers include Uber, Airbnb, and Grubhub. Although the number of independent contractors, temporary workers, and contract workers has actually remained relatively unchanged since 1995, according to Yahoo Finance, the transportation sector has seen a major increase in the percentage of self-employed workers over the last two decades.

However, the transportation gig economy has been forced to entertain some major legal complications that could potentially change the way companies such as Uber and Lyft do business globally. A new study from JPMorgan Chase Institute spotlights 53 percent decline in average transportation earnings for gig workers in the past five years. With this alarming trend of income insecurity, Reuters contributor Daniel Wiessner, reports that “The legal classification of workers [and employees is now] a major issue for ‘gig economy’ companies [in the U.S. and U.K.]. . . . Uber, in particular, has been hit with dozens of lawsuits in recent years claiming that its drivers are employees and are entitled to minimum wage, overtime, and other legal protections not afforded to contractors.”

“Almost all taxi and private hire drivers have been self-employed for decades, long before our app existed,” Uber spokesman Alex Belardinelli counters that “[i]f drivers were classed as workers they would inevitably lose some of the freedom and flexibility that comes with being their own boss.” According to The New York Times, classifying gig workers as employees tend to cost 20 to 30 percent more than classifying such workers as contractors.

Recently, a federal judge in Philadelphia ruled in Razak v. Uber Technologies Inc, that limousine drivers for Uber are independent contractors and not company “employees” under federal law. The judge reasoned that Uber under the federal Fair Labor Standards Act does not exert enough control over drivers to be qualify as their “employer.” “The drivers work when they want to and are free to nap, run personal errands, or smoke cigarettes in between rides,” Judge Michael Baylos Baylson essentially identified in his ruling.

Other rulings pertaining to this issue have been made on the state level, but their outcomes vary. In 2017, a Florida appellate said Uber drivers were not employees under Florida law. However, state agencies in California and New York maintain otherwise based on their respective state laws. Two months prior to the Razak ruling, a federal judge in San Francisco held that food delivery workers for Grubhub Inc. were not the company’s employees because it did not exert sufficient control over the workers to be considered an employer.

Gig economies function primarily on expendable labor to ensure low prices and provide ultimate convenience for customers. If gig economy workers should qualify for higher pay and greater benefits as “employees” under U.S. law, we could see a drastic change in the gig economy business model, adversely affecting the app-based consumer and his associated choices.

Nathaniel Reiff is a second-year law student at Wake Forest University School of Law. He holds a Bachelor of Arts in Business Administration and a Master of International Business from the University of Florida. Upon graduation, he intends to practice corporate and tax law.