Gig workers will need protection under the law

Companies employing gig workers may have to bargain with unions, which their workers will now have the right to form.

By Laura Tyson (Perspective)

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Published: Thu 24 Oct 2019, 9:14 PM

Last updated: Thu 24 Oct 2019, 11:16 PM

In the United States and other advanced industrial economies, a growing number of workers no longer work for a single employer on a traditional contract. Instead, they earn income through a variety of "non-standard" working arrangements, including work mediated by digital platforms, or so-called gig work.
The distinction between an employee and a gig worker is not inconsequential. Under current laws, employees have rights and access to significant protections and benefits not provided to gig workers. A critical question now confronting policymakers is whether gig workers should be classified as independent contractors or as employees of the platform companies with which they have employment contracts and for whose customers they provide services. California, a US state with more than two million independent contractors, has attempted to resolve this question with a new law, California Assembly Bill 5, which codifies the legal criteria for determining how to categorise workers. Applying the three-part "ABC test" that many states already use to determine whether a worker is eligible for unemployment insurance, AB5 makes it considerably harder for businesses to classify their workers as independent contractors rather than employees. To win political support for AB5's passage, lawmakers exempted many types of independent contractors - such as doctors, dentists, and real-estate agents - on the grounds that they set their own compensation rates, communicate directly with their customers, and earn at least twice the minimum wage. But AB5 does cover the more than 400,000 workers who drive for platform companies like the ride-sharing services Uber and Lyft. Enforcement of AB5 means these companies will start providing their drivers with benefits like minimum wages, overtime pay, sick leave, unemployment insurance, and employer contributions to Medicare and Social Security. Moreover, companies employing gig workers may have to bargain with unions, which their workers will now have the right to form.
The changes could increase labour costs significantly - by an estimated 20-30 per cent. This is the last thing that platform companies and their investors want. Not surprisingly, Uber and Lyft tried to stop AB5, offering to implement a wage floor, create a benefit fund, and allow workers to form organisations to defend their interests, in exchange for continuing to classify them as independent contractors. California lawmakers, however, rejected the companies' proposals, which fell short of the benefits and protections that employees enjoy under state and federal law.
Similar proposals have been rejected in New York, New Jersey, and Washington.
But platform companies will not give up so easily. In response to AB5, Uber's chief legal officer, Tony West, released a statement declaring: "We continue to believe that drivers are properly classified as independent," because they are "outside the usual course of Uber's business." That is a bizarre and outrageous claim for a company whose business model is based on giving rides and making deliveries.
Uber and Lyft are developing an updated plan that would set higher pay standards, provide more benefits, and create a driver feedback mechanism. The success of this approach is far from guaranteed, and not just in California.
President Donald Trump's administration, opposes extending traditional employment protections to gig workers. The Trump-appointed National Labor Relations Board recently ruled that gig workers are independent contractors with no right to unionise. Amid heated debates on Big Tech's market power, AB5 and similar legislation can be expected to spur major legal and political battles in 2020. The decisions of individual companies will be shaped by both their traditional market power and their monopsony power - that is, their power in the labour markets where they hire workers.
By allowing (or requiring) multiple employers to make pro-rated contributions to security accounts attached to the individual, rather than the job, such systems enable workers to combine benefits from the various companies that purchase their labour. Because all businesses would have to make contributions for all of their workers, a portable benefits system would level the playing field among firms, while discouraging them from misclassifying workers. Rather than allowing technology to accelerate this trend, governments at all levels should be strengthening worker protections. In a fast-changing labour market, there is no time to waste.
- Project Syndicate
Laura Tyson, a former chair of the US President's Council of Economic
Advisers, is a professor at the University of California

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