A Third Employment Category for On-Demand Workers?

This past week, the Central London Employment Tribunal ruled that Uber drivers are workers entitled to minimum wage and holiday pay, and Uber vowed to appeal. The ruling is the latest contribution to a number of worldwide ongoing disputes about whether platform workers are properly classified as independent contractors or employees. Currently, many platform companies operate in an environment where the triangular relationship between the platform, customer, and worker obscures the role of the intermediary as employer. In the past few years, platform workers in the United States have brought lawsuits alleging that platforms in the on demand economy are misclassifying workers as independent contractors. At stake are benefits and legal protections for workers, as “employee” status is the gateway question for applicability of many laws. In the U.S., many of the major cases on misclassification have settled, leaving the issue unresolved.

Increasingly, work in the modern economy is becoming casualized, outsourced, and broken apart. Workers are being managed by and through data, through a system of algorithmic management. Even without a platform intermediary, many sectors are seeing the rise of the just-in-time workforce. In response to widespread confusion about whether platform workers are employees or independent contractors, there have been proposals for a “third” or “hybrid” category. Proponents advocate that such a hybrid category would be a good fit for digital platform work.

However, other legal systems have already had decades of experience with implementing an intermediate category. In our paper, “Dependent Contractors in the Gig Economy: A Comparative Approach,” which is forthcoming in the American University Law Review, we examine the laws of three countries: Italy, Spain, and Canada. These legal systems – pre-dating the platform economy – have had varying success with the third category, crafted in response to a perceived lack of coverage by the “binary switch” between employee and independent contractor. Before reflexively launching a hybrid category only for platform work, we want to understand and evaluate how this third category has been implemented.

In Italy, businesses used the presence of the third category of parasubordinato to evade regulations applicable to employees, such as social security contributions. In essence the quasi-subordinate category created an opportunity for arbitrage that resulted in less worker protection. The end result was confusion and, since 2015, the third category is extremely limited and Italian workers are presumed to be employees. Spain’s third category (the TRADE) was only made available to a small percentage of self-employed workers because of the burdensome nature of its regulations and the high dependency threshold required for inclusion. As for Canada, the passage of legislation in the 1970s created a third category of “dependent contractors” through amending the definition of “employee” in various statutes. The practical result of the “dependent contractor” category was to expand the definition of employee and to bring more workers under the ambit of labour law protection. In Canada, the third category seems to have worked well in terms of expanding the coverage of the laws to an increasing number of workers.

From these experiences we conclude that the hybrid category of worker is no panacea. In fact, without knowing what rights and benefits that third category would contain, it is difficult to assess. The Canadian experience, however, seems to provide a useful template if the goal is to increase protections to workers in the on-demand economy. This makes sense whether we are thinking about workers in fissured workplaces or other non-standard work arrangements, the on-demand economy being only the most visible example of a larger trend.

Of course, there are other options. As we note in our paper, there are parts of the on-demand economy that are not about potential exploitation of workers; rather, they are about communities, genuine sharing, and innovation. Instead of creating a new category, one solution that works within the current framework would be to change the default presumptions regarding the two categories that already exist. Above a minimum threshold of hours worked or income earned, the default rule would be an employment relationship for most gig workers, except those that may fit into a “safe harbor” because they are either true “amateurs” or engaged in volunteerism.

Professor Miriam A. Cherry is currently the Director of the William C. Wefel Center for Employment Law at Saint Louis and a co-editor of a volume published by the University of California Press entitled Invisible Labor: Hidden Work in the Contemporary World (2016).

Antonio Aloisi is currently a PhD candidate in Business and Social Law at Bocconi University, in Milan.