The battle over gig worker status is heating up

The fight over whether gig workers are independent contractors or employees is heating up in both states. What are the consequences of the stakes? The business model could be disrupted.

This week has seen developments in the case as companies that rely on gig workers put forth arguments against last year's ruling that the law was unconstitutional and therefore unenforceable. In 2020 a California ballot initiative will allow app-based ride-hail and delivery companies to classify gig workers as independent contractors instead of employees. The law was found to be in conflict with the state constitution by the judge.

The same coalition that spent millions on advertising to convince Californians to vote for Prop 22 filed an appeal to overturn the court ruling. They called the challenge to Prop 22 an attack on voters' direct democracy powers and out of line with California's legacy of guarding voter initiative powers and uphold their acts wherever possible.

As the public comment period for the U.S. Department of Labor's proposed independent contractor rule comes to a close, the issue comes back to mind. The rule would make it easier for contractors to get full employment status if they are economically dependent on the company.

The proposal only covers minimum wage enforcement, which has been a sticking point for labor activists fighting for gig worker protections. The law ensures that 120% of the minimum wage is earned by workers. Critics say that app-based companies only count the time spent actively driving to pick up and drop off a customer or deliver a meal as active time, which leaves out the hours drivers spend driving to busy areas or waiting online for a job.

If a similar law were passed in the state, gig workers in Massachusetts could make as little as $4.82 per hour. Gig workers have supported this wage in the past. The proposal was thrown out by a Massachusetts court.

Because of the appeal, Prop 22 is still in effect. Attorneys involved in the case believe it will happen much sooner than 90 days.

The employment status of gig workers in the U.S. is expected to be determined any day. If California's appellate court allowed the ballot initiative to stick, we don't know how the DOL's rule will affect it.

What would employee-driven ride-hail even look like?

There is a reason why companies that rely on gig workers feel threatened by what could be a complete upheaval of their entire business models, so we can expect them to fight any changes through a variety of appeals and countersuits. Some companies have made it a point not to depend on gig workers.

I have used the all-employee ride-hail service at New York City's Revel and drivers have said they love it. Alto, which operates in Dallas, Houston, Los Angeles, Miami, San Francisco and Washington, D.C., relies on employees to operate.

Alto pointed out the responsibility and costs it bears that its competitors shirk via the independent contractor model, like paying employees by the hour for all hours they spend driving instead of only paying them for engaged time. Alto said that while this lowers competitors costs, it also encourages an oversupply of drivers on public roads which leads to congestion and higher emissions.

Large-scale ride-hail operators deliberately over supply the market because it does not add to their costs and creates a free surplus through lower wait times, according to a comment. artificially lowering wait times with oversupply is unsustainable for drivers and leads to many making less than minimum wage in the jurisdiction in which they work when measured on a total time basis.

Alto called on the DOL to understand the economic reality of the ride-hail industry. The work of drivers is dependent on the existence of ride- hail companies. According to Alto, drivers are in the category of employees because of their economic dependence on ride-hail companies.