Laura Thalacker participates in the IR Virtual Series – Shock Of The New: What is the impact of the gig economy on the traditional workplace?

Laura ThalackerFounding Member, Hartwell Thalacker, LTD.

Foreward by Andrew Chilvers

Whenever the gig economy comes up in conversation, app-based technology companies such as Uber usually get a mention as the emerging business models for ‘gig’ workers. And while these new ‘gig’ business models are changing the way people work, many jurisdictions are resisting the changes taking place.

Back in the pre-COVID-19 days of 2019, two London-based Uber drivers sued the company claiming they should be classified as workers and given a minimum wage, holiday pay and other benefits due for company employees.

They argued that Uber was a proper taxi company employing drivers to provide a service for customers. Uber employment rules included standardised routes and fares, similar to any employer-employee relationships, and driver standards and conduct, under the Uber brand banner. Indeed, they said if drivers failed to keep to these standards their driver accounts would be deactivated, essentially sacking them like any other company.

Meanwhile, Uber argued that it was not a taxi company but rather an app-based software company providing a direct contact (via the app) between the driver and the customer. Simply put, the app helps freelance employees gain customers and the company’s terms of business state that drivers work for themselves. They are not obliged or indeed contracted to work solely for Uber. An employment tribunal upheld the taxi drivers’ claims, while Uber was set to appeal the decision.

The issue of companies such as Uber and Deliveroo as employers of gig workers and drivers of the gig economy is a talking point the world over. The debate goes well beyond taxi and delivery services and highlights the fundamental shift now happening in the modern workplace. This shift eschews the traditional nine-to-five office hours in favour of employment based on often casual, remote working underpinned by digitisation. Above all, it’s a generational shift based on technology, as our members discuss in the following pages.

The recent resurgence of the gig economy can be seen as an extension of the technology revolution in the workplace. Does the gig economy offer benefits that older models of employment lack?

Obviously, technology is the starting point for a lot of this. But, tying into what Shilpen said, it’s gone beyond that now to where the gig economy offers workers the option of having flexibility and work life balance. What may have started as new and different opportunities available because of technology has now become a way of life for people.

The gig economy also offers choices and new opportunities for employers. You are no longer limited by a local pool of talent. You could be sitting in Las Vegas and have somebody in London design your company logo. Your ability as a company to find workers is unlimited. And, vice versa, as a worker, you have an unlimited pool of potential companies to work with and a reach far beyond the usual geographic bounds of an employer-employee relationship. So, in this sense, the gig economic provides for additional economic opportunities.

On the other hand, right now with COVID-19 and high unemployment rates, there are a lot of people jumping into the gig economy. Because of technology, companies can essentially find workers anywhere in the world and so there’s a lot more competition. It seems like there’s the potential for a race to the bottom – the gig market has become so saturated that it is increasingly difficult to earn a living wage with gig work.

So, for all the benefits with flexibility and choice that go with the gig economy, there are unavoidable problems. As I said initially, I still believe for most people being a gig worker has become a lifestyle. The question going forward now, in the current environment with all the people jumping into the gig economy, how much of a lifestyle is it really going to be able to provide for people?

As employers see the benefits of the gig economy in terms of cutting the costs of social security payments, pensions and health insurance, how important is it for companies in different jurisdictions to understand local legislation and court precedent?

In the US, we have a complicated scheme where you have to comply with both federal law and the particular laws of your state for worker classification. The challenge of properly classifying workers is further complicated because many of the different agencies, at both the state and federal level, use different tests for deciding who is an “employee” versus who is an “independent contractor.”

The US Department of Labor, for example, does not use the same test used by the US Internal Revenue Service for worker classification. Multiply that by multiple agencies and then on top of that you layer in the state analysis and companies find it very difficult to comply with legal requirements for independent contractor requirements. If you fail to understand all this as an employer, you’re going to end up with litigation, which unfortunately has become very common.

There are severe consequences for improperly classifying workers. Nevada, where I practice, primarily has its own set of rules about independent contractor status. For labor laws, there’s a multifactor test for independent contractor status. This is a statutory framework that lays out very specific elements and criteria such as, for example, the person has a business license; the person has paid self-employment taxes; or they applied for an employer identification number; or they invest in their business, they pay rent, etc. Over the past several years, there have been multiple changes in the analysis and criteria – sometimes favoring companies and at other times seeming to favor gig workers. In the most recent legislative session in Nevada, the pendulum started to swing back toward increased scrutiny of how workers are classified.

What is the gig economy’s impact on employment patterns in different jurisdictions?

The traditional employment relationship for several years now has not provided the security and the safety net that it had supplied to previous generations. Certainly, my generation saw some of the benefits of the traditional employment relationship such as a measure of job security and decent wages and benefits. As these benefits of employment have declined over the past decades, people are willing to strike out on their own as gig workers with a “what have I got to lose?” mentality. Interestingly, there was a survey done back in 2017 in the U.S. and something like almost 70% of gig workers said they felt gig work actually provided them with more security than regular employment. There was a sentiment among gig workers that they’d rather be on their own and controlling their own fate.

But I also agree that people are drawn to gig work for a number of the reasons we have been discussing — lifestyle, flexibility and technological advances. These lifestyle benefits have now been experienced by a whole new group of workers who, for the first time, have been working from home during the pandemic. With more and more people realizing first-hand that gig work provides a lot of freedom and flexibility, it seems likely that once the pandemic is over, some workers will opt not to return to traditional employment and the gig economy will keep expanding.