Gig Economy Impact Wrongful Termination Cases
While the gig economy offers workers flexibility, it can also render them vulnerable to exploitation. For example, being classified as an employee guarantees certain protections and basic entitlements such as pay, leave, health insurance and superannuation.
Many gig companies use cutting-edge technology to create digital, app-based platforms that link consumers directly with workers who can fulfil a particular task, such as ride-sharing or food delivery. These platforms may pay workers by wrongful termination, via a retainer, per task or another agreed-upon system. Gig companies often advertise these platforms as enabling workers to make money at their own pace and choose when they want to work. However, the reality is very different. Gig worker earnings can fluctuate dramatically, and many struggle to meet their financial obligations. In addition, many platforms deactivate workers without providing advance notice or explanation, leaving them with bills to pay and no income source.
The vast majority of gig workers have significant economic insecurity and are not enjoying the freedom promised by these companies. In fact, many report that they do not earn enough to support themselves or their families. The reality is that the gig economy offers few opportunities to earn family-sustaining wages and benefits, and a quarter of all gig workers earn less than the federal minimum wage. Moreover, the rate of job turnover for gig workers is much higher than that for W-2 service-sector workers: 55% of gig workers expect to find another job within three months.
How Does the Gig Economy Impact Wrongful Termination Cases?
These challenges are exacerbated by the fact that the giant app corporations, such as Uber, Foodora and Deliveroo, have made aggressive efforts to misclassify their workforces as independent contractors rather than employees. These companies have a vested interest in deceiving regulators and consumers.
This confusion and deception is why it is critical for regulators to take a firm stance on these issues. They should not be fooled by false marketing and should seek to establish a clear legal standard for worker classification. In California, for example, the state’s landmark Dynamex decision triggered Assembly Bill 5, or AB-5, which established a new test to determine whether or not a worker is an employee or independent contractor.
The law imposes a three-part test for classifying workers: the worker must perform work that is outside of the usual course of business for the hiring entity; the hiring entity must control or direct the performance of the work; and the worker must be paid at a fixed amount for each work unit completed.
Although the law could be improved by extending its application to all labor code and Industrial Welfare Commission wage orders, and by clarifying the definition of employee-like status, the law will help ensure that all gig workers receive the protections they deserve. Further, it should ensure that gig companies do not use the legal uncertainty surrounding this issue to engage in monopolistic practices, such as naked wage-fixing or no-poaching agreements, that harm consumers. The FTC has enforcement powers that can be used to counter these abusive practices and pursue consumer redress and civil penalties.