Future of work: Approaches to regulating gig employment

Future of work: Approaches to regulating gig employment

Phuah Eng Chye (1 September 2018)

Several task forces, commissions, institutions and study groups have been established to address the challenges posed by the disruption of traditional labour regulation. In this context, Anna Ilsøe point out employers and employees are no longer well defined due to fissure and dispersion. More individuals are combining different forms of employment and may have multiple employment relationships while the income may be supplemental to “to other sources of income such as salaried work, student allowances, pensions, unemployment benefits or social assistance”. Hence, there have been many proposals to address challenges from the new work forms, particularly gig employment, which can be clustered into several broad approaches.

  • Legal reform. It is critical to clarify employment status because it affects renumeration, working conditions, benefits and social protections. There have been many court disputes over whether workers should be classified as employees or independent contractors. Litigation has been time-consuming and “leaves uncertainty about how any given situation would be resolved.” Some employers “have been frustrated with the ambiguity in employment law, fearing that they cannot provide benefits, education, and training for their workforce without increasing their litigation risk in misclassification lawsuits.”[1] The Taylor Review propose governments “should replace the minimalistic approach to legislation with a clearer outline of the tests for employment status, setting out the key principles in primary legislation, and using secondary legislation and guidance to provide more detail”. In terms of legal reform, the choice is between modifying existing categories or creating new ones. There can be a spectrum of categories ranging from employees, self-employed, independent contractor, independent worker, dependent contractor or on-demand contractor. This can be followed by tagging the various job descriptions with the associated bundle of labour rights, benefits and social protections. Expanding the number of categories will increase the likelihood of overlap while limiting the number of categories will result in gaps in coverage. Sorting out legal definitions is a painstaking task. Shayna Strom and Mark Schmitt describe the legal framework as a “patchwork” of regulations (e.g. labour, welfare, tax, state law) with different interpretations of Other legislations, private contracts and international jurisdictional issues also need to be considered. At the end, intense bargaining is required to calibrate the definitions, the trigger points and the rights and benefits to be attached to various job categories. The lessons from other industries such as the airline and finance industry disrupted by information[2] is that it may be better to regulate by principles than to avoid having to review and approve specific situations due to the large number of permutations.
  • Expedient fixes. Specific actions are an expedient alternative to slow-moving wholesale legal reform. The Taylor Review propose agency workers who have been placed with the same hirer for 12 months be granted the legal right to request for direct employment. Similarly, workers on zero-hour contracts who have been in the same post for 12 months should have the right to request a contract that guarantees hours which better reflect the actual hours worked. To ensure agency workers are not used as cheap labour, agency workers should be entitled to be paid the same as a permanent member of staff doing the same job. In this regard, there is a need to deal more effectively with abuses to avoid paying workers between assignments. Kerstin Jürgens, Reiner Hoffmann and Christina Schildmann suggests that as structural change accelerates, there should be programs to cater to “employees who have lost their jobs or whose jobs are at risk due to substantial changes in their company”. This would include putting in place government-funded programs such as “cyclical short-time working arrangements” or establishing transitional companies (Transfergesellschaften) and providing reskilling programs to facilitate dislocated employees to find new jobs. Kerstin Jürgens, Reiner Hoffmann and Christina Schildmann also suggest “the trend towards marginal part-time employment and other short-hours part-time jobs be halted.” This would include abolishing or restricting work-on-demand as it “prioritises operational requirements in a completely unacceptable way…People engaged in this form of work are usually poorly paid because the time between jobs is not remunerated, in contrast to being on-call or stand-by. For example. They call for the rejection of zero-hours contracts as workers “are paid only for the hours actually worked and the employer is not obliged to provide any minimum working hours”. Measures to be considered include establishing a floor on working time and ensuring renumeration of stand-by time. In relation to this, incentives for part-time work and mini-jobs (e.g. the splitting system for assessing married couples’ tax liability, the free health insurance scheme for spouses and dependent children and the tax and social security concessions associated with mini-jobs) “have all conspired to subsidise the secondary-earner model. The consequence is that one spouse, usually the woman, remains confined to the short hours segment. This subsidising of mini-jobs is no longer in tune with either the changes in women’s career aspirations or men’s increasing involvement in the family.” Other proposed fixes include requiring large companies to provide work schedules ahead of time, extending benefits such as sick and holiday pay to gig employees and providing contractors the right to request for formal employment. It is also suggested worker misclassification can be discouraged by placing the burden on employers to proof their workers are not employees[3]. In addition, greater responsibility for employment practices can be imposed on lead companies or to ensure that employment responsibilities are exercised jointly.[4] Governments can also be more pro-active in communicating to contractors and workers their legal rights.
  • Fair application of minimum wage. The Taylor Review notes sensible calculation of working time is required to apply the minimum wage to platform workers. This faces challenges such as “drawing a distinction between simply logging on to an app, and being available and genuinely looking for work” as well as the fact that “oversupply of labour at certain times, effectively flooding the market and driving down the hourly rate to below” the minimum wage. To ensure “those working in the gig economy are still able to enjoy maximum flexibility whilst also being able to earn” the minimum wage, they proposed the government “explore options for requiring that platforms provide real time data in addition to a notice increasing transparency for workers”. The notice should “provide individuals with an accurate guide to their potential earnings if they sign on to an online platform at any given time”.
