Bar News - December 21, 2016
Business Law and Business Litigation: EEOC Focusing on Gig Economy
By: Jennifer Parent
Many of us remember the cartoon series The Jetsons. In that futuristic animation, we were introduced to George and Jane Jetson, their teenage daughter Judy and elementary-school-age son Elroy from Orbit City. George worked at Spacely Space Sprockets, Inc. for the owner Cosmo Spacely and commuted to and from work in what looked like a flying saucer car with a clear bubble roof. In the episode entitled “The Vacation,” George describes his workweek as working “his fingers to the bone” two days a week for an hour a day.
Supposedly, The Jetsons takes place in the latter half of the 21st Century. While I have not seen any aero-cars or adjustable space-like buildings high above the ground, we do have moving sidewalks, robots cleaning floors, and drones delivering pizza to our doorsteps. And the concept of a different type of work structure or relationship is now a reality. Anyone who has used the Uber or Lyft apps has already participated in this emerging business structure.
Known as the “gig” economy, the term refers to the shifting away from the traditional long-term work relationship with a single employer to one of freelance or temporary work on short-term assignments or projects. Workers in this type of business environment have an entrepreneurial and independent spirit. This on-demand work structure brings flexibility and the ability to work on as few or as many projects or assignments as desired.
McKinsey Global Institute, a company that researches the evolving global economy, reported in October 2016 that up to 30 percent of the working-age population in the United States and certain European Union members are independent contractors. McKinsey defines independent work as a “high level of control and autonomy,” “payment by task, assignment, or sales,” and “short-term duration.” More than half of those providing services in this category do this type of work to supplement their primary income, choose this path out of preference rather than necessity, and report high satisfaction in their work lives.
McKinsey statistics further show that while only 15 percent of independent workers have used a digital platform, digital platforms such as “Upwork, Uber, Airbnb, or Etsy have been growing rapidly,” according to McKinsey’s paper, “Independent Work: Choice, Necessity, and the Gig Economy.”
Businesses participating in this gig economy will be the focus of the Equal Employment Opportunity Commission (EEOC). In October 2016, the EEOC unveiled its four-year Strategic Enforcement Plan (SEP). The SEP provides employers insight into the direction of the EEOC in the coming years, allowing companies to ensure their businesses are compliant. There is continued attention on the classification of workers as independent contractors or temporary workers.
Additionally, under the Emerging and Developing Issues, the EEOC expects to clarify the employment relationship and the application of workplace civil rights protections to these 21st Century workplace relationships and structures. The EEOC will focus on the increasing complexity of this gig economy, including temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy – for example, Uber drivers.
Companies already in this on-demand workplace, however, are currently facing high-profile litigation. Class action litigation involving current and former Uber drivers in Massachusetts and California is being closely watched. In that case, the drivers brought claims alleging that they were improperly classified as independent contractors rather than as employees. The actions cover about 385,000 drivers. After three years of contentious litigation, and on the eve of trial earlier this year, the parties reached a settlement of these two class-action lawsuits. Among other terms, Uber agreed to pay $84 million, plus an additional $16 million if the company went public. Drivers remained classified as independent contractors, and Uber agreed to institute certain processes and procedures internally.
Upon a motion for preliminary approval of the class-action settlement for $100 million, the US District Court for the Northern District of California found the settlement “not fair, adequate and reasonable” and denied approval. Later, in a surprise twist in early September, the US 9th Circuit Court of Appeals in San Francisco reversed an earlier ruling by that judge finding the arbitration agreements signed by the Uber drivers to be unenforceable. The appeals court found that drivers who joined Uber in 2013 and 2014 must go to arbitration rather than the courts to resolve the dispute, affecting some of the drivers in this class-action lawsuit. There is also a separate appeal pending on whether the arbitration agreements are unenforceable in any event, because they violate the National Labor Relations Act to engage in concerted activity.
As the EEOC targets the 21st Century workplace, it is evident that there is a growing demand for this type of independent, on-demand workplace structure today. New digital platforms like Uber are expanding this marketplace for freelance and temporary workers to connect with those purchasing their services. As McKinsey notes, “Anyone who has ever felt trapped in a cubicle, annoyed by a micromanaging boss, or fed up with the office politics has probably dreamed of leaving it all behind and going it alone.”
As we move further into the 21st Century, policymakers will need to consider whether these workers are independent contractors or employees or fall into a new category of classification. What discriminatory protections, benefits, or income security should be put in place for these gig economy workers? Whatever the decision, companies are likely to continue to explore this new marketplace. We are already seeing this with the use of digital technologies – apps – that allow businesses to reach a broader pool of external talent and workers to have the independence they desire.
Perhaps the futuristic world of The Jetsons is not that far away.
Jennifer L. Parent is chair of the Litigation Department and a director of McLane Middleton. She is the current NH Bar Association Delegate to the American Bar Association and a past president of the New Hampshire Bar Association.