If you tuned in to my appearance a few months ago on Bloomberg Law Radio, you heard me bemoaning our legal system’s failure to catch up with the gig economy.
For those of you who don’t know, the term “gig economy” (also known as the “sharing economy”), refers to casual on-demand services undertaken by individuals yearning to fit “work” into their lifestyle unsullied by a traditional long-term employment relationship, employment regulations and other aggravations like payroll taxes. The casual worker concept appeals to businesses as well, especially those in beta mode that are not equipped to take on the tremendous responsibilities (and expense) of a W2’d workforce.
The problem of course is that laws and regulations drafted thirty years ago did not contemplate that people would actually elect to throw off the constraints of typical employment where they are told what to do, where to do it, and how it must be done, and instead elect to do their own thing – where, when and how they wished. Layer on top of that a bit of the nanny state mentality and it creates the perfect storm of non-bottom-line enhancing litigation.
So what is a reasonable gigster to do?
The decision to certify the class action in the pending Uber case (for most of the claims) wasn’t really all that much of a surprise. But the fight over misclassification is far from over. In the meantime, for those starting a business, or perhaps taking a fresh look at their business model in light of this ruling and the recent California Department of Labor Uber decision, here are some guidelines that might keep you out of trouble when the department of labor (or taxing authority) comes knocking:
- Make sure the person can do their own thing. The best indicia of an employment relationship is the employer’s right to tell someone what to do (or how to do it). And by the way, it isn’t how much supervision actually takes place (welcome to the real world of bad management), but whether the right to supervise exists.
- Tie the person to a contract. If you can let someone go just like that (which is the employment norm), that signals an employment relationship. But if the contractor has to actually finish the work they started, that helps the independent contractor classification.
- Do they have their own gig? People who really are in business for themselves – as reflected by the incorporation of a business, a business tax identification number, business cards (and can you imagine), a shingle on main street, and the ability to perform services for other companies in addition to yours, likely have their own gig.
- Can your business run without them? Some courts have suggested that if gig workers perform the services that are at the core of your business, then they can’t be independent contractors. While it remains to be seen if this rule-swallowing approach continues to make sense and will become good law, this is another component to keep in mind when signing up service providers.
- Is it hard to do? People like accountants, auditors, financial planners, lawyers and other professionals have to go to school and often get licensed to do their jobs. The skill inherent in their jobs makes them experts (of a sort). The less skill necessary to get a job done, the less likely the person doing the job is a contractor.
- Make them bring their own stuff. If you supply someone with all the tools they need to do the job, then you are likely their employer. But if they bring (or invest in) their own materials, tools, and equipment, they are more like independent contractors.
- Labels matter. Though not in the way you would think. Calling someone an “independent contractor” is meaningless. But referring to “salary” or “wages” and other employment-like language in a contractor’s agreement will not help your cause.
If you can’t satisfy all or the right combination of these components, then absent the creation of a legislative “gig worker,” designating folks as employees is a conservative approach the government will rarely (if ever) question.
That’s enough of the free tips. For the detail work, you need to contact – you guessed it – your favorite employment lawyer, who surely is an independent contractor. Good luck out there – the gig economy is fraught with potholes. Subscribe to our blog for a smoother ride.