Who is an 'employee' in the gig economy - and can the courts help protect labour rights?
The following is an extract from BHRRC's Corporate Legal Accountability Quarterly Bulletin - Issue 30, March 2019. You can read the full bulletin here.
The gig economy is an important global trend revolutionising the traditional concept of employment. Businesses are increasingly using freelancers, “gig” workers and an on-demand reserve of workers, who are classified as “independent contractors”.
While on-demand work arrangements are good for people who prefer flexible working hours to the rigidity of full-time employment, they raise serious issues around workers' rights and protections of workers.
Conventional employment is typically characterized by secure, regular work, and the provision of legally mandated benefits and protections, including a minimum wage, workers’ compensation, paid leave and overtime, unemployment insurance and the right to collectively bargain. By comparison, labour laws do not afford these same protections to independent contractors.
According to recent estimates, it would cost companies an average of 20 to 30 percent more to classify workers as employees instead of independent contractors. This blatant attempt to lower overhead costs and maximize profit at the expense of workers’ rights is not new, nor is it limited to the gig economy.
However, the legal, practical and economic implications are becoming increasingly serious in this rapidly growing economy:
Using litigation to assert labour rights
As a result of this protection gap, an increasing number of non-conventional workers are asserting their core labour rights in courtrooms, suing employers to redress grievances and improve working conditions. The plaintiffs’ central claim is that the defendant has misclassified them as an independent contractor, and thus deprived them of various legal rights and protections.
In these cases, workers tend to seek remedies for underpayment, lack of benefits and re-admission to work after wrongful termination on the basis of being an independent contractor.
Uber, for instance, has faced misclassification lawsuits in the UK (Aslam et al. v. Uber) and the US (Razak et al. v. Uber Technologies) regarding the minimum wage and other benefits. And in Nigeria, two Uber drivers filed a proposed class action seeking health insurance and pension benefits. Similar misclassification lawsuits have been filed by Uber drivers in France, Canada and Brazil.
In the Netherlands, a former Deliveroo rider sued the online food delivery company for wrongful termination, and sought reinstatement under local labour law stipulations. Similar misclassification claims were made against the food delivery enterprise GrubHub (Lawson v. GrubHub), and courier services Postmates (Vega v. Postmates), and Dynamex (Dynamex Operations West v. Superior Court of Los Angeles).
Who is an 'employee' in the eyes of the law?
Though the specific claims of the various lawsuits differ, they all revolve around the issue of determining exactly what, or who, is considered an employee according to the law. When alleging misclassification, plaintiffs need to demonstrate that they meet the legal criteria for being an employee.
One factor that appears to be consistent across jurisdictions in the determination of employee status, is the consideration given to the degree of control that the company has over the worker, and the level of independence that the worker has in performing the job.
In Dynamex Operations West v. Superior Court of Los Angeles, the California Supreme Court found that there is a presumption in favour of employee status, and established the ABC test for determining worker classification.
The test places the burden on the company to prove non-employee status, by satisfying certain criteria relating to its control over the worker, as well as the freedom and flexibility of the worker in performing the job.
Similar considerations informed the decision of the UK Employment Tribunal, which ruled that Uber drivers are not independent contractors, but workers providing skilled labour that helps generate company profits (Aslam et al. v. Uber).
In Brazil, Uber drivers were found to be regular employees based on contractual obligations such as punctuality, payment schedules and attendance requirements. In this case, Uber was required to issue a formal employment contract and to provide certain benefits.
In other misclassification lawsuits, the courts have decided in favour of the defendants. The District Court for Eastern Pennsylvania agreed with Uber’s characterisation of itself as a “modern day yellow pages”, and as not being an employer under the US Fair Labour Standards Act (Razak et al. v. Uber).
The New York Supreme Court ruled that couriers for the online delivery company Postmates were not employees, because the alleged company “control” (establishing pay rates, tracking deliveries) amounted to merely “incidental control”, and did not constitute substantial evidence of an employer-employee relationship.
Where to now?
Workers and lawyers around the globe are fighting the culture of corporate impunity, consolidating their power, and turning to the courts to assert core labour rights, including through class action lawsuits. Litigation is a key tool in this fight, which has resulted in some important wins for workers, and has helped set positive precedents for other workers in similar situations.
Courts continue to play a crucial role in testing legal norms against new labour realities, prompting governments to amend and fill the gaps in existing labour legislation, and creating important opportunities for the emergence of new employment standards through caselaw.
For more in-depth analysis on labour rights and the future of work, see our 2019 Corporate Legal Accountability Annual Briefing, 'The Future of Work: Litigating New Labour Relationships.'