Gig Businesses and Silicon Valley Unicorns Compelled to Be Fair

Legal amendments are requiring that labor in gig businesses is appropriately compensated and not exploited.

18Dec

America’s visionary automaker Lee Iacocca once said, “I hire people brighter than me and I get out of their way."

Even as authorities in different states engage in safeguarding the employment rights of their constituents, it appears that Colorado has seen more and speedier changes to protect employees and job candidates in the gig economy. New laws have been introduced, which seek to close the wage gap between the genders and to make it easier for those holding a criminal record to get jobs. This is mostly because, since the beginning of 2019, Democrats are dominating Colorado’s House of Representatives, the senate, and the governor’s office. As the governor of Colorado, Jared Polis, said, “It’s about time that we elevate the concerns of workers and update our labor laws to better meet today’s world.”

And so it was that in April 2019, Colorado became the first state to pass a law HB19-1166, which requires employers to take an extra step when fingerprint-based criminal record checks turn up arrests. This law requires employers to verify that a prospective employee whose judicial criminal records reveal an arrest was actually convicted. 

2015 federal report found that arrest records in 10 states did not reveal the conclusion of a case at least 50% of the time. While not all arrests end in convictions, without a final check to verify that point, job candidates could be unfairly losing out on job prospects. Colorado’s HB19-1166 runs parallel to the Equal Employment Opportunity Commission’s 2012 guidance to employers, which prohibits companies from eliminating a candidate from consideration for a position based on his arrest record.

This fundamental change in Colorado’s employments laws indicates employment laws across the United States are changing rapidly, compelling employers to change their hiring practices significantly to remain in compliance.

Yet, the process of hiring in itself is complex, with the employer required to understand a variety of issues, from minimum wages requirements to discrimination laws and the need to provide a safe environment, among other things. Often, employers are overwhelmed by the extent of background knowledge they have to acquire and look to lawyers to help them. From the employee’s perspective, they need the expertise and skills of an employment lawyer to enforce necessary laws their employer has not followed, including workers’ compensation insurance.

Apart from Colorado, California, too, is facing major labor challenges. The main protagonists in this issue are gig companies like Uber and Lyft. While many other states, including sections of the U.S. government, are making it easier for gig businesses to function, California is engaged in making it hard for them to survive.

California, together with several other states, is getting new laws in place to require gig businesses to convert their freelance workers into employees. This is a strategy to strengthen worker protections, for, as gig workers, contractors get fixed fees and have no other perks given to full-time employees.

According to the tough conditions, the California Supreme Court imposed on gig businesses in 2018, they are now compelled to treat their workers as full-time employees. And many people who were earlier treated as independent workers are now getting minimum wage and overtime pay.

The California legislature is actually moving further, with a new law, Assembly Bill or AB5, which was signed into law on September 18, 2019. AB5 requires many existing gig businesses to change the status of their independent contractors into employees, and thereby offer them all the benefits of being full-time employees.

The ride-hailing companies, in response to this law, are trying to get their drivers exempt from the law with the compromise of recognizing a union to represent the workers. However, where stringent requirements apply, businesses are finding it more expensive not to abide by the law. For instance, in the past few years, FedEx Ground spent about $500 million in settling lawsuits by workers who sued the company for denying them the benefits of being full-time employees.

In the case of AB5, the California Supreme Court shifted the burden to businesses to show clearly whether workers are employees or independent contractors. The new “ABC” test introduced by the law states that a person is “presumed to be an employee,” unless the company is able to prove that the person is not under “the control and direction” of the organization in performing the job; the work the person did has nothing to do with the line of business of the company;and that the worker is generally involved in an independent business.

Meanwhile, the sixth annual “Freelancing in America” survey, which released the results on October 3, 2019, concluded that 57 million American freelancers contribute over $1 trillion to the economy each year. Furthermore, more than 75% of freelancers work independently by choice. With the availability of numerous apps, people, especially millennials, are able to work on their terms and accept opportunities they believe are right for them.

As famous business magnate, Bill Gates said, “"The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area."

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