Regulating gig, crowd, and platform work
Carlos Toxtli, Claudia Saviaga, Saiph Savage, Six Silberman
Goal of this document
The goal of this document is to summarize as briefly as possible the various laws and non-legal initiatives that apply to regulating and governing gig, crowd, and platform work.
This includes both “location based” platform-based work such as transportation and care work (for example, Uber and Care.com) and “location independent” platform-based work such as microwork (for example, Amazon Mechanical Turk) and freelance platforms (for example, Upwork).
Laws generally apply to a particular legal jurisdiction (for example, a country, state, or city, or a “supranational” entity such as the European Union). The sections of this document are therefore subdivided by legal jurisdiction.
Employee or self employed?
The legal question in the “gig economy,” especially with respect to platforms for “location based” work such as personal transportation, that has been discussed perhaps more than any other by journalists, legal scholars, and policy makers concerns the employment status of platform workers.
That is, it concerns the question of whether platform workers are self-employed persons or employees – either of the platform or of the client that hires them through the platform.
Miriam Cherry’s 2016 paper “ Beyond Misclassification: The Digital Transformation of Work” lists in a table some of the litigation around this question.
Not included in the table in that paper is the first crowdsourcing lawsuit, Otey v. Crowdflower. A brief article describing the outcome of that case, which was settled, is here.
Since the publication of Cherry’s 2016 article there have been many more such lawsuits, including some interesting ones in the United Kingdom (see for example this article about a 2018 judgment against Deliveroo) and Spain (also against Deliveroo; news article; legal analysis in this article). There are many more. These are just a selection.
Interestingly, in the UK, senior executives of Amazon (which also uses a gig-economy-like workforce for package delivery), Uber, and Deliveroo apparently said before members of parliament that their firms would still be “viable” if they were required to classify their workers as employees, not self-employed persons. Article here.
The question of whether a worker is an employee or an independent contractor is important because a worker who is an employee is entitled to many rights and protections, including minimum wage, overtime pay, paid vacation, sick pay, employer-subsidized health insurance, and the right to unionize and negotiate collective bargains over pay and working conditions with their employer. A worker who is classified as self employed has none of these rights: they must pay their own health insurance, they cannot negotiate collective agreements or unionize, they have no right to overtime pay, sick pay, or paid vacation, and they are not guaranteed a minimum wage.
Almost all crowd and platform workers are required by the platform operating company to agree that they will be classified as independent contractors, not employees of the platform or of any client, before they begin work. On Mechanical Turk, for example, this is written in the Terms of Service (see Section 3d). This is why it is legal for Mechanical Turk workers to earn less than US minimum wage, even if they are located in the United States.
The question of a “third” or “intermediate” category of “dependent contractors”
A second major point of debate in the discussion in labor law around platform workers of all kinds is if they do not really fit either of the two main categories, “self employed” (in some countries called “independent contractor”) or “employee.”
For example, in her 2016 paper “ Beyond Misclassification: The Digital Transformation of Work” on page 6, Miriam Cherry quotes the (frequently quoted) Northern California District judge, Vince Chhabria, in the employee misclassification lawsuit filed against Lyft. Chhabria now famously said:
the jury ... will be handed a square peg and asked to choose between two round holes [i.e., the two categories of “independent contractor” and “employee”]. The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem…
In response to this problem, some legal scholars and policymakers have proposed to create a new, third or “intermediate” category in labor law, “in between” “employee” – a kind of worker who would have full rights and protections – and “independent contractor” – a kind of worker who has almost no rights or protections at all, as they are assumed to be running their own company and to be able to negotiate “equally” with clients and other companies.
This new category could be called something like “independent worker” or “dependent contractor.” Workers in this category would have some but not all of the rights of employees. Which rights exactly they would have depend on the proposal you read. The most famous of these proposals in the United States was written by Harris and Krueger ( here).
