What Does the Gig Economy Mean for Employers?

What Is the Gig Economy?

The gig economy is a new term that describes work done by independent contractors, also called freelancers. A gig is a temporary job or project, and hence the name of “gig economy.”

Gig economy workers are not employees. They fall under the classification of independent contractors. This classification means employers do not have costs such as payroll taxes, social security payments, retirement income investments, healthcare benefits or unemployment benefits for the worker. Employers pay independent contractors by the project or by the hour, and there is no employment agreement for continuing to provide work once the job is done. Employers can terminate at will for no reason. The same is true for the contractor.

Forbes magazine predicted in 2018 “the gig economy will only keep growing in numbers.” By 2020, the estimate is that 50% of U.S. workers will be independent contractors.

How Employers Benefit from the Gig Economy

Employers benefit from gig economy relationships by having short-term projects done by short-term professionals. Permanent hires might otherwise be too expensive and hurt their bottom lines. This may be especially true for startup companies.

The Legal Landscape of the Gig Economy

The legal landscape may appear to be cut and dried. However, a recent New York case has shown that case laws are still emerging and employers can face challenges. Precedents determine where the legal lines are drawn.

In the Matter of the Claim of Luis A. Vega (Respondent), Postmates Inc., (Appellant) and Commissioner of Labor (Respondent), the Unemployment Insurance Appeal Board ruled that the company Postmates Inc. had to pay an independent contractor unemployment compensation.

Postmates Inc. operates an on-demand pickup and delivery service for local restaurants and retail stores. When Postmates terminated the work relationship, the worker applied for unemployment insurance benefits.

The crux of the case was whether or not an employer-employee relationship existed. While the Unemployment Appeals Board had ruled there was an employee relationship, the higher court reversed the decision. It remitted the case to the Unemployment Insurance Appeal Board to continue with the other proceedings not related to the Court’s ruling.

If you have employment related issues, our attorneys at Stephen Hans & Associates are glad to answer your questions, provide legal advice or representation. We have decades of experience representing employers in work-related issues.


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