United States: The Future Of Work: Opportunities And Challenges In The Gig Economy

From online dating apps to online food delivery, ride-share services, and just about every other activity imaginable, digital platforms have revolutionized the way that people work, play, learn, socialize, and purchase and sell goods and services.  One of the most interesting recent developments has been the continual rise and development of the gig economy – that is, workers developing niche areas of specialist expertise, but having careers characterized by a series of interactions with various organizations. This does not mean a person working in multiple jobs over the course of their life; but instead, that they are running their own independent businesses providing services to different companies and customers.

The benefits of the gig economy are not difficult to see.  Businesses can outsource non-core functions to workers who can perform important business tasks on an as-needed basis without the administrative burden of employing full-time employees.  In turn, workers can perform jobs when (and sometimes where) they like with flexibility unknown in most industries until recently. 

Despite these obvious benefits, the gig economy also poses challenges to businesses that choose to outsource functions to "gig" workers that were previously performed by full-time employees.  For example, operational continuity can be difficult to maintain when important functions are outsourced to multiple independent contractors.  Similarly, ensuring consistent customer service can be a challenge when customers interact with different personnel each time they purchase a product or service from a company.

Beyond these operational challenges, the gig economy poses considerable legal risks for businesses, particularly because labor and employment law has been slow to catch up with these developments.  While it would be impossible to list all of the potential risks to businesses in a blog post, the following are some of the most significant risks to businesses:

  • Misclassification of Employees as Independent Contractors—Independent contractors are generally entitled to fewer workplace legal rights than employees.  Accordingly, courts and regulatory agencies have increasingly cracked down on businesses that treat workers as independent contractors when, according to the courts and agencies, the workers should be classified as employees.  While no one single test exists to determine whether a worker is properly classified as a contractor, courts and regulatory agencies (including the Department of Labor and the IRS) generally look at a number of "economic realities" factors.  While many "gig workers" are properly classified as independent contractors under these tests, courts and regulatory agencies have found many such workers to be employees.  Because the potential exposure for misclassification can be significant, business should ensure that they have thoughtfully classified gig workers as employees or independent contractors with the guidance of legal counsel.
  • EEO Training—Most companies have comprehensive policies against discrimination, harassment, and retaliation, and most companies provide routine training to employees on these policies.  Such training is essential for companies to avoid liability for alleged workplace harassment or retaliation.  While most companies provide training on their EEO policies to employees, fewer companies provide such training to short-term contract workers.  As companies outsource more jobs to short-term workers, companies face the risk of increasing legal claims brought by such workers or arising out of the workplace behavior of such workers.  For this reason, employers should consider ways to expand training on EEO policies to include workers they engage on a short-term basis through the gig economy.
  • Performance Management—Given the short-term nature of most work performed in the gig economy, businesses can face considerable challenges managing worker performance.  In a traditional employment relationship, employees have an incentive for maintaining positive performance.  Many businesses evaluate employees' performance on an annual basis and reward employees with increases in compensation for demonstrated good performance over a certain  period of time.  Depending on how the relationship is structured, workers engaged in the gig economy may not have the same incentive.  Therefore, many companies are turning to immediate "on-demand" evaluations assessing each individual project completed by workers engaged through the gig economy.
  • Ensuring Efficiency and Compliance with Policies—Along the same lines, where workers perform work remotely, companies may have less opportunity to ensure that workers are performing efficiently and consistent with company policies.  If workers are paid based on their time spent working, rather than their output, time reporting is rife for abuse.  But the reverse is also true:  if workers are performing tasks remotely with little or no oversight, there is a high risk that workers may perform work off the clock or fail to take mandatory meal or rest breaks.  While such requirements do not apply to true independent contractors, they do apply to employees.  For that reason, if a court or agency determines that gig workers are employees, companies can face considerable exposure for permitting remote workers to work off the clock or miss mandatory meal or rest breaks.
  • Managing Reductions in Force—On a macro scale, the gig economy can be seen as part of a wider trend in which disruptive technologies are transforming the workforce on a scale not seen since the Industrial Revolution.  The challenges posed by these changes have led some commentators to predict a dystopian future in which disruptive technologies will displace workers on a massive scale, resulting in widespread unemployment and implosion of the consumer economy.  Even if one doesn't share such a pessimistic view, there can be no doubt that the gig economy is transforming (or even eliminating) some functions that were previously performed by full-time employees.  As businesses weigh the costs and benefits of outsourcing some functions to gig workers, they should keep in mind that such a move may result in one or more reductions in force.  Such RIFs must be properly managed to avoid exposure under numerous laws intended to protect laid-off workers (including, among other laws, the Older Workers Benefits Protection Act and the WARN Act).
  • Protecting Confidential Information and Trade Secrets—The gig economy can also pose new risks to businesses in protecting their trade secrets, confidential information, and other soft intellectual property assets  (such as customer lists, financial data, business plans, etc.)  In a traditional employment relationship, prudent employers take practical steps to limit employees' ability to abscond with the information to which they are entrusted to perform their job.  Such steps can include requiring employees to work only on company-issued computers and other devices and ensuring that such devices are returned (and, if appropriate, forensically analyzed) at the end of the employment relationship.  In jurisdictions where non-compete and non-solicitation covenants are permitted, employers might also require employees to execute restrictive covenant agreements in connection with their employment.  While some of these tools are available to companies operating in the gig economy, practical challenges may limit their effectiveness.  Given the short duration and non-exclusivity of relationships with gig workers, non-compete/non-solicitation covenants may be impractical or unenforceable; and since many gig workers perform work remotely on their own personal devices, companies may have less practical ability to protect the confidential information that they entrust to gig workers in connection with their work assignments.

The bottom line—the development of the gig economy poses great opportunities but also poses considerable legal and business risks that companies must manage. Sophisticated businesses with an eye on long-term success should consider these issues now to make sure they are ahead of the gig movement.

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
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
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