Avoid Misclassification in the Gig Economy

With the gig economy booming, businesses need to ensure they are properly classifying workers as independent contractors instead of employees. Gig economy workers enjoy flexible work schedules and a lack of oversight. They retain control over the manner and the means of performing their work and are thus usually classified as independent contractors. This classification means that gig economy workers do not have rights, such as overtime, minimum wage, unemployment insurance benefits and workers’ compensation benefits guaranteed to employees under the Fair Labor Standards Act. Even so, experts say businesses want to build loyalty among the most talented independent contractors and are increasingly considering offering benefits to gig workers. Independent contractors want to be treated as professionals, but satisfied companies must be careful not to treat them as employees.

In a technology-driven economy, the EEOC intends to “address issues related to complex employment relationships and structures…focusing specifically on temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.” In other words, the EEOC plans to increase scrutiny of companies and their business relationships with gig economy workers.

Employers should avoid including gig workers in company retreats, meetings and programs. Further, if gig workers/contractors are offered a discount on the company's products or services during the contract term, it should be made clear that such discount is being offered because the worker is a valued contractor of the company and it is not equivalent to an employment benefit. Importantly, only “portable” benefits should be offered to independent contractors. This means benefits that are portable from job to job, prorated by contributions from businesses and universally accessible by all workers. With portable benefits, gig economy workers own their own benefits and have security knowing that their benefits are not tied to a particular job or company. Portable benefits make contractors feel valued and important to a company without crossing the line and inadvertently converting them into employees.