What is the “Gig Economy” and Why Does it Matter?

By Joan Fucillo

February 20, 2020

What is the “Gig Economy” and Why Does it Matter?


By Joan Fucillo

“Some call it the ‘sharing economy’ or the ‘on-demand economy,’’ he said, “but ‘gig economy’ is more reality-based.”

Ben-Asher (Ritz Clark & Ben-Asher) was part of a panel discussion on “The Gig Economy” at the New York State Bar Association’s Labor and Employment Law program during NYSBA’s 2020 Annual Meeting. He was joined by Terri Gerstein (Harvard Labor and Worklife Program), Lisa Lupion (Orrick Herrington & Sutcliffe) and Patricia Smith (National Employment Law Project).

Gig workers take on temporary or project-based jobs of different durations performing personal services to consumers or contract work for companies. Workers connect with contractors or consumers via online digital platforms or apps.

This type of work comes without income stability, job continuity, health insurance, retirement plans, unemployment insurance, disability, severance or collective bargaining rights. It also offers no safety net and requires no contributions to Social Security or Medicare. What does it offer? Flexibility – most particularly the ability to say ‘no.’

For people who want to pick up extra cash, gigging can be convenient. But the unreliability of gig work makes it a very difficult way to make a living. There is a wide range of gig workers and a wide range of reasons for taking on gig work, which has made it almost impossible to accurately measure or define its effect on the economy.

People who take on temporary jobs of any sort can be considered gig workers. The Federal Reserve (2018) estimates that 31% of all adults are part of the gig economy while the Bureau of Labor Statistics (2017) estimates they are about one percent of the workforce. Yet, the Bureau of Labor Statistics’ contingent work survey (2018) estimated that 10.1% of workers were in “alternative work arrangements.”

The gig workers that concerned the panel are those trying to make a living. According to Upwork/Freelancers (2019) younger workers ‘freelance’ (gig) the most. Almost 60% live paycheck to paycheck and only 43% have enough saved to get through two weeks without a gig.

Let’s say the worker is providing a cleaning service to consumers through an app-based platform and essentially working fulltime. Yet the company classifies that worker as an independent contractor, because it just helps people find each other. But if that worker is injured on the job the worker pays the costs – or the public does.

So, is a worker an independent contractor or an employee? It is a question of control. Gerstein noted that recently California established a strict test as to whether a gig worker is an independent contractor or an employee. Known as the “ABC” test, it was included in Assembly Bill 5, which became law in December. Uber, Lyft and DoorDash have pledged to spend $90 million on efforts to repeal the law.

According to the “ABC” test, workers are independent contractors, if a business must prove that they a) are free from the company’s control and direction, b) perform work that is outside the hiring entity’s business, and c) customarily engage in an independent established trade in that industry. If they don’t meet all three criteria, they are employees.

Smith pointed out that even as these companies are challenging the law, they are looking for ways to re-tool their practices in order to avoid the law, as that ultimately might be a better for business decision.

Other tactics, said Lupion, include requesting opinion letters from the Department of Labor to bolster their case. However, she added. these do not always hold up in state court. State and local law can override the federal opinions, Lupion noted, so don’t be afraid to challenge them.

State agencies, Gerstein added, such as the Division of Human Rights and the attorney general’s office have a powerful arsenal.

New York City’s Freelance Isn’t Free Act took effect in 2017. It gives the city’s Corporation Counsel the power to file suit. Specifically, freelancers have the right to a written contract, timely and full payment and protection from retaliation.

In response to growing concerns, Governor Andrew Cuomo created the Digital Marketplace Worker Classification Task Force to study California’s ABC test and to see what could be done in New York

Legislation to give New York State’s gig workers some form of collective bargaining rights was proposed last year and has been reintroduced in the state Legislature’s current session.

As in California, expect pushback from the digital platform industry. In her program materials, Lupion noted that “employment laws written in the 1930s simply haven’t kept up with the pace of innovation and trying to apply them to the way services are delivered today can be like trying to fit a square peg into a round hole.”

And yet, although the new technologies present challenges, in her 2017 testimony before Congress Sharon Block, executive director of the Harvard Labor and Worklife Program, argued that basic labor and employment protections have never undermined the dynamism of the American economy.

Smith saw an underlying issue that can be corrected with education. “Young startups are clueless when it comes to labor and employment law,” she observed. “Every business school in the country need to have labor law in its curriculum.”

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