Gig Platforms Under Fire


“The long arm of the law” has been catching up with Gig Platforms, forcing them to come under federal, state, and municipal laws. Over the last few years, much of the legislation has involved the initially “presumed” and increasingly challenged status of Gig workers as Independent Contractors.

As “the new kid on the block”, and often operating worldwide via cloud-based, digital platforms, it has been difficult for governments to regulate them.

We have written on these platforms and the attempt to regulate them since October 8, 2019, with other articles on October 18, 2020 and February 25, 2021 (see blog title page. The Gig companies have been very difficult to regulate for a few reasons. The most surprising one is that, although governments have claimed to be working to give Gig workers the protections enjoyed by employees, the gig workers themselves have often been against them.

Many workers preferred the status of being free “independent contractors and very willing to work without government protections, like minimum wages, safety protections. unemployment insurance, etc…

This was particularly the case in California where the state initially passed legislation that changed the status of Uber and Lyft drivers (and many others) from Independent Contractors to Employees but were forced to drop the new law (AB5) when a ballot initiative was passed the following year, which rescinded the legislation.

Many commentators have made the point that the different governmental agencies may not have been as concerned with the employees as they have been with the increasing lost tax revenue, especially as the Gig Economy has grown. There has also been pressure on governments from traditional companies that these Gig platforms represent unfair competition.

The latest news in the battle came on March 26th, 2024, when Gig platform “Instacart” agreed to pay $730,000 to settle violations of the City of Seattle’s “Gig worker paid sick and safe time ordinance.” This money was used to pay unpaid sick pay to 5,567 workers, in addition to a fine of $18,685.

So, now even municipal governments (as well and state and federal) are passing laws specifically written to regulate Gig platforms and other App based businesses and their workers. The laws have come a long way in just the 4+ years we have been writing about them.

Just this past November (2023), New York State settled a case totaling $328 million against Uber and Lyft. The state accused them of  “cheating drivers out of hundreds of millions of dollars”. Those two Gig companies withheld monies from payments due to their workers, and prevented them from receiving valuable benefits available under New York State labor law.

A different but similar battle was waged by governments and traditional business concerns when online retailers did not pay sales taxes. As Online Shopping gained in popularity, the increased loss of tax revenue and the complaints of traditional businesses of unfair competition demanded a solution. Enforceable legislation soon followed.

(No back taxes were assigned, that I am aware of, but may have happened especially when new laws were challenged, and payments were withheld pending appeal)

The Old Controversy Rises Yet Again

Before the ink was dry on a new U.S. Department of Labor final rule making it more difficult to use the worker classification of “independent contractor”, which we wrote about just last month, (February 2024), the Congress was introducing legislation to overturn that rule.

The chances of the new rule (effective March 11, 2024) being successfully overturned by congressional action will be difficult because the President is expected to veto it, making a two-thirds majority necessary to overcome the veto. In addition to the congressional action there are several lawsuits in the works challenging the new rule.

It is not only the business community that is against the new rule, but many workers are against it as well. Worker opposition is based on the thousands who desire the independent contractor status. It is just like the recent situation in California, where a ballot initiative overturned a law that took away the right of Uber and Lyft drivers to use the independent Contractor classification. Unlike state governments, our national government has no procedure like a state ballot initiative or referendum to overturn federal rules or laws.

In the California battle most of the Uber and Lyft drivers joined the fight that overturned the law (AB5) which made use of the IC status more difficult. More and more workers like that status and are very willing to vote and otherwise work for it.

The final decision will probably be decided by the coming Presidential election this November.

But the real trend is that governments are increasingly able to create and enforce legislation that makes a more level playing field for both Gig platform companies and traditional ones, and I think that is good news.

As always, stay safe and continue to pray for Ukraine and Russia as well as Israel and Gaza.