United States: Freelancing In The Age Of Unicorns: Understanding The Role Of The Gig Economy In The Modern Workforce

Last Updated: February 9 2017
Article by Robert W. Ratton III

Mobile devices that connect the worker with the in-need consumer have become a mainstay of our marketplace in the past five years. Whether you take Uber to the airport or stay at someone's home using Airbnb, millions of consumers around the world are tapping into these new markets. According to a PriceWaterhouseCoopers study from 2014, almost 20% of US adults had participated in the sharing economy via the internet. In this article, we will seek to understand the terms that describe this new facet of the economy, legal problems created when the 21st century work model meets 20th century labor and employment laws, and predictions for how law and regulation will catch up with what is at least perceived as a new workforce reality.

A Gig by Any Other Name

The term "gig economy" is bandied about with such regularity we rarely stop to think about what it means or the section of the economy in which it represents. Based on a term frequently used by musicians, the term "gig economy" was coined in 2009 to describe the rather unfortunate economic reality of the Great Recession. From February of 2008 to February of 2010, the U.S. economy lost a staggering 8.7 million jobs. To fill in the gaps created by job loss or underemployment, people started reaching out to new methods to generate income. Around this time, gig economy powerhouses such as Uber and Airbnb came into existence.

Broadly speaking, the gig economy includes any industry where you match up a contingent workforce (i.e., someone who doesn't mind working a series of one-off tasks, or "gigs") with a willing consumer via an electronic platform, usually a mobile device app. There are a number of subgenres within these markets that make up the gig economy. Peer-to-peer service exchanges, such as TaskRabbit, connect an individual with a particular need to a freelancer with a particular skillset. Companies such as Lyft and Uber allow individuals to exchange services. By the time you have finished this article, it is safe to assume that some enterprising individual will have found another market appropriate for the gig economy.

While it appears that the gig economy is predominated by these internet-based organizations, this assumption is greatly misleading. A recent study by Lawrence Katz of Harvard University and Alan Krueger of Princeton University revealed two surprising realities about the gig economy's prevalence in the modern workforce. Internet-based gig economy freelancers account for only a fraction of all workers in 2015. However, what has risen meteorically are the number of workers who rely on "alternative work arrangements," which can include internet-based intermediaries. An alternative work arrangement includes independent contractors, on-call workers, temporary agencies and contract workers. Individuals involved in an alternative work arrangement increased from roughly 10% of the workforce in 2005 to 15% of the workforce in 2015. The most prevalent increase has been among independent contractors. Notably, of all participants in the survey, 19.4% stated that they sold goods or services directly to a customer, the hallmark of the gig economy. However, only .5% of these workers use an online intermediary.

None of this is to diminish the rising importance of the gig economy. The workforce is undoubtedly shifting toward work arrangements that fit the gig economy model. The fundamental question is why so much emphasis has been foisted upon the internet-based intermediaries. It is likely two forces. First, the novelty factor of technology has been driving a great deal of the attention. Most of us don't use services where groceries are delivered to our home, but the possibility of never again slogging through a crowded grocery store is an exciting prospect. The other, more likely factor is the world's fascination with the ever elusive unicorns. A unicorn is a startup business valued at $1 billion or more. The online gig economy has an impressive stable of unicorns. It is this combination of new technology and massive pay out that helps fuel a national obsession.

Square Pegs, Round Holes

The greatest dilemma from a legal perspective is trying to wedge a freelancer who uses a web-based interface as the predominant link to customers into our current employment law strictures. If you have had access to any form of media over the last year, you have probably heard of the titanic legal battles of Uber. At the heart of this disagreement is whether Uber exerts a level of control over its drivers to categorize them as independent contractors or employees. The ramifications of this decision are tremendous. If deemed employees, Uber has a whole new level of responsibility, and cost, associated with its drivers.

Even in the traditional work arena, it is often difficult to determine who is an independent contractor. The IRS, the Department of Labor and the National Labor Relations Board, along with courts and state agencies, implement different tests and standards to determine if independent-contractor status is appropriate. The IRS looks at over 20 factors focused on the amount of behavioral control, financial control and the relationship between the employer and the worker to determine the propriety of independent-contractor status. This determination becomes even more complicated when one looks to the peculiar relationship between Uber and its drivers.

While independent contractor status has taken center stage, there are numerous other issues that crop up. For example, how does traditional civil rights law function in the gig economy? Technically, Title VII applies to employees, but few individuals are likely comfortable with a large percentage of the workforce having no civil rights protection. There are also issues with benefits, trade secrets and workplace safety that have not yet been answered. Right now, we are at best trimming the corners of the square peg to squeeze it into our current labor and employment model.

New Classifications

For better or worse, it is unlikely that our government will allow the gig economy to continue without new laws and regulations. The Hamilton Project, a think tank within the Brookings Institution, has proposed the creation of a new class known as the "independent worker." An independent worker is the hybrid between a traditional employee and an independent contractor. In this scenario, the employer would exert some control over the means and methods of work by the independent worker, but not to the extent of a traditional employee relationship. The Hamilton Project's proposal is that a compact exist between the independent worker and his or her "employer." The "employer" of the independent worker would allow the right to collectively bargain, provide civil rights protection and handle some tax withholdings. However, the employer would not be responsible for overtime pay and/or unemployment insurance.

This new definition will create a ripple effect across many legal concepts. For instance, a group of independent businesses banding together to set a price, as requested in the collective bargaining portion of the compact, would normally constitute price fixing in violation of antitrust laws. Regardless of these effects, it is likely the cost of maintaining the status quo will be too high.


The prevalence of the gig economy in the modern economy is still undecided. We are coming out of a rough job market where people with college degrees competed for unskilled jobs barely above minimum wage. It's not hard to leave a job making ten dollars an hour with a rigid schedule and no benefits for the potential of greater money and freedom as a freelancer.

Regardless of the effect of an improved economy, the gig economy will undoubtedly play a role in the workforce of the future. Currently, we have a labor and employment legal structure designed to support a pre-internet workforce. This has kept us going for some time. Except now, we are moving away from a gold watch retirement culture, frequently prizing autonomy over security. If the old expression "may you live in interesting times" has any positive connotation, those who practice human resources and employment law are truly lucky.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Robert W. Ratton III
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.