Against the Gig Economy
by Drew Anderson ’21, Opinion Columnist
Last week, California Governor Gavin Newsom signed into law Assembly Bill 5 (2019), a landmark law with the potential to upset the growing gig economy. The law requires companies like Uber and Lyft to treat contract workers as employees. Classified as employees, workers would subsequently be entitled to more expansive labor protections like minimum wage, sick pay, workers compensation, and unemployment benefits. All of these protections do not apply to independent contractors.
Assembly Bill 5 marks a turnaround in the expansion of the gig economy, which has grown in popularity as Americans seek flexible hours and low-commitment employment outside their primary occupation. According to the Intuit and Emergent Research On-Demand Economy Worker Study in 2017, the American gig economy is expected “[to] grow from 3.9 million Americans in 2016 to 9.2 million by 2021.”
Now this expected growth in the gig economy workforce might face unexpected challenges in California. But contrary to what some believe, many gig economy workers supported the passing of the law, even as gig economy companies claim that the law will lead to a diminished workforce and fewer hours available for employees to work.
For years now, large delivery and ride-sharing corporations have been raking in massive profits off the backs of a vulnerable workforce. Independent contractors have become ubiquitous in the gig economy; people who might have taken a few shifts from an employer as a second job are now taking on a lot more than just extra hours. When they work as independent contractors for gig economy companies, workers assume risks and liabilities that should be covered by their employers.
Independent contractors in the gig economy operate separately from the companies that pay them and are tasked with the responsibility of paying for and maintaining vehicles by renting vans and trucks, or driving their own car for ride-hailing services like Uber and Lyft.
Workers crave the flexibility offered by gig economy work, but it is unreasonable that workers are expected to accept the risks and liability of their work while lacking corporate resources like a legal team or in-house repair services for protection. When workers have accidents while operating as independent contractors, they are on their own.
If a worker crashes a van while operating as an independent contractor for Amazon, they are liable for the accident. Amazon routinely cites indemnification agreements when taken to court to account for accidents by drivers delivering its packages. Agreements like these usually require contractors to “defend, indemnify and hold harmless Amazon.”
As The New York Times reported earlier this month, “The agreements cover ‘all loss or damage to personal property or bodily harm including death,’” and an Amazon operations manager testified recently that Amazon signs agreements like this with all of their “delivery service partners.” Amazon is off the hook for the actions of the drivers delivering its packages, even as ProPublica identified over 60 accidents since 2015 that caused serious injuries that involved contractors delivering for Amazon, including ten deaths.
Gig economy companies argue that this approach to employing a driving workforce makes the logistics and expense of such massive operations possible. In order to ship more goods to customers, drive around more ride-hailers, and make two-day shipping possible, gig economy companies turn to massive networks of independent contractors to fulfill their needs.
These flexible networks of employees allow companies to expand and contract their enormous delivery and ride-hailing fleets in order to deliver to market needs. Uber uses surge pricing to get more drivers to areas of high demand while diminishing rider over-demand. Amazon’s contractors negotiate their own contracts and hours with the company.
But the flexibility that these companies often reference in defense of the independent contractor approach to work is not a two-way street between workers and companies. Though work in the gig-economy is often described as flexible, the conditions and format in which workers operate is often less than so.
Even as companies like Amazon and Uber argue in court that they bear no legal responsibility for the accidents and damage caused by the thousands of drivers working for them, these companies often maintain strict control over how their employees operate while on the job.
Take independently-contracted drivers for Amazon, who are paid by and work for hundreds of different companies throughout the United States. Even though Amazon is not signing their paychecks, it is often setting strict delivery quotas for drivers. The New York Times reported earlier in September that drivers working through independent contracts had to ensure that “999 out of 1,000 deliveries arrive on time.” Amazon also controls the order of drivers’ deliveries and the route they take to destinations. Amazon has software that tracks drivers along their routes and Amazon warehouse dispatch teams can contact drivers if they are running late on deliveries.
The flexibility afforded to companies by the gig economy does not extend to the workers themselves. The most pressing issue with the gig economy approach to employing a delivery workforce is that these drivers are not permanent, professional drivers; many are professionals only in the sense that they are paid to drive vehicles. A potential lack of training and experience can lead to an increased risk of accidents on the job.
Delivery companies like UPS train their drivers in multi-million dollar facilities, while Amazon’s drivers train “primarily through instructional videos they watch on their phones” and an onboarding course that includes “less than half of one page devoted to defensive driving,’’ according to the Times. Meanwhile, ProPublica reports that five in ten fatal crashes involving Amazon drivers occurred while drivers were making left turns, an action that is usually programmed out of most UPS routes.
Of course, permanent employees are expensive. Unlike independent contractors, who are usually liable for their own actions even when working on company business, employees require health care, pensions, worker’s compensation, and unemployment insurance obligations. Having employees on the books also triggers federal and state tax withholding.
The numerous costs of having employees, as opposed to independent contractors, explains why companies in the gig economy are pushing hard to protect the status of their workers as independent contractors. With the signing of California’s Assembly Bill 5 into law last week, gig economy companies including Uber, Lyft, and Doordash have pledged to pump more than $90 million combined into the issue to take it to the California ballot and allow the voters to decide. This strategy serves as plan-B if these gig economy companies are unable to negotiate special contractor status for their workers with the California government.
Many businesses argue that they will not be able to sustain their existing business models with the passage of more extensive labor laws. But a business model should not be considered sustainable in the first place if it requires the exploitation of workers without overtime, sick pay, and workers being held solely liable for incidental accidents while on the job. Gig economy work has its benefits, especially in providing employees with immense flexibility in their hours. But workers should not have to give up commonplace employee protections as a trade-off.
