The Gig Economy, An Ongoing Concern

Dating back to a different time in the employee / employer relationship, most labor and employment laws only govern the conditions of employees, those individuals on an employer’s payroll, earning W-2 reportable wages. The number of American workers working as independent contractors, or otherwise working in the non-wage earning economy, ranges from 5.9 million workers (DOL Bureau of Labor Statistics) to 75 million (Federal Reserve)! In any case, employers are increasingly performing work through arrangements with independent contractors, temporary labor, and other forms of contingent work, including the use of “permanent temporary” employees. Contingent workers generally have lower wages, benefits, promotional opportunity and job security than regular non-union employees, let alone the unionized workforce.

This distinction is critical, as the Fair Labor Standards Act (minimum wage and overtime), anti-discrimination laws, the National Labor Relations Act (private sector union organizing), and a myriad of state and local laws only apply to employees. Yet rather than addressing this concern, the National Labor Relations Board (NLRB) has supported the independent contractor relationship, making it more difficult to prove employee status. The NLRB claims the importance of “entrepreneurial opportunity” must be considered in determining whether a worker is an employee or independent contractor. While the United States Department of Labor (USDOL) takes the position that workers can be misclassified by employers as independent contractors, it adheres to a somewhat complex test in determining whether a worker is an employee or an independent contractor. Moreover, both the NLRB and the USDOL have articulated interest in making it even more difficult for workers to receive protections under the laws by creating tougher standards to prove that a contractor is a joint employer for purposes of the laws they are responsible to enforce.

In contrast to this trend, in September 2019, California passed a bill that requires businesses to hire workers as employees, rather than independent contractors. Under the California law, employees are required to hire and classify workers as employees unless the business can prove that the worker is:

1. Free from the company’s control;
2. Is doing work that is not central to the company’s business; and
3. Has an independent business in his / her industry.

This means that California workers will receive the minimum wage and overtime, may be entitled to health care benefits, and have the right to unionize. All workers deserve the protections often provided solely to those classified as employees. Ideally, labor and employment laws would apply to all workers, regardless of employment status. Requiring the hire of workers as employees may not be as far reaching as simply applying all labor and employment laws to all workers, but is certainly a start. Let’s hope that more jurisdictions follow California’s lead in protecting all workers.


By: Alexia Kulwiec, Associate Professor