Workers’ Rights in the Gig Economy

Can The Self-Employed Survive Without Legal Protections?

By Kim Post

Law Students on Workers’ Rights Series

The Law Students on Workers’ Rights series publishes essays from current and incoming students at some of the top law schools in the country. These essays, submitted for the Charles E. Joseph Employment Law Scholarship, address the question “What are the biggest challenges facing workers’ rights in the future?”

Tomorrow’s greatest threat to workers is that they will be pushed outside the scope of workers’ rights altogether. The old distinction between employees who are dependent on an employer and independent contractors who are in business for themselves has become untenable.

The rise of “ride-sharing” companies like Uber and Lyft is a typical case. To the consumer, they are indistinguishable from taxi services, offering transportation on demand. To the worker, though, they present themselves merely as payment platforms, matching a driver to a passenger. The driver is self-employed and supplies everything that is needed—except the vital source of income.

In part this trend is technological progress. As it becomes easier to connect a willing worker with a paying customer, the barrier between employment and self-employment becomes smaller. That genie is out of the bottle. With improved agriculture came enclosure of common farmlands, too, and it is no use yearning for Arcadia. 

But there is something more insidiously political to this development: at its outset, Uber was usually treated as an illegal, unlicensed taxi service. Venture capital funded lawsuits and payments of fines as the company continued to expand, and even the term “ride-sharing” was meant to hide the commercial nature of the taxi service. Reform of taxi regulations ultimately came not because of democratic pressure, but because a powerful business had delivered city governments across the country a fait accompli.

The disturbing effect of this phenomenon lies in more than licensing. The self-employed are usually omitted from legislation for workman’s compensation, unemployment benefits, minimum wage or overtime pay. Even the apparent advantage of no withholding from income proves deceptive when workers have the burden of making quarterly estimated tax payments.

The traditional trade-off that justified this legal distinction is that the self-employed have greater opportunity for profit. They can keep a greater share of their labor, use their capital to hire others and expand. Indeed, the American rags-to-riches story is rarely about a lifelong wage-earner. But neither is this story about the typical delivery driver (GrubHub), dog-walker (Rover) or even pornographer (OnlyFans) in the “gig economy.”

While they can more freely negotiate contracts than employees, these new self-employed have little ability to enforce their contractual rights—no money for an attorney and no Department of Labor willing to intervene in their stead. In practice that means they trade the rights of employees for almost no rights at all. Moreover, successfully running a business requires a certain level of sophistication. Few former employees are prepared to keep ledgers of their income, expenses, assets and liabilities. Without accounting for wear on equipment or taxes due next year, they overestimate their profits and suffer unexpected losses.

First, an ounce of prevention is due. The federal and state departments of labor must be more aggressive in combating misclassification of workers who are not truly self-employed, on the model of California Assembly Bill 5. As more workers legitimately fall into this category, though, there must also be treatment for the difficulties of being self-employed. 

The under-the-table economy will shrink when it becomes easier to register a business or pay taxes. Nor is there a fundamental reason the self-employed could not participate in worker protection programs—let them buy into unemployment compensation, like they may be temporarily receiving under the federal CARES Act.

Workers will more likely find the cure, though, in an old-fashioned medicine: the worker’s cooperative, which can do for the self-employed what unions did for employees. The same technology that makes it easier for large businesses to shift to independent contractors makes it easier for contractors to organize themselves. A cooperative of independent taxi drivers in a city could own its own servers, run its own app—truly setting its own terms instead of workers picking which major company they will serve. 

Although legal reform may make formally organizing more accessible, the foundation can be laid today. Future rights, too, will require workers to unite and fight for them.

Reflections from Charles Joseph

The growth of the gig economy has left millions of workers without the traditional protections offered by workplace discrimination laws and sexual harassment laws, many of which only apply to traditionally-defined employees. And, as Kim Post reminds us, misclassifying workers comes at a high cost––misclassification remains one of the most common forms of wage theft. While some local laws offer payment protections, such as New York City’s Freelance Isn’t Free Act, or extend employment laws to freelancers, the law must catch up with the new economy. Until it does, workers will continue to suffer.

Kim Post earned a bachelor’s degree from Drexel University and helped workers file tax returns with the Campaign for Working Families. In fall 2020, Post will attend Temple University’s Beasley School of Law.

Charles Joseph has over two decades of experience as an NYC employment lawyer. He is the founder of Working Now and Then and the founding partner of Joseph and Kirschenbaum, a firm that has recovered over $140 million for clients.