The gig economy vs. America’s workers

Uber, Lyft, DoorDash, Instacart, and other gig corporations are blessing for unscrupulous employment practices

COMMENT | SANDEEP VAHEESAN | Uber, Lyft, DoorDash, Instacart, and other gig corporations are once again seeking the law’s blessing in the United States for their unscrupulous employment practices. Ahead of November’s election, these firms have proposed several ballot initiatives in Massachusetts that would empower them to classify drivers and delivery people as independent contractors rather than employees. (The Open Markets Institute, where I work, filed an amicus brief supporting a challenge to the constitutionality of the ballot questions.) As with Proposition 22 in California in 2020, Uber and other companies will probably spend lavishly to convince voters that these measures would benefit the affected workers and the public alike.

If Massachusetts voters endorse the ballot initiatives in November, these firms would have the freedom to rob workers of basic employment rights and benefits, including minimum wages, overtime pay, workers’ compensation, and unemployment insurance. It would also give gig employers a major – and manifestly unfair – competitive advantage over rivals and drive down labour-market standards. Instead of encouraging this exploitative business model, state and federal policymakers should force these companies to comply with the laws that apply to all employers.

Gig companies have misclassified their main workforce from the beginning, openly violating the law or exploiting its ambiguities. Uber and Lyft, for example, have insisted to regulators and the public that their drivers are independent contractors and thus not entitled to the rights and protections of employees, including the freedom to organise. These companies retain the control of an employer – Uber tells its drivers who to pick up and what routes to take, and sets their fares – while renouncing the responsibilities and costs of being one.

The ballot initiative process could lift the legal cloud hanging over gig corporations – at least in Massachusetts, where they appear to be in violation of pro-worker employment laws. In 2020, then-Attorney General Maura Healey (who is now the state’s governor) sued Uber and Lyft, alleging that they misclassified drivers as independent contractors and illegally denied them the minimum wage and overtime pay. Proceedings in the case have just begun.

Codifying the classification of gig companies’ drivers, shoppers, and delivery people as independent contractors would cause substantial harm. For starters, gig workers would be formally stripped of employment rights. Despite being misclassified, they can currently pursue legal recourse under Massachusetts law for nonpayment of the state’s $15 minimum hourly wage. Moreover, gig workers would not be entitled to unemployment insurance if they lost their job, or compensation if injured or attacked while on the clock.

These are not merely theoretical harms. Many, if not most, Uber and Lyft drivers make less than the applicable minimum wage after factoring in the costs of their vehicle, gas, and insurance. Many gig workers lost their livelihood during the COVID-19 pandemic. Cab and delivery drivers are frequently attacked or injured on the job. According to the federal Bureau of Labor Statistics, transportation and delivery is the most dangerous line of work in the U.S., with 1,620 fatalities in 2022. Depriving gig workers of basic protections would have severe consequences for a group made up disproportionately of immigrants and people of color.

What gig companies are seeking in Massachusetts and elsewhere is a permanent competitive advantage over rivals that must comply with the state’s employment laws. Firms that misclassify workers as independent contractors, and thus shirk their responsibilities as employers, save an estimated 20-40% on labor costs. Uber, Lyft, and DoorDash already possess this advantage. Rivals required to classify their workers as employees would still need to pay their workers a livable wage and contribute to the state social safety net. Taxicab companies that employ drivers and restaurants and supermarkets that deliver food have already lost substantial market share to gig companies that have long violated employment laws and were able to operate at a loss for years on end. The proposed ballot initiatives would legalize this unfair competition.

The injustice is clear: a restaurant that employs a driver to deliver meals would be obligated to pay them at least $15 per hour, while DoorDash, delivering the same food from the same restaurant, could legally pay its driver less. When Congress enacted the national minimum wage and overtime law in 1938, it called payment of sub-living wages to workers “an unfair method of competition.”

Lastly, if successful, the proposed ballot initiatives would unleash a race to the bottom. Over time, gig companies would capture even more market share through their harmful labour practices, and employ more workers who lack fundamental protections. Their rivals would face the choice of complying with the law and potentially going out of business, or engaging in practices such as wage theft to remain competitive. Though ostensibly narrow in scope, these measures could ultimately undermine Massachusetts’s strong labour-market standards.

The proposed ballot initiatives represent an insidious effort on the part of gig corporations to legalize their unlawful business models. While a defeat at the ballot box – or in court – could force these companies to change tack in Massachusetts, that will not be enough. State and federal policymakers must take stronger action against these companies, which have largely succeeded by violating the rules enacted by elected officials. They have moved fast and broken things, and now seek after-the-fact validation for the damage they have caused. The government should say enough is enough: no one, including Uber, is above the law.

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Sandeep Vaheesan is Legal Director at the Open Markets Institute.

Copyright: Project Syndicate, 2024.