Warming to Alternative Classifications for Gig Economy Workers

Judges and juries around the country are being asked to decide whether Uber and Lyft drivers and other participants in the “gig economy” are really independent contractors or just employees in disguise. But what if they’re something else altogether?

Vince Chhabria, the U.S. District judge in San Francisco who is presiding over one of these cases (Cotter v. Lyft), framed the question nicely back in March:

[T]he jury in this case will be handed a square peg and asked to choose between two round holes. The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem. Some factors point in one direction, some point in the other, and some are ambiguous. Perhaps Lyft drivers who work more than a certain number of hours should be employees while the others should be independent contractors. Or perhaps Lyft drivers should be considered a new category of worker altogether, requiring a different set of protections.

Several other countries already have an in-between classification of “dependent contractor.” These generally seem to be people who do their work for one organization, though, so it’s not clear that such arrangements would make sense for the archetypal gig worker who does projects on Upwork, sells crafts on Etsy, drives a few hours a week for Lyft and rents out her apartment on Airbnb when she leaves town to, I dunno, dog-sit at her parents’ house.

So we’ve been getting some interesting proposals. I last wrote about this topic back in June, and a lot has happened since then.

This summer, venture capitalist Nick Hanauer and Service Employees International Union official David Rolf outlined a “Shared Security System” of portable benefit accounts and basic job standards.

In October, Republican Presidential hopeful Marco Rubio gave a big speech on the “on-demand economy” in which he endorsed the “dependent contractor” idea.

In November, a motley crew of tech executives, venture capitalists, union officials, academics and think tankers from both the center-left and center-right signed on to a similar set of principles for portable and universal job benefits.

There are other efforts too, several of which are discussed by the Washington Post’s Lydia DePillis here. And this week we have an important proposal from Seth Harris and Alan Krueger, under the auspices of the Brookings Institution’s Hamilton Project, for a new employment category called the “independent worker:”

“In our proposal, independent workers — regardless of whether they work through an online or offline intermediary — would qualify for many, although not all, of the benefits and protections that employees receive, including the freedom to organize and collectively bargain, civil rights protections, tax withholding, and employer contributions for payroll taxes.”

These independent workers would not, however, be subject to minimum-wage or overtime rules or be part of the unemployment insurance program, the reasoning being that such protections don’t really make sense for someone who chooses her own hours and works through multiple companies. On health insurance, companies such as Uber would be encouraged to offer pooled coverage and be “required to pay a contribution equal to five percent of independent workers’ earnings (net of commissions) to support health insurance subsidies in the exchange,” but would not otherwise be subject to the employer mandates in the Affordable Care Act.

Part of what makes this proposal interesting is who wrote it. Employment-law expert Harris, now at Cornell University, served five years as the No. 2 official in the U.S. Department of Labor, and six months as its acting secretary, in the Barack Obama administration. Krueger, a long-time Princeton University economist, was chairman of the Council of Economic Advisers and assistant secretary of the Treasury under Obama; he has recently been documenting the growth and characteristics of the gig economy, doing some of his research in cooperation with Uber.

As a result, their recommendations are exceptionally well- informed, both about the extent of the gig economy and the current realities of employment law. There are no overblown pronouncements about gig work taking over the economy — right now, Harris and Krueger estimate, “about 600,000 workers, or 0.4 percent of total U.S. employment, work with an online intermediary in the gig economy.” But that number is growing fast, and many more people who work in nontraditional jobs could probably benefit from the new rules. Meanwhile, the Harris- Krueger proposals don’t require a radical redo of U.S. employee protections and benefits, just an extension of some to independent workers.

That doesn’t mean there’d be much political support for this particular approach to solving the gig-economy puzzle. “We think we’ve perfectly found no-man’s land,” Krueger joked to the Post’s DePillis. The union-backed National Employment Law Project has already called for applying all current employment standards to on-demand work. Gig-economy companies won’t be happy with all the new responsibilities they’re asked to take on, and the business community in general would likely fight such a major expansion of collective-bargaining rights.

For the immediate future, we’re going to be stuck with letting the courts decide, in possibly contradictory ways. But it does seem like we might be watching the very beginnings of a sea change.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.