However, “third employment categories” in fact already exist in some countries – including the United Kingdom, Germany, Austria, Italy, Canada, Spain, and others.
A detailed analysis of these “third categories” and their effects on workers is undertaken by Valerio De Stefano in this paper (especially Section 7). A follow-up paper on the same topic, analyzing the effects of the “third category” in Canada, Spain, and Italy, was published in 2017 by Miriam Cherry and Antonio Aloisi (a student of both Cherry and De Stefano), and is available here. They point out that the existence of this third category has been good for workers in some countries but bad in others. I have not read this whole paper though.
The “Dynamex Decision”
In April 2018, the California Supreme Court issued a decision in the employment misclassification case Dynamex Operations West, Inc. v. Superior Court of Los Angeles. Dynamex is a courier and delivery company that before 2004 classified its couriers as employees; after 2004 they were reclassified as independent contractors. In this lawsuit, a former Dynamex contractor sued the company, claiming they had misclassified him and that he should have been classified as an employee.
The California Supreme Court ruled in favor of the worker. In doing so they used test for determining whether a worker is an employee or independent contractor based in California law called the “ABC Test.” The test used in previous employment misclassification lawsuits is usually a different one, based in national law, that allows a broader range of employment relationships to be classified as “independent contractor” relationships.
In a labor and employment law blog hosted by a law firm, Timothy Kim writes ( link):
Under the ABC test, a worker will be deemed [to be an employee] unless the … employer proves:
(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Under the ABC test, the employer must prove all three of those for the worker to be classified as an independent contractor.
If the ABC test becomes the standard test for employee status in California, many gig economy companies may be forced to convert their “independent contractor” workforces to employees – at least in California. This would provide minimum wage as well as many other protections to the workers.
However, gig economy companies and other companies have been lobbying California lawmakers enthusiastically to try to stop this from happening ( article). Unions, meanwhile, have been lobbying to try to prevent the companies from getting their way ( article, another article). It will be very interesting, and probably important, to see what happens.
Informally proposed European Union Directive on Platform Work
- First draft circulated April 2018 by Joachim Schuster, Member of European Parliament
- Still under informal discussion, not formally proposed
- Next meeting January 10, 2019 in Brussels
- Main points:
- The Directive defines what counts as a “labor platform” under the law
- The Directive requires platforms to prove that their workers are not employees. This turns current labor law around, as it requires workers to prove that they are employees, not independent contractors, if they claim that they are misclassified
- The Directive also regulates what must and cannot be written in a platform’s terms of service
- The Directive also sets out conditions for when it is not possible for a platform to “rebut” the “presumption” of employee status of its workers
- In the current draft of the Directive (August 2018), it is very easy for a platform to fall into the category of being “unable to rebut the presumption of employment”. Almost all crowd work platforms would become employers and their workers would become employees, even if they are working for multiple platforms simultaneously.
- The current draft of the Directive does not set out if the law would apply to platforms whose legal location is outside the European Union
- Six has a PDF copy of this draft (can email)
In some countries, including Germany and Austria, employees have additional rights covered by the term “co-determination.” The Wikipedia article “Codetermination in Germany” describes these rights well.
If gig or crowd workers in countries where workers have co-determination rights were to become classified as employees, rather than independent contractors, they would receive these rights as well.
Data protection law
The European Union General Data Protection Regulation (GDPR)
- Six has a working paper about GDPR and what it means for crowd platforms and workers (can email)
- Adrián Todolí, Professor of Labor Law at University of Valencia in Spain, has written a paper (in Spanish) assessing whether worker ratings (for example, when a passenger on Uber rates the driver after a ride) are “personal data” in the sense of GDPR. His answer is “Yes, they are.” (can email)
- Todolí also believes that data about how YouTube classifies videos may also be the “personal data” of the video creators under GDPR.
- In short, GDPR is probably going to be very good for crowd and platform workers in the European Union. It will not solve all problems (especially problems with low wages) but unless a court or data protection authority decides that this data is not “personal data” in the sense of GDPR, workers will have a lot of good “procedural” rights as a result of GDPR.
