When Will Labor Laws Catch Up With the Gig Economy?

Companies such as Uber will get regulated eventually—but whether that's the best way to help on-demand workers is still being debated.

Jeff Chiu / Reuters

If asked to define the variously named sharing/gig/on-demand economy, anyone would struggle. Despite the fact that Uber and Airbnb have become household names, most companies that are considered part of this new tech-driven, non-ownership economy do vastly different things. And so do their workers.

This nebulousness of these companies makes them hard not only to define, but also to regulate.

Part of the problem is the limited, binary system for labeling workers—either they are employees with all the legal protections that imbues or not—argue Seth Harris and Alan Krueger in a new paper from the Brookings Institution. They (and others) have suggested that the solution is finding a new, middle classification, which would allow workers and employers to retain some of the freedoms associated with independent work while enjoying some of the protections from being mistreated.

Krueger and Harris specifically recommend that workers who straddle the line between being a 1099 independent contractor and a W-2 employee should be able to retain flexibility of hours, while enjoying the right to organize, civil-rights protections, and tax withholding—but not the more contested benefits of unemployment insurance, workers comp, and minimum-wage requirements. For many workers’ advocates, leaving these benefits out of the classification is a weakness of this proposal. In particular, the rejection of workers comp, for individuals injured on the job, and unemployment insurance, should a worker be suddenly dismissed, would be hard to swallow. Harris says these benefits were left out because they could be addressed through collective bargaining, which the proposed classification does protect.

During an event hosted by Brookings to discuss the new proposal, experts agreed that the fast and vast growth of these companies made pinning down precise problems and solutions difficult. “We are creating really large businesses very very quickly and are not completely educated on what it takes to be a good employer,” said Marcela Sapone, the chief executive officer of Hello Alfred, an on-demand service that helps coordinate chores like grocery shopping, laundry delivery, and cleaning. But already the conversation about employee classification seems to be having an impact without explicit regulation. Hello Alfred and a spate of companies that fit the sharing or on-demand model have already made the choice to bestow greater protections on their workers by making them full employees. The benefit for workers is apparent, but for companies it also means that they have greater control over their workers and their work product and they don’t have to worry about lawsuits or impending legislation that could force them to make their workers employees.

A middle ground for classification sounds useful, given that for many workers the benefits provided would be an upgrade over their current self-employed status, but is America ready to alter the legal framework that defines the relationships of workers and their employers—and is doing so even necessary?

“If we legislate too quickly we're going to screw it up,” said Virginia Senator Mark Warner during the event. That fear seems to be something widespread among both regulators and businesses, despite encouragement from workers and their advocates. Legislators see reforming the worker-classification system as a major undertaking, one that Gene Sperling, the former director of the National Economic Council, called a once-in-a-generation endeavor.

And it’s possible that even once new regulations kick in, they won't be as protective as some might hope, which means that businesses still bear some responsibility  in caring for workers, says Arun Sundararajan, a professor at NYU’s Stern School of Business. “We don't have a rich and deep government-provided social-safety net. If we look to the government as the place the social-safety net is going to come from, we'll fall short.” That means, at least for now, the industry and it’s workers will have to figure out a way forward on their own, while regulators and laws play catch up.