Employment law and society as a whole is now grappling with the question of what makes an employee. The nature of the difference between independent contractors and employees has been hotly debated, and one battleground has only just been introduced to the limelight.
One only has to take a look at the scale of the gig economy to understand how relevant this debate has become. It is estimated that 51 million Americans may currently be employed in the gig economy. Countless companies ranging from the smallest businesses to the largest multi-national corporations regularly employ gig workers to perform services on-demand, and these workers are classified as independent contractors.
There are many financial incentives to this classification, starting with the obvious financial advantages of not having to pay for employee benefits, and a more subtle advantage comes in the reduced protections these workers are entitled to compare to full-time employees.
One often overlooked part of the debate when it comes to worker classifications is mandatory arbitration clauses. It has recently been estimated that roughly two-thirds of gig economy workers have an arbitration clause in their contracts which essentially means that they agree to negotiate problems privately instead of filing a lawsuit.
Generally, arbitration is a poor deal for workers which generally receive far smaller rewards than those they would likely receive in court. More importantly, it is a fact that no matter what settlement a worker receives, it does not lead to an overall improvement in workplaces. Decisions in arbitration are typically confidential and will not influence future rulings by setting a precedent. This means that arbitration simply amounts at best for workers to a one-time payment and nothing more.
As a result, some gig workers have begun to take legal action against major gig economy employers and demand that courts hear their complaints. If these claims succeed in being heard and find the courts ruling their way, it could lead to fundamental changes in the gig economy.
This has so far resulted in mixed responses from the courts. In some cases, courts have ruled against compelling arbitration, and in others, they haven’t. Overall, the future outcomes of these hearings pose two big questions that we may soon see the answers to. First, can these workers seek claims and damages from the courts instead of arbitration, and if so, will courts begin awarding these independent contractors employment rights?
Employers should keep a close eye on the outcomes of these cases. Depending on how things look to be going, it is important to stay ahead of the curve and discuss your situation with legal counsel.