  • Portable benefits. A portable benefits scheme is often advocated as a means of ensuring workers operating outside of employee relationships get access to a safety net for medical expenses, injuries, disabilities and retirement. It involves the establishment of a central administrator (either managed by the government, the private sector or worker organisation) and the appointment of service providers. In this regard, Nick Hanauer and David Rolf[5] proposed the establishment of “a new Shared Security System” comprising a Shared Security Account complemented by Shared Security Standards. The proposed Shared Security Account would “accrue the basic employment benefits necessary for a thriving middle class…via automatic payroll deductions, regardless of the employment relationship, and, like Social Security, these benefits would be fully prorated, portable, and universal.” The Shared Security Standards would provide protection to workers to ensure they were legally granted paid leave, had livable minimum wages, higher overtime pay thresholds, ensure pay fairness and fair scheduling…Together, the Shared Security Account and the Shared Security eStandards – along with critical family support programs like affordable child care, high-quality universal preschool, debt-free college education, and immigration reform – would comprise a new social contract designed to fit the flexible employment relationships of the new economy”. Another scheme is the personal activity account (compte personnel d’activité; CPA) which was launched for every French citizen aged 16 and over in 2017. “People can collect points in their account, for example through work activity, and government institutions can award points. The points can be used for various purposes, for example to set towards educational activities, financial assistance for business formation, or leave for family obligations or social commitments. The points are not lost if a person’s employment status changes…Employees can use the latter to collect points for exposure to hazards throughout their working life and then use these for specific qualifications for less hazardous positions within the company, shorter working hours or early retirement”[6].
  • Self-regulation. Self-regulation is often viewed as a cost-effective approach that provides employers the flexibility to voluntarily address concerns in a manner suitable with their operations. Cristiano Codagnone, Fabienne Abadie and Federico Biagi cites examples of platforms voluntarily redrafting their terms of agreement and reclassifying individuals as employees and establishing a wage floor for tasks. Platforms can also establish standards, best practices and norms to ensure fairer practices and to improve social protection. For example, Food delivery service Deliveroo proposed issuing a charter to allow it to provide benefits such as accident and third-party liability insurance, funds for time off or holidays, and training. However, it wanted clear guidance from the government as to the benefits it could offer without risking the self-employed status of their contractors[7]. Critics see the charter proposal as an attempt to forestall litigation over the misclassification of their contractors. David Weil suggests regulators could also develop relationships with various stakeholders where labor and employment law violations are rife and encourage companies to create voluntary compliance arrangements across their operations[8].
  • Regulation of platforms – standards, transparency and data sharing. The CERIC study proposed to establish standards for platforms to “ensure the fair and timely payment of wages and settlement of disputes”. This includes ensuring clarity of task pay terms and work institutions, strict rules on non-payment, making visible customer non-payment history, background information on customers and the purpose of the work. In the event of non-completion of tasks, there should be a fair process to ensure workers do not bear the cost for lost time or work due to technical problems; that workers are able to contest non-payment, work evaluations, and qualification test outcomes; and to ensure there isn’t unfair and arbitrary use of ratings and reviews. In tandem with this, worker account deactivations should be subject to fair, transparent and independent review procedures; independent mediation panels should be established for settlement of platform-worker grievances; there should be provision of information to platform workers concerning employment rights; and collective bargaining rights should be extended to labour platform workers. Shayna Storm and Mark Schmitt note “the Freelancers Union has worked with the New York City Council to develop the Freelance Isn’t Free Act, which would require contracts with payment deadlines for certain freelance work and would set penalties for employers that do not pay, including, potentially, jail time” as a means of deterring wage theft. A. Schmidt suggests “there is a need for more transparency regarding the processes on the platforms, the terms of service agreements, the mediation fees incurred and the liability rules. The terms of service agreements should be presented in a form that allows users to make informed decisions about the conditions under which they want to work. The platform companies have outstanding capabilities in the field of user-friendly interface design. They should be obliged to use these skills to create navigable surfaces for the terms of service agreements, with more options than just an all-encompassing agree button”. In addition, there is also a need for independent organisations “to test and evaluate the working conditions on the various digital labour platforms, and warn workers, independent contractors and clients of particularly problematic clauses in the terms of service agreements”. At the national level, “measures should be put in place to ensure that labour platform companies supply regulatory authorities with appropriate and sufficient information to inform policy development around social protection”.[9]

Overall, the reformulation the labour framework to cope with the realities of information disruption is still work in progress. But another area deserving greater attention are the enabling changes to unlock the benefits of flexible employment.

