California’s new gig economy laws are a big win for gig economy workers. Now, app-based companies operating in the state can (hopefully) no longer skirt labor laws by calling their workers “freelancers.” While Uber now claims its drivers are “outside the usual course of Uber’s business,” the gig is up.
What’s happened in California shouldn’t be surprising. With strategies geared toward explosive growth, gig economy companies spent a lot of time attracting new workers to their respective platforms with the promise of easy money — and for while, it worked. If you were able to get in on the ground floor earlier this decade, you probably made a killing at first. Even just one or two years ago, rideshare drivers could easily make $100, $200, even $300 a night.
Thing is, it didn’t last. Except in New York City, there is no cap on the number of drivers in any given market. Whereas a year or two ago drivers could easily make $20 an hour, you’re lucky to make $10 an hour now. Worse yet, rate cuts left drivers with less and less of a cut of fares. Now, there is pushback.
Uber, Lyft, DoorDash, and others have nobody to blame for the situation they’re in but themselves. Had they been honest from the beginning, nobody would have likely cared enough to complain. But we’re here now, and the industry needs to rethink its business model.
Don’t lie about your business, guys
I am a freelancer for Digital Trends. And to be honest, the news industry doesn’t have the best history when it comes to freelancers, but at least most media companies draw a clear line to make sure there is no question as to the employment status of a freelancer — including this publication. I know for sure that I can’t work from Digital Trends’ offices around the world. Digital Trends doesn’t provide me anything, whether it’s a laptop (though that would have been nice!), a company phone, or anything else. The only transaction is that i submit my work, and they pay me for it. That’s it.
Why is it like this? IRS guidance on what a freelancer dictates that Digital Trends can’t supply me with anything or control how I work, or anything that constitutes an employer-employee relationship. I am also “outside the usual course of Digital Trends’ business.” The company would still be able to continue operating without me or any other freelancer.
The freelance tag is placed on these individuals in an attempt to save on labor costs.
That’s not the case with the app-based companies. They provide their workers with a platform which would not operate without their participation. There are no driver “employees.” In some cases, these companies provide equipment (hot bags, etc.) to complete their work, and requires their use. But the freelance tag is placed on these individuals in an attempt to save on labor costs.
An end-around labor laws
This designation also gives companies far more control over managing employees. One of freelancing’s biggest downsides is that while you have freedom of how, where, and what you work on, your relationship is purely transactional. Your client can cancel at any time and for whatever reason, as long as they have fulfilled their contractual obligation. They can also pay you whatever they want as there are no “minimum rates,” unless you set them yourself. If your prospective client doesn’t like those rates, you simply won’t get the gig.
Gig economy companies use this to their advantage. There are stories of companies like Uber and Lyft deactivating workers without cause, then refusing to provide reasons for dismissal. They’re also known to change payout rates frequently, and their cut of fares (known as the take rate) is not a fixed amount. They allow markets to saturate, pushing hourly rates to close to the minimum wage in some of the worst cases. Workers also have no control over how the company conducts its business or the worker’s role in it.
The Ubers of the world know that for every well-informed quitter, there are dozens more uninformed newbies ready to hop behind the wheel.
It feels like wage slavery: drivers are often forced to accept whatever their app-based overlords give them, or deal with a loss of a significant portion of their income. Yes, they’re free to quit at any time — but it doesn’t matter. The Ubers of the world know that for every well-informed quitter, there are dozens more uninformed newbies ready to hop behind the wheel.
And we haven’t even talked about how little these companies prepare their workers for the tax liabilities and realities of self-employment. That’s a whole other issue in and of itself.
Protect gig workers now
California’s law is a starting point to stop this practice. Working conditions in the gig economy are rapidly deteriorating, and none of these companies seem to care much. Giving these workers rights to minimum wage and overtime, unemployment insurance and family leave, and bargaining rights is crucial. Right now it’s too easy for any of these companies to take advantage of their workforce.
With protections in place that disincentivize gig-economy companies from rapid and nonsensical expansion, some hard choices will likely need to be made. No, you won’t be able to grab a Lyft anymore in rural Kansas — at least without paying for it. Maybe DoorDash won’t be able to serve a town in rural Vermont. But as crazy it sounds, these companies are trying to do just that, while asking the worker to eat the cost of making it happen. Freelance labor is cheap in the long run, and there is a seemingly endless supply of new gig workers.
Why stop when you don’t have to? What is stopping other industries from doing precisely what these app-based companies are doing? The answer’s not much. It is imperative that an example is made here, or we risk further erosion elsewhere when it comes to worker’s rights. There’s no reason not to act.
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