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.

Conclusion

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.

Authors
Robert W. Ratton III
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions