The Perils of the Gig Economy

As the economy recovers from the Great Recession of 2008, many permanent jobs have been replaced by temporary independent contractor positions, called “gigs.” The gig economy has been a boon to employers, because unlike employees, independent contractors don’t receive health insurance, vacation pay, overtime pay, or retirement benefits. In addition, many laws that protect employees, such as the wrongful termination and minimum wage laws, do not apply to independent contractors.

However, federal and state authorities are now taking a closer look at whether employers are breaking the law by treating workers as independent contractors instead of employees. Recently, the California Labor Commissioner ruled that Uber should have classified one of its drivers as an employee because Uber controlled every aspect of the driver’s job, including his hours, rates, and the type of vehicle he could drive.

In general, the more control a company has over a worker’s activities, the more likely the worker is an employee rather than an independent contractor. Workers who have been misclassified as independent contractors may be able to recover significant damages and penalties, including minimum wages, overtime pay, vacation pay, health insurance premiums, and retirement contributions.