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

Rebecca TorreyPartner, The Torrey Firm

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?

As my colleagues have described, the gig economy provides individual flexibility, better access to entrepreneurship, personal control over one’s vocation and work/life balance, and potentially a financial upside, depending on the impact of the economy on the chosen business sector. But we’ve seen upsides and downsides of rapid changes in the economy with gig workers who have fewer restrictions and regulations compared to traditional workers in the employment context.

One thing that’s become clear with regard to the United States in the past six months is that workers in a gig economy lack an adequate safety net if they aren’t classified as employees. When work dries up due to a recession, or if a business relationship with a gig worker is altered or interrupted, the same government benefits simply aren’t available to support gig workers. That can have a devastating impact on individual lives. That distinction was less impactful during a booming economy when work was readily available to nearly everyone who wanted it.

Recently the federal government and some state agencies in the US have implemented emergency legislation providing basic support benefits in the form of unemployment insurance available to certain sole proprietors and independent contractors who have lost their source of income as gig workers. It has been a radical change in our public benefit system that heavily favors employees in terms of subsidized healthcare and income alternatives.

Another factor impacting access for gig workers is purely technical. There is a wide disparity in the United States as to WiFi connectivity due to the vast and varying geography of the country. Urban areas obviously have high speed Internet at a price. Other remote areas don’t have that type of access, which does impact the ability to succeed in the gig economy, particularly during a pandemic.

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?

I agree that it is important to be knowledgeable about the changing legislation in the jurisdictions where a business is operating. It seems that that government worker classification models are trying to keep up with the direction that the economy is developing, rather than the other way around, and some legislators and regulators are doing better than others in that process of keeping up. As Laura pointed out, it is complex in the United States when a business operates in multiple locales due to different state standards in combination with the federal standard.

The gig economy enables a person to conduct business with the world — to cultivate work, relationships and resources anywhere. But for those individuals working in California, the stricter of the California and federal rules would apply. Adding complication, in 2020, there was new state legislation prompted by a recent California Supreme Court decision that set up an entirely different system for classifying workers performing services in the state. The new standard establishes that most workers would be properly classified as employees unless they are performing work that is outside the usual course of a hiring entity’s business. The standard was simplified, but it is an uphill battle in establishing contractor status. As a result, the California gig economy, among the largest in the world, is developing in opposition to applicable new legal standards and the consequences of not abiding by the new legislation can be quite costly.

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

I agree with these insights in terms of the gig economy impacting employment patterns. It is the economy that drives business, not the law, although the law may have an effect. As a result, California businesses are reaching beyond state borders to retain talent, both internationally and in other states and that’s just one example where business activity is determined to go, regardless of legal structures.

With the pandemic, businesses who can are adjusting to a remote workforce and reducing overheads. I also see businesses devaluing restrictions that are out of step with the direction the gig economy is headed, particularly those with a younger workforce. They deal with the risk and hope the law will catch up.