Although President-elect Joe Biden’s campaign platform called for gig workers to be classified as employees, narrow Democratic majorities in the House and the Senate and those intraparty philosophical rifts could block Democrats from reaching agreement on gig-worker rights.
Similar divisions played out in California in 2019 when legislators passed a law to define many app workers and other contractors as employees — only to have app workers’ reclassification defeated in a statewide ballot, called Proposition 22, after gig companies spent tens of millions of dollars to fight the legislation.
Under the Biden administration, the Labor Department and other agencies could immediately take actions that would benefit many gig workers, such as reinterpreting their work as employment at the federal and IRS level and pursuing stronger enforcement and legal options against companies then found to be misclassifying workers, labor and policy experts say.
In Congress, labor advocates would like to see a more explicit definition of “employee” in the Fair Labor Standards Act, which requires employees to be paid minimum wage and overtime. But that legislative change faces the same hurdles as any other: overcoming the 60-vote Senate threshold needed to bypass the filibuster, as well as agreement among all the Democrats.
Unlike other labor issues that prompt broad agreement among Democrats, such as raising the minimum wage, strengthening protections for worker activism and creating workplace safety protections amid the pandemic, the gig worker question has the potential to be more divisive.
Some Democratic senators are hinting that they are more sympathetic to the arguments put forth by companies such as Lyft and Uber, which have said that their services are threatened by provisions that would require their labor costs to go up and that gig workers generally like having the ability to work as contractors.
“We know that independent contractors are not all the same — some are misclassified or would prefer to be treated as full-time employees, while others genuinely prefer to be independent contractors and use this kind of work to supplement other employment,” Sen. Mark R. Warner (D-Va.) said in a statement. “My position has simply been that a one-size-fits-all model that locks you into benefits with one employer might not work for everyone and, frankly, doesn’t work all that well right now for people that want to either try something new or start their own business. We should be testing different strategies at the local level and uncovering what works best for workers long-term.”
It is similar to how the issue divided Democrats in California, pitting centrist and establishment figures who had worked for the Obama administration against the left.
After California legislators in 2019 passed Assembly Bill 5, which sought to eliminate legal gray areas around gig work, Uber, Lyft, DoorDash and other companies mounted fierce opposition, pouring $200 million into a ballot measure to supersede the legislation. The measure, Prop 22, won with more than 58 percent of the vote. And it has further complicated the question about how gig work should be defined.
The result in California may have dissuaded Democrats who were already on the fence from joining the pro-employment faction on the left, policy experts said.
“Anyone who’s a little more pro-business or any kind of Democrat from a red state is not going to necessarily be with them,” said Bradley Tusk, an early Uber investor who previously served as a political strategist for the company. Still, he said, “this is the biggest organizing opportunity that private-sector unions have had in decades.”
And U.S. labor secretary nominee Marty Walsh, who as Boston mayor pushed to raise fees on Uber and Lyft to benefit public transit and congestion goals, will be expected to deliver the big changes gig workers were promised, Tusk said.
Biden was explicit during his campaign about what he regarded as the abuses of the gig work model.
“Employer misclassification of ‘gig economy’ workers as independent contractors deprives these workers of legally mandated benefits and protections,” the president-elect’s website says, adding, “This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts.”
Many advocates and labor market experts say that software-powered gig work is just a smokescreen for an age-old problem: worker misclassification, which allows companies to profit from labor without adhering to the rules — and paying into the support systems — that protect traditional employees. These include a mandatory minimum wage, overtime pay, sick pay and leave requirements in many jurisdictions, the right to join a union, and access to workers’ compensation and unemployment insurance — all of which contract workers are generally exempt from.
From this vantage, the coronavirus pandemic has only underscored the need for gig workers, increasingly in high demand in growing sectors such as delivery, to be classified as employees.
To cope with the fallout from the economic crisis, Congress created a special category of unemployment insurance for gig and self-employed workers, Pandemic Unemployment Assistance (PUA), which has been in heavy use. But unlike traditional unemployment assistance, which companies pay into to help governments foot the bill, PUA comes exclusively from federal funding — essentially forcing taxpayers to foot a bill that companies should be responsible for, advocates say.
“What’s happened with unemployment, to me, has sort of most exposed the myth of the unique digital platform or gig worker,” said Celine McNicholas, the director of government affairs for the left-leaning Economic Policy Institute. “You can dress it up, you can put it on a phone and make it an app and make it pretty and make it seem like it’s something else, but at the end of the day it’s misclassification, and we need to tighten those standards in the Department of Labor to crack down on it.”
