The Work of the Future: Ending Employment Misclassification

During the last decade, technology has contributed to widespread and significant changes not only in how work is performed but also in the structure of work itself. In only the past few decades, entirely new career paths and ways of working have been created. From rideshare to crowdsourcing, digital labor platforms have created new markets for labor that previously did not exist, matching customers and service providers. Work is more global than ever before, and many people work in a completely online environment. During the pandemic, remote work allowed companies and workers to manage health and safety concerns, with praise for the additional flexibility work from home afforded workers. These accelerated changes, however, have had serious consequences, and, in some instances, they have been used to undermine worker protections and benefits. The most significant cautionary tale concerns the gig economy. In the last decade, digital labor platforms have tried to opt out of the labor and employment laws, created legal uncertainty, and raised concerns that such efforts could undermine labor protections for workers more generally. The trend toward the informalization of work has a serious negative impact on gig workers and their families, who do not receive the accustomed benefits or protections that workers in the traditional economy currently receive.

With the rise of the platform economy, courts, policymakers, and voters around the United States and the world have all been grappling with the question of whether gig workers are employees or independent contractors. Employees are typically seen as dependent and have little bargaining power, whereas independent contractors are seen as savvy business owners who can stand up for themselves and set their own rules. This division in the law is ancient and traces back to Roman law, where one could contract for time worked (location operarurm) or a specified result (location operis). This longstanding bifurcation has major implications for worker rights, as employee status is an important gateway for receiving the protection of labor and employment laws. In most parts of the world, only employees can organize and bargain collectively in a union; enforce minimum wage and hour laws; be eligible for the protection of workplace safety laws; bring claims for employment discrimination; and be eligible for unemployment insurance.

Gig work, however, has challenged this binary divide. Traditionally, classification as an employee depended on multiple factors focused on control over how work is performed. Gig work, however, promised that jobs would come to workers over their cellphones that could be done at the workers’ convenience. Over the years, however, gig workers have been accorded less scheduling flexibility. Most digital labor platforms use GPS or other tracking software. Platforms implemented these systems to make matches and provide timely service, but they also have resulted in de facto worker surveillance. Both crowd work and location-based gig work also rely on customer ratings in order to evaluate the quality of the work provided, often down to the most minute detail of how the work is performed. 

More recently, many platforms have begun to push workers toward sustained hours akin to shift work. There are practical reasons for this. For example, rideshare platforms want to ensure that there are drivers on the road when customers need them. As such, drivers on these platforms cannot count on earning adequate income unless they work at the specified times. Platforms accomplish the move toward shift work through a mix of incentives, like surge pricing, along with the gamification of work, like fun graphics or bonuses, which give workers a sense of accomplishment for driving particular hours or meeting other of the platforms’ goals. As such, there are significant limits on the flexibility that platforms offer workers despite their marketing.

Over the years, the hybrid nature of gig work has led to widespread confusion and litigation. Famously, in 2016, two misclassification cases pending in the Northern District of California settled for approximately $100 million but never resolved the employment status issue. What followed was a torrent of lobbying, reforms, retrenchment, and counter-reforms in the state of California. Sometimes referred to as the “Gig Battles” of California, the state Supreme Court, the legislature, and the voters all weighed in on the matter of gig worker classification. In 2019, the California Assembly passed AB5, which contained the ABC test, an expansive new test for employee status that had the effect of classifying gig workers as employees. In response, several digital labor platforms threatened to cease operations in California. Platforms also spent $200 million to lobby for the new ballot initiative, which at that time was the most money that had ever been spent on a ballot initiative. Platform-backed Proposition 22 received approval from California voters in November 2022, and gig workers were stripped of their employee status.

Instead, Proposition 22 created an intermediate category situated between employees and independent contractors specifically crafted for gig workers. Known as an “independent contractor plus” model, this hybrid category was the first of its kind in the United States. Workers in the intermediate category received some, but not all, of the rights employees had. California’s intermediate category included eligibility for unemployment insurance, the ability to sue in state court for employment discrimination, and a health benefit that drivers could access—provided they met certain requirements. However, there were limitations. The initiative prevented workers from joining a union or bargaining collectively. Proposition 22 also limited the California legislature from overturning its provision unless there was a 7/8 vote of the legislature, requiring near unanimity. After the passage of Proposition 22, gig workers and the Service Employees International Union brought a constitutional challenge to Proposition 22, which is currently on appeal to the California Supreme Court. Essentially, the challenge argues that the near unanimous vote preempts the legislative branch from regulating labor, a right allocated exclusively to the legislature in the state constitution.