By: Ogletree Deakins

Economists and business commentators believe that the U.S. economy is moving from a world of corporations to a world of “pop-up” businesses. Further, they point out that these pop-up businesses are powered by what’s becoming known as “gig workers” – a term borrowed from the music industry, where musicians move from job to job (gig to gig), employed for a particular performance or a defined time, with little more connection to the venue than to the fast food they’re eating for lunch.

While the concept has been around for years, it has been gaining traction through articles from both supporters and nay-sayers. First, there was attention to the change from large corporations to smaller, more agile businesses:

  • In a You Tube video posted on March 21, 2014, Gerald F. Davis, Professor of Sociology at the University of Michigan spoke on “The Coming Collapse of the American Corporation (and What Comes Next?).” According to Professor Davis, public corporations have become “less concentrated, less integrated, less interconnected at the top, shorter-lived, and less prevalent since the turn of the twenty-first century.”
  • In May 2014, Economist Richard Florida (“Rise of the Creative Class”) wrote an article titled simply: “The Rate of New Business Formation Has Fallen By Almost Half Since 1978” which generally supported Davis’ assertions.

More recently, there has been a flurry of attention to the fact that with the slowdown of business dynamism – the rate at which firms are created – a different kind of job force is rising:

Why does any of this matter? With recent attention on both proposed overtime regulations and independent contractor classifications, advocates for employers and employees are struggling with how workers should be classified for tax and employment purposes.

For employees who fall between the traditional “employee” classification and formal “independent contractor” status, the question is critical. While employees enjoy employer contribution to Social Security and Medicare and reimbursed business expenses, independent contractors normally shoulder those obligations.

With increasing numbers of on-demand businesses (think Uber, Thumbtack, and at-home pet care or massage services), workers get to choose when and where to work. But these service providers generally have no benefits or legal protections. That could change.

Two former members of the U.S. Department of Labor – attorney Seth Harris and economist Alan Krueger – recently authored a white paper entitled “A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: ‘The Independent Worker’.” The two suggest that a new “independent worker” classification for gig workers should be considered which would entitle those workers to bargain collectively, and would allow them to become eligible for certain tax contributions from employers.

The broadest suggestion made in the paper is the construction of a “portable benefits system,” in which independent workers could pay into a universal fund on a pro rata basis (calculated by hours on a job, numbers of tasks done, etc), rather than be required to participate in any one employer’s plan. In addition, the authors argue that antitrust laws should be amended to allow gig workers to organize for the purpose of aggregating bargaining power, in order to collectively influence compensation and benefits.

While the “gig worker” classification has yet to become a mainstream concept, there clearly is movement in that direction. Corporations and companies – especially those in on-demand businesses – should watch carefully to see where this idea goes, and whether it is picked up by policy-makers and/or government agencies with a voice in worker classification issues.

 

 

Photo of the band Autosalvage playing a gig at Threadgills in Austin, TX in 2013.