References

Anna Ilsøe (2018) “Denmark: Progressing the voluntarist approach”. From Work in the digital age: Challenges of the fourth industrial revolution edited by Max Neufeind, Jacqueline O’Reilly, Florian Ranft. Policy Network, Das Progressive Zentrum. Published by Rowman & Littlefield International Ltd. http://bruegel.org/wp-content/uploads/2018/07/Work-in-the-Digital-Age.pdf

Chris Forde, Mark Stuart, Simon Joyce, Liz Oliver, Danat Valizade, Gabriella Alberti, Kate Hardy, Vera Trappmann, Charles Umney, Calum Carson (November 2017) “The social protection of workers in the platform economy”. Centre for Employment Relations Innovation and Change (CERIC). http://www.europarl.europa.eu/RegData/etudes/STUD/2017/614184/IPOL_STU(2017)614184_EN.pdf

Cristiano Codagnone, Fabienne Abadie, Federico Biagi (2016) “The future of work in the sharing economy. Market efficiency and equitable opportunities or unfair precarisation?” Institute for Prospective Technological Studies, JRC Science for Policy Report. http://publications.jrc.ec.europa.eu/repository/bitstream/JRC101280/jrc101280.pdf

Enzo Weber (2018) “France: Moving up the digital ranks?” From Work in the digital age: Challenges of the fourth industrial revolution edited by Max Neufeind, Jacqueline O’Reilly, Florian Ranft. Policy Network, Das Progressive Zentrum. Published by Rowman & Littlefield International Ltd. http://bruegel.org/wp-content/uploads/2018/07/Work-in-the-Digital-Age.pdf

Heather Boushey (22 June 2017) “Equitable growth in conversation: David Weil”. Washington Centre for Equitable Growth. http://equitablegrowth.org/labor-markets/equitable-growth-in-conversation-david-weil/

Kerstin Jürgens, Reiner Hoffmann, Christina Schildmann (2018) “Lets transform work!”. Recommendations and proposals from the commission on the work of the future. No. 376 Hans Böckler Foundation’s Study series (Hans-Böckler-Stiftung edition). https://www.boeckler.de/pdf/p_study_hbs_376.pdf

Matthew Taylor, Greg Marsh, Diane Nicol, Paul Broadbent (July 2017) “Good work: The Taylor Review of modern working practices”. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/627671/good-work-taylor-review-modern-working-practices-rg.pdf

Nick Hanauer, David Rolf (2015) “Shared security, shared growth”. Democracy – A Journal of Ideas.  Summer 2015 No. 37. https://democracyjournal.org/magazine/37/shared-security-shared-growth/

Phuah Eng Chye (4 November 2017) “The sharing economy: The challenge of regulating ridesharing”. http://economicsofinformationsociety.com/the-sharing-economy-the-challenge-of-regulating-ridesharing/

Phuah Eng Chye (21 October 2017) “The sharing economy: Disruptive effects of ridesharing”. http://economicsofinformationsociety.com/the-sharing-economy-disruptive-effects-of-ridesharing/

Phuah Eng Chye (18 November 2017) “The sharing economy: Scale and regulatory arrangements”. http://economicsofinformationsociety.com/the-sharing-economy-scale-and-regulatory-arrangements/

Phuah Eng Chye (16 December 2017) “The sharing economy: Distribution of value and corporate dominance”. http://economicsofinformationsociety.com/the-sharing-economy-distribution-of-value-and-corporate-dominance/

Phuah Eng Chye (20 January 2018) “The sharing economy: A futuristic taxi landscape (Part 2 – Modular regulation)”. http://economicsofinformationsociety.com/the-sharing-economy-a-futuristic-taxi-landscape-part-2-modular-regulation/

Schmidt, F.A. (2017) “Digital labour markets in the platform economy”. Friedrich-EbertStiftung, Bonn. http://library.fes.de/pdf-files/wiso/13164.pdf

Seth Harris, Alan Krueger (December 2015) “A proposal for modernizing labor laws for the twenty-first-century work: The independent worker”. Brookings Institute. https://www.brookings.edu/wp-content/uploads/2016/07/modernizing_labor_laws_for_twenty_first_century_work_policy_brief.pdf

Shayna Strom, Mark Schmitt (7 April 2016) “Protecting workers in a patchwork economy”. The Century Foundation. https://s3-us-west-2.amazonaws.com/production.tcf.org/app/uploads/2016/04/25195440/ProtectingWorkersInAPatchworkEconomy-1.pdf

Shona Ghosh (23 July 2018) “Deliveroo proposed a charter to make its workers’ rights problem go away”. Business Insider. https://www.businessinsider.com/deliveroo-proposed-charter-end-workers-rights-argument-2018-7?utm_source=reddit.com

[1] Shayna Strom and Mark Schmitt.

[2] My articles on the disruption of taxi regulation are listed in the references.

[3] Centre for Employment Relations Innovation and Change (CERIC).

[4] David Weil

[5] Nick Hanauer, David Rolf.

[6] Enzo Weber.

[7] Shona Ghosh.

[8] See Heather Boushey.

[9] CERIC

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