Gig companies argued that the Prop 22 vote in California reflected a strong desire among workers to remain independent. Uber chief executive Dara Khosrowshahi argued in favor of the independent-contractor model in a letter last month to the Biden-Harris transition team in which he congratulated the Democrats on their election victory.
“While you have previously expressed a different opinion on this issue, I sincerely believe that we can provide the best of both worlds and we stand ready to invest in benefits and protections we believe workers on our platform deserve,” he wrote in the letter, which Uber shared with The Washington Post. “Let’s work together to improve upon the status quo.”
Elizabeth Jarvis-Shean, DoorDash’s vice president of communications and policy, said the company is working with lawmakers to provide job protections and independence for its contract workforce.
“The reality is, the overwhelming majority of workers value their independence, and Dashers tell us everyday how important their ability to flexibly earn is,” Jarvis-Shean said in a statement. “It’s time to update our nation’s labor laws so today’s workforce doesn’t have to sacrifice independence to access the benefits they deserve.”
Jan Krueger, a part-time Lyft driver who serves as a spokeswoman for the Protect App-Based Drivers and Services coalition, which represents gig companies, said: “Voters in one of the most progressive states in the country overwhelmingly passed Prop 22. California is an example for efforts in other states and federally. We can couple driver independence with portable benefits.”
Susan Kennedy, Lyft’s vice president of communications, said in a statement: “We’re excited to work with the Biden Administration. We’ve been working with labor on some groundbreaking proposals at the state level and we’re ready to work together to move the country forward.”
Under President Donald Trump, the Labor Department has made it easier for companies to classify workers as contractors and not employees. But the Biden administration could reverse that, making stronger rules for classifying workers as employees that would supersede laws in states such as California where gig companies have pushed measures to weaken worker protections, McNicholas said.
The federal government also would have the legal firepower to combat what probably would be another round of aggressive campaigning on behalf of companies such as Uber and DoorDash, while smaller states and coalitions of labor unions do not.
An ambitious bill to strengthen labor laws that was passed last year by the Democratic-led House, the Protecting the Right to Organize Act, known as the Pro Act, probably would give huge numbers of gig workers collective-bargaining rights. But the measure’s prospects with such a tight margin in the Senate and a growing number of other crises is unclear.
Administrative action, through the Labor Department, to broadly define certain categories of gig workers as employees could have a significant effect in Illinois, Massachusetts, New Jersey and New York, where companies are aiming to define gig workers as independent contractors, similar to what Prop 22 allowed. And a more activist National Labor Relations Board could go after states that misclassify workers, Tusk said.
“In any given fight between labor and the companies, federal law would say the tie goes to the unions,” he said. “On adjudications, the shift in federal policy will probably have some real weight.”
Meanwhile, ideas have been floated for years about creating a third category of worker that would provide gig workers some benefits, with one version recently picked up by the gig companies themselves. But even some proponents of this idea have begun backing away from it, and it is unlikely to be popular with many labor experts and the greater left.
Gig companies absorbed some high-profile officials from the Obama administration, and some advocates worry that these connections, as well as others in the incoming Biden administration, could further influence federal decision-making.
Tony West, Uber’s chief legal officer and a public face of its opposition to a California bill defining drivers as employees, is Vice President-elect Kamala D. Harris’s brother-in-law. Anthony Foxx, transportation secretary under President Barack Obama, has called for expanding the Prop 22 model nationally as Lyft’s chief policy officer. Valerie Jarrett, who served as a senior adviser to Obama, sits on Lyft’s board. David Plouffe, one of Obama’s chief strategists and an adviser in his administration, went on to work as senior vice president of policy and strategy at Uber, although he no longer works for the company.
The backing of the gig companies through $200 million in spending has made Prop 22 itself somewhat toxic among workers who say it does not go far enough to protect them and activists who say it provides cover to companies that did not want to better compensate and protect their workers.
“I don’t think it should be the model for the country,” said Liya Palagashvili, a senior research fellow at the Mercatus Center at George Mason University who studies the gig economy.
A model that would maintain workers’ independence but have eligibility criteria set up by individual states rather than the companies, she said, is a more likely and achievable solution. But the government could start by allowing companies to provide benefits without risking redefining their workers as employees if they do so.
“I would put that as the most low-hanging fruit, the most easy thing they could do that everyone could get on board with,” she said.