Gig Economy Workers: Employees Or Independent Contractors?

• Jurisdiction: United States,Federal,California
• Law Firm: Kevin Martin Ogwemoh Legal
• Subject Matter: Employment and HR, Contract of Employment
• Published date: 29 March 2023

Gig economy refers to the use of temporary or freelance workers to perform jobs typically in the service sector.¹ It is characterized by flexibility, zero hour contracts, self-employment, workers paid for limited contracts, and people engaging in more than one job.² Examples of jobs in the gig economy include ridesharing, delivery driving, selling craft, consulting, freelance writing, photography, coding and programming etc.³ The terms "gig workers and on-demand companies" are often used to refer to participants in the gig economy.

Although a gig worker is usually engaged under a contract for service and therefore referred to as an independent contractor which is a major attractive feature in the gig economy for employers as an independent contractor is not entitled to benefits provided for typical employees, many gig economy participants exhibit both the features of an employee and an independent contractor. Thus, the question as to whether a person is an independent contractor or an employee often arises because there is a thin line between the two concepts which often overlap.

This issue of classification has raised many concerns and the need to address these concerns is pertinent now more than ever especially in light of the boom in the gig economy post covid-19 in addition to other factors such as technology, decline in traditional manufacturing jobs, shift in the economy, tax/payment issues, unemployment, underemployment etc.

In fact, a study conducted using the online labour index of Oxford University shows that covid-19 has positively affected the gig economy by increasing the number of participants in the gig economy. The index thus suggests that policies should be made to support the gig economy because of its potential to keep the world going.⁴ This suggestion re-echoes the call to extend certain benefits to participants in the gig economy which has been on the rise and there is no better time to evaluate the employment relationships obtainable in the gig economy than now.

Globally, the gig economy has been identified as an important and growing issue making it clear that in many countries, it is felt that the traditional model of what constitutes employment needs to be revisited in the light of the growth in gig works to avoid misclassification and also extend certain benefits to participants in the gig economy.

In the United States of America, different positions obtain depending on the State. In California, the policymakers passed a law known as the Assembly Bill 5 (AB 5) law in 2019 which enabled gig workers to enjoy the same benefits as employees but it was extremely challenged. Thus, it is not surprising that in November 2020, another law known as Proposition 22 was passed which reverses AB 5 and allowed gig workers to be classified as independent contractors rather than employees.⁵ In Tennessee, there is a similar trend as Tennessee lawmakers are currently considering legislation (HB 1978) that would classify gig workers as contractors and remove protections provided by worker's compensation law and the Tennessee Employment Security Law.⁶ This is a deviation from their present misclassification test that provides more of a balance between the interests of employers and workers. Some States are considering the similar legislation to Tennessee's in this reclassification. In New Jersey, Governor Murphy signed a legislative package also referred to as "the misclassification package" on 20^t...