- For governments in other countries who want to create rights for platform workers, creating strong data protection regulation can be a very good step.
The California Consumer Privacy Act
This law was passed in California in 2018 and will come into force in 2020. It looks like it was roughly modeled on GDPR and is good. However it seems to talk a lot about “consumers.” I (Six) don’t know if this means workers will fall into a “loophole” and this law will not provide workers with useful rights to their data. I need to read the law.
Do platform workers have the right to organize and negotiate collective agreements?
One challenge for improving the rights of platform workers is that workers’ status as “self-employed persons” or “independent contractors”, rather than employees, may prevent them from unionizing and negotiating collective agreements with platform companies over wages and working conditions.
This is because “self-employed persons” are assumed to essentially be independent businesses, and independent businesses are often prohibited by competition law from making agreements with one another about prices - as that would be “price fixing” and illegal. In economic theory (and the theory that guides competition law), independent businesses should be competing with one another, including to provide services for lower prices, not “colluding” with one another to “fix” prices to their mutual advantage (and therefore to the disadvantage, presumably, of the consumer).
In the European context this has not had a major effect on “gig economy” organizing yet, although it has been raised as a concern by some legal scholars, trade unionists, and policy makers. For example in the Frankfurt Paper on Platform-Based Work (2016), we argued that “Laws that prohibit platform-based workers classified as independent contractors from organizing and negotiating collective agreements with platform operators should [...] be reassessed” (page 5).
Others have noted that in the “Fundamental Principles and Rights at Work” of the International Labour Organization, the right to organize and the right to bargain collectively are envisioned and framed as fundamental universal rights for all workers; no exception for independent contractors is mentioned or implied.
Unfortunately, the United States has not ratified the relevant ILO Convention ( Convention 98, “Right to Organise and Collective Bargaining Convention”), and as far as I know it’s in the United States where competition law has been used most effectively to prevent organizing by gig economy workers. Specifically, in 2015 the City of Seattle passed a law allowing drivers for Uber, Lyft, and other gig economy ride-hail platforms, to join unions and negotiate collective agreements with the platforms, even if the drivers were not classified as employees. The US Chamber of Commerce sued the City of Seattle to prevent the law coming into force, with an argument partially based on competition law (also sometimes called “antitrust” law). So far the lawsuit seems to have successfully prevented the law from coming into force (see article); if the City of Seattle really wants to allow Uber and Lyft drivers to negotiate collective agreements with the platforms they will probably have to pass a new law that is designed differently, although it is not clear if even that will succeed.
Are some platforms illegal cartels?
Ironically and sadly for drivers, the economic and legal truth - of course this is my personal assessment and opinion - may be closer to the opposite of what is claimed by the US Chamber of Commerce in its lawsuit against the City of Seattle: that is, if drivers are really independent contractors or self-employed persons, not employees of the platform companies, then the platform companies themselves may be cartels in that they allow independent contractors - who under competition law are supposed to be competing with one another and not “colluding” or communicating to “fix prices” - to all offer the same price scheme via the pricing algorithms employed by the platform companies! So the question is, is Uber an illegal cartel?
This question is taken up in these papers:
- Mark Anderson and Max Huffman,
The Sharing Economy Meets The Sherman Act: Is Uber a Firm? a Cartel? or Something
in Between?, 2017 Colum. Bus. L. Rev. 859 (2017). See esp. page 907, “Is
the Uber Arrangement Per Se Illegal?”
- Julian Nowag, The UBER-Cartel? UBER between Labour and Competition Law, 2016 Lund Student EU Law Review Vol 3
Additionally, there was a lawsuit against Uber about this in the United States in 2015 ( background info; short article), but it went to arbitration in 2017. There was no court decision on the competition law/antitrust question of whether Uber is an illegal cartel of self-employed drivers.