Governments' gig economy problems could be solved by a legal tweak

Jane drives in circles around a city-centre neighbourhood on a hot afternoon. Two phones stuck to her dashboard display different apps: the ride-hailing services Lyft and Uber, one phone logged on to each. She’s on the lookout for a client who needs a trip to another neighbourhood.

Should someone be paying Jane for this sweltering, riderless downtime? If so, who? The conundrum, raised in a recent Brookings report, is just one of the legal and ethical quandaries caused by the rise of “gig economy” platforms and the growing number of people around the world who work for them.

The heart of the problem is the driver’s relationship with the platforms. Many gig economy workers rely primarily on one or perhaps two companies for their work. While Jane is not a formal employee, the maximum prices she sets and other conditions, such as the kind of vehicle she can use, may be dictated to her. So do these companies officially employ her? What labour rights does she have?

One proposal gaining traction among policymakers — and already adopted by New Zealand’s government — is the idea of creating a new category of worker-employer relationship.

Often called the “dependent contractor”, this new status could mean a radical rights overhaul and has the potential to provide certainty for millions around the world. But it poses risks, too. If not done carefully, some fear that governments might force new platforms to behave exactly like traditional employers, taking away flexibility many gig workers enjoy.

Know your place

Traditionally, countries have clear demarcations between different types of worker. The UK, for instance, has the “self-employed”, who are entitled to very few worker rights, “employees”, who are entitled to full rights, and “workers”, a ragtag category in between. The US has two types: “employees”, who get full labour rights, and “independent contractors”, who have far fewer rights but more freedom to take their work elsewhere.

But if, like Jane, you are an independent businessperson who nonetheless relies on a small number of platforms not only to provide you with the bulk of your work, but also to set the terms on which that work is carried out — maximum pricing, for example — you don’t fit neatly into pre-existing categories.

Uber in the UK, for example, is working its way through the late stages of a lengthy legal battle over the rights to which its drivers are entitled. Drivers are “self-employed”, the company argues — they are freelance professionals who just happen to ply their trade using Uber’s tech. But the employment courts, so far, have backed drivers who say they should have a place in the UK’s middle employment category, “workers”.

If the drivers win the final stages of their battle, that could entitle them and many others to rights including the UK’s relatively robust minimum wage.

But for Matthew Taylor, author of a UK government-commissioned review into the future of work, even if the drivers win it still won’t clear up the confusion. Taylor is calling for the creation of a “dependent contractor” category within the wider “worker” bracket that would give on-demand gig economy workers security but, crucially, not entirely destroy the business model of companies like Uber.

Meanwhile, in New Zealand, the ruling Labour Party ran for last year’s election on a manifesto that pledged, within a year of taking power, to “introduce legal rights for ‘dependent contractors’ who are effectively workers under the control of an employer, but who do not receive the legal protections that are currently provided to employees.”

Iain Lees-Galloway, the workplace relations minister, admits that at this stage the government is “still very, very early in our thinking” — it’s not yet clear what rights would apply, or which groups of workers would come under the new definition. But, Lees-Galloway said, “We would like to try and stop the race to the bottom [on standards of work] whilst also maintaining the benefits that can come with a contractual relationship.”

New kinds of rights

Lees-Galloway is still developing his party’s offer to the new dependent contractors. But, he said, one priority is the right to collective bargaining. “One thing that we are particularly interested in is whether we can extend the right to bargain collectively to dependent contractors,” he said.

For Taylor, a priority should be access to a kind of minimum wage, adapted to ensure fairness for platform workers while also acknowledging that a traditional approach to working time would be hugely challenging to platforms like Uber.

“It is a legitimate concern of the platforms that if they can't control labour supply and they have to pay everybody a minimum wage for those working,” Taylor said, “they could find themselves with an unsustainable business model.” What happens, for instance, if thousands of drivers log on in the middle of the night when there’s no demand, but Uber must still pay them?

Taylor’s report suggested a new system whereby dependent contractors could be paid a company-set rate for tasks completed, provided the company could show that “an average individual, working averagely hard, successfully clears the National Minimum Wage with a 20% margin of error.”

But working out where to draw the line on this new definition could prove complex. Taylor said he would not want the new category, for example, to capture odd job merchants who use platforms, like Taskrabbit, to find customers but set their own pricing and conditions.

Meanwhile, Taylor fears that his radical idea on the minimum wage may go ignored. Along with the government worrying about being seen to undermine the minimum wage in any way, Taylor said, “I think it just felt a little bit too clever, a little bit too tricky.” He suspects, if the British courts rule that Uber drivers are workers, the government will go down a more conventional route, “which will probably mean those companies have to move to something a bit like a shift system.”

What worked elsewhere?

Some countries embarked on similar legislative experiments decades ago. A paper by Miriam A. Cherry of Saint Louis University and Antonio Aloisi of Bocconi University spells out the experiences of Canada, Italy and Spain in creating new types of worker, with very different results.

In Canada, the law professor Harry Arthurs noticed in the 1960s that many tradespeople, such as plumbers, were setting themselves up in business but had, in practice, one customer. He suggested such people be classified as a new type of worker, called “dependent contractors”. In the 1970s, the government listened to him and gradually implemented the change.

This process, Cherry and Aloisi said, was fairly smooth: an “expansive and inclusive” series of legislative changes, benefitting the new class of employees. It’s a comparatively simple solution that has worked for Canada. But a process from decades ago won’t help modern-day policymakers solve thorny issues like calculating working time for on-demand workers.

Meanwhile, Spain and Italy’s experiences with creating new worker categories are cautionary tales. The former has a TRADE (“economic dependent self-employed worker”) category — to classify a worker has to own their own tools but be 75% dependent on an employer. In Italy, there have been at various times shifting versions of a “quasi-subordinate” category.

Spain, Cherry and Aloisi wrote, made its category “too generous” and “too burdensome” to opt into, meaning few took it up. Italy, conversely, introduced too few rights and found the ill-defined and “mercurial” law to be often abused by employers looking for a discount.

Governments around the world should watch closely what’s happening in the UK and New Zealand. There’s no doubt establishing new “dependent contractor” categories is difficult to get right. But if done correctly, the proposition of new certainty and harmony both for often-precarious workers and the innovative businesses they work for is tempting.

(Picture Credit: Flickr/Noel Tock)

Josh Lowe
Josh.Lowe@apolitical.co