Workers, Protections, and Benefits in the U.S. Gig Economy

Global Law Review (Sept. 2018, Forthcoming)

41 Pages Posted: 12 Jul 2018  

Seth D. Harris

Cornell Institute for Public Affairs

Date Written: June 14, 2018

Abstract

Under existing American labor, employment, and tax laws, in any one work relationship, a worker is either an “employee” or an “independent contractor.” This binary classification of workers, and the high-stakes outcomes it produces, have been challenged by “gig economy,” or “online platform” companies that provide personal labor services (e.g., ride-hailing, home cleaning and handyman/woman, and food delivery services that use smart phone “apps”). Employees in the United States are entitled to a long list of legally mandated benefits and protections. Independent contractors are not. Independent contractors are presumed to have sufficient individual bargaining power to secure their own individual compacts with contracting partners, and either ward off undesirable outcomes or use their freedom in the market to evade them. This article argues that online platform companies’ relationships with their “independent workers” force these workers into a gray area between employee status and independent contractor status. It also argues that American law does not offer a clear and broadly applicable rule for resolving the resulting ambiguities and ensuring consistent and predictable decisions by adjudicators. Serious social and economic problems have resulted.

This law and policy article considers these work relationships in the online platform economy with a particular focus on independent workers’ lack of individual bargaining power. The article also extends its bargaining power analysis to workers outside the online platform economy, including those currently classified as independent contractors. Based on this analysis, and after reviewing the state of the law in the U.S. and the size and shape of the workforce in the U.S. online platform economy, the article articulates a set of principles that should guide policy makers in determining how to reform the worker classification system to address its ambiguities and the problematic social and economic outcomes it produces. Most important, the article provides a menu of policy solutions with an assessment of how well each solution serves these principles (i.e., “selection criteria”). The solution advanced in the author’s 2015 paper with Alan Krueger entitled “A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: The ‘Independent Worker’” is included on this menu.

Keywords: Employee, Independent Contractor, Labor Law, Employment Law, Tax Law, Worker, Independent Worker, Gig Economy, Online Platform, Bargaining Power, Individual Bargaining Power

JEL Classification: J30, J38, J41, J48, J58, J83, J88

Suggested Citation

Harris, Seth D., Workers, Protections, and Benefits in the U.S. Gig Economy (June 14, 2018). Global Law Review (Sept. 2018, Forthcoming). Available at SSRN: https://ssrn.com/abstract=3198170

Seth D. Harris (Contact Author)

Cornell Institute for Public Affairs ( email )

294 Caldwell Hall
Ithaca, NY 14853-2602

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