Why the Gig Economy Is a Game Changer for Employers

Uber headquarters entrance in San Francisco with signWith the number of freelance or contract workers very much on the rise, a new term “the gig economy” has grown along with it. The gig economy refers to the contingent workforce operating in a digital marketplace, and Fisher Phillips employment attorney Rich Meneghello calls it, “an absolute game changer.”

On a recent XpertHR podcast, Meneghello joined me to discuss this hot-button trend. He noted that the average gig worker likes the freedom and does not want to be treated as an employee. And that, he asserts, has led the average employer to face an entirely new source of competition.

“It’s not just somebody new in your industry who opened an office down the street and might be paying workers a little bit more or offering a different benefits package,” Meneghello says. “We’re talking about an entire new way of thinking. And that way of thinking is the main competitor that many employers have to face.”

So rather than appealing to job candidates with a choice between your company’s stability and that of a rival, Meneghello notes that today’s workers now can cobble together a lifestyle if they want to by performing discrete tasks for a variety of companies. And, he adds, this change has forced employers to rethink what they are offering their workforce.

What to Make of Uber and Lyft

Uber has perhaps become the poster child for the gig economy trend. The company has revolutionized ride-hailing transportation services. But its rise and that of Lyft, another ride-hailing company, also is leading to an entirely new round of employment litigation.

At the heart of these misclassification lawsuits are claims that the gig workers at these companies are, in fact, employees in every meaningful way. Meanwhile, Seattle has enacted an ordinance that gives drivers for Uber, Lyft and similar companies the right to unionize. Whether workers with such disparate interests will band together remains to be seen, but if they do that will surely have ramifications for the gig economy.

Meneghello says many gig workers have become “micro-entrepreneurs,” and suggests these workers “fall somewhere in the middle between employees and contractors.” Meanwhile, the law is still playing catch-up as a federal judge opined in one of the Uber cases, “I’m being forced to solve a 21st century problem using 20th century laws.”

The gig economy dilemma is hardly unique, however, to Uber and Lyft. Meneghello says employers should be looking at their arrangements with part-time workers, if they aren’t already doing so.

The Power is Shifting

Meneghello suggests that the power is shifting in the gig economy more towards workers, who value their freedom of movement. And, he says, there’s no question it’s increasingly difficult for employers operating in this contingent workforce world to have certainty.

For instance, the National Labor Relations Board’s 2015 Browning-Ferris ruling has made it much easier to find an employer to be a “joint employer” with a staffing agency or another third party. That also eases the path for unions to seek to negotiate on behalf of workers that rely on contractors.

The Browning-Ferris decision, coupled with other recent developments, leads Meneghello to conclude, “Employers should get specialized legal counsel on these issues rather than relying on a smart phone app in the way that they would find an Uber driver.”

Rich Meneghello co-chairs the new Gig Economy Practice Group at Fisher Phillips in Portland, Oregon. More of his insights are featured on my podcast, “How the Gig Economy Is Changing the Workforce.”

 

 

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