Without question, the rapid rise of the gig economy has upended the traditional 9-to-5 employment arrangement. Because of this, more independent professionals and companies are subject to the gig economy law. This will continue as this alternative setup gains traction.
The gig economy poses a lot of legal challenges for employers and employees. The workforce dynamic has shifted employment laws in many countries. And with this comes the permanent alteration of traditional notions of employer and employee relationships.
It is important to understand these changes and the impacts that the gig economy laws have on your business.
What Is the Gig Economy?
The gig economy has become a large part of the labor market since the outbreak of the novel coronavirus. Now, gig workers perform essential tasks like providing transportation, renting out homes, and performing essential tasks like shopping for groceries. Typically, these jobs involve working on a project basis. In a lot of ways, the gig economy provided refuge for those who lost work. So it has provided a dependable source of income for people around the globe. The rise of the gig economy is a permanent fixture in the global economy.
Gig work has no universal definition. But the United States Bureau of Labor Statistics’ Contingent Worker Supplement defines gig work as online platform work and electronically mediated work where people use a mobile app or website to connect with customers to:
- Source gigs
- Receive compensation from the website or app
- Have the autonomy to decide when they want to have temporary projects
What Makes Worker Status So Important?
Worker status has a critical effect on the rights of an individual. It also affects how workers pay taxes. There is a wide array of case laws that seeks to establish the principles on whether an individual is an employee. And when none of these principles are met, a person is considered an independent contractor or self-employed. People who fall into this category have limited rights.
Considering this perspective, only company employees can benefit from all employee rights. For instance, unless clear laws are in place, a worker in the gig economy cannot claim a statutory redundancy payment or unfair dismissal against an employer. Despite this fact, they are entitled to rights like paid annual leave and being paid more than the national minimum wage.
Gig Economy Regulations in the World
Here are the regulations of different nations when it comes to gig economy workers.
US Gig Economy Law
The Department of Labor withdrew a rule that would make it easier for companies to classify their workers as independent contractors. This reversal does not make a difference in the employment status of workers. The reasons cited for this ruling included it would “undermine” the current jurisprudence on gig work in the country. Also, this rule was “in tension” with the 1938 Fair Labor Standards Act.
Meanwhile, President Joe Biden has pledged support to proposed laws in California that are set to protect gig workers from corporations undermining their basic rights. In this way, he has opposed California’s Proposition 22. This is an initiative that granted app-based drivers to become contractors who can enjoy labor and wage policies specific to them.
Together with Vice President Kamala Harris, they are advocating for better gig economy regulations. This includes protection for gig workers and greater legal benefits, as well as changes to the legal tests that enable gig workers to receive status as independent contractors. If federal level legislation pushes through, the Department of Labor can sue companies that fail to meet the minimum wage requirements.
Various Tests Used
In the country, at least 20 states have adopted the ABC test with minor variations. This test presumes that a worker is an employee, and the burden lies with employers proving that workers are independent contractors by demonstrating that they have:
- Full control of their work performance
- Their work is completed outside the company’s normal course of business; and
- The worker has an independent occupation or business that performs the work
In the US, app-based companies such as Uber and Lyft designate their workers as independent contractors or employees. To determine the status that best describes the work arrangement with employees, there are multiple classification tests like the Economic Reality Test that was established by the Supreme Court case the United States v. Silk and the IRS Three-Pronged Test.
For taxes, the IRS states that individuals must file tax returns if they have net earnings from self-employment of $400. This includes gig work and part-time jobs.
Canada Gig Economy Law
Before the pandemic began in Canada, gig workers did not make up a huge part of the national workforce. However, this figure has drastically changed due to COVID-19. Workers in Canada are either independent contractors or employees. What separates these two terms is the extent of the organization’s control over the worker as well as their dependency on the company. Independent contractors are defined as a worker who gives services temporarily on their account.
Gig workers are classified as independent contractors, but some argue they should be classified as dependent contractors who enjoy a level of economic dependence, bargaining power, permanence, and exclusivity between them and the company they are providing services to. This is because, in provinces like Newfoundland, Alberta, British Colombia, and Ontario, they can unionize under labor laws just like employees.
On the legislative front, the Expert Panel on Modern Federal Labor Standards was established to examine the labor protection of non-standard workers. This panel addressed considerations such as the need for securing better benefits and protections for gig workers.
Residents of Canada, including gig workers, must report their income for tax purposes. For those who earn over $30,000, they must register for an HST or GST account.
UK Gig Economy Law
In recent court proceedings, the UK tribunal has not been siding with the self-employment models of the gig economy. Companies like Uber have tried to prove that the people who work for them are self-employed in the Supreme Court. But in September, their license to operate was revoked by Transport for London due to safety concerns.
Despite this, the UK remains a great location for gig workers from an employment law perspective. For instance, Deliveroo won a case against the Independent Workers Union of Great Britain when their riders were refused union rights by the Central Arbitration Committee.
For taxes, Her Majesty’s Revenue and Customs are promising to give those who are part of the gig economy tax and social security benefits. This is set to narrow down the distinction between self-employed individuals and those who work for a company. This is because the UK tax authority does not currently recognize the term “worker” in the same way as the statutory employment law. Because of this, they are taxed through self-assessment.
Self-employed people pay taxes in the UK only on their profits rather than their total income. This allows them to deduct expenses when calculating their tax amount. In the UK, 85 percent of income tax is collected via Pay As You Earn (PAYE). Therefore, as the number of self-employed and gig workers increases, the amount collected through this system will decrease. This poses a concern for the government because self-assessment makes taxes more challenging to collect. Also, the tax authorities need to heavily rely on taxpayers to declare their tax amount accurately.
Australia Gig Economy Law
Workers in Australia fall into two categories, namely independent contractors and employees. A contractor is not provided the same rights as employees, including minimum pay rate, leave entitlements, maximum work hours, and protection from termination of employment. Australian courts have classified gig workers as independent contractors but also acknowledge that there are certain ambiguities between the two terms.
Australia’s Senate Inquiry Committee has recommended that the government must amend the Fair Work Act to cover all kinds of workers when it comes to labor standards and minimum wages, among other conditions. Despite this, it is still unknown when this change will be put into practice.
France Gig Economy Law
In France, the model of gig economy platforms is based on the assumption that people part of the gig economy are self-employed. The difference between self-employed and a regular employee is vital from the legal perspective. This is especially true with the strict employment laws in the country. This includes working time restrictions, employer’s duty for social security contributions, eventual entitlement to benefits after termination, and protection of termination.
Case law has established that to determine the status of employees, their relationship with the service provider is crucial. Also, factors like their integration in the company, equipment provided, and their level of control are critical determinants.
A law passed in 2017 granting rights for people that give services through digital platforms. This includes the obligation of the company to handle expenses related to work accidents, as well as obligations to cover professional training and the right to strike and have a trade union.
Although France views gig economy workers as being self-employed, in 2018, the Supreme Court decided that a rider is an employee of a service provider, and they had the power to levy penalties on gig workers that could lead to termination.
In 2019, a new law was proposed that would allow platforms to set up a social policy to determine people’s rights and obligations. However, it was deemed invalid by the Constitutional Court. They found that only the court should have the power to say whether an individual is an employee.
The Gig Economy Law Is Constantly Evolving
Gig workers do not fit the traditional parameters of the laws that relate to the relationship between companies and employees. Governments face challenges in determining the employment status of workers.
Despite the rising number of gig workers, there are still large gray areas in the gig economy law. There is much uncertainty in establishing employment status and benefits for these workers. Much of the distinctions constantly evolve through case law. And determinations in the future will largely depend on the outcomes